Ethos calls on investors to vote FOR item 21 on the agenda of the AGM of Royal Dutch Shell, to be held on May 23, 2017. The shareholder association ‘Follow this’ has filed a shareholder resolution asking the company to set greenhouse gas (GHG) emissions reduction targets compatible with the Paris Agreement to limit global warming to a maximum of 2 degrees Celsius relative to the pre-industrial era. Shell’s board has advised its shareholders to vote against the resolution (Item 21 on the agenda).

Two years ago the board of Shell had supported a resolution by the ‘Aiming for A’ investor coalition calling on companies to make a step change in the way they report on their climate change strategy. This resulted in considerably improved disclosure to investors about how Shell plans to address the challenges posed by the global drive to mitigate climate change.

Now the time has come for Shell to move from disclosure to action and set concrete and challenging GHG emissions reduction targets. Given that most GHG emissions occur during the use of Shell’s products, asking Shell to think about and set reduction targets for its scope 3 emissions will have a big impact. The ‘Follow this’ resolution does not prescribe exact reduction targets but asks for targets in line with a 2 degrees future. The setting of concrete reduction targets and the decision on how to meet these targets remain at the discretion of the company’s management. Setting targets and disclosing them fosters accountability and is necessary to convince investors that capital is spent on future proof projects and not on assets at risk of being stranded in a few years’ time.

Ethos believes that it is of utmost importance that companies, especially those active in fossil fuels, and their shareholders take decisive action to combat climate change now. If investors are opting to engage GHG-intensive companies rather than divesting them, then ambitious actions like those demanded by the ‘Follow this’ resolution are crucial. Thus, Ethos strongly urges all shareholders to support the ‘Follow this’ shareholder resolution and to instruct their custodian to vote for item 21.