Oil giant Shell will hold its AGM today, with investors expected to challenge the energy company's green investment agenda. Shell
reported an annual profit of £32.2bn earlier this year – the biggest in its 116-year history. Bumper profits from both Shell and BP have raised eyebrows as the two shy away from some of their climate commitments. Both companies are under the microscope when it comes to their spending on low-carbon energy
Shell PLC (NYSE:SHEL, LON:SHEL) need to address some tough questions today about the delivery of their climate change commitments, especially in light of their recent huge earnings report.
The energy crisis had given big firms across the industry a bit of a break from their green investment agendas, while they focussed on securing oil and gas supplies, but now climate-focused investors want to see more progress toward net zero and hold them to account.
The Church of England is reportedly going to vote against the reappointment of all directors at Shell's AGM in response to a perceived lack of progress over climate change objectives.Gates Cap Management Reduces Risk After Rare Down Year
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Laura Hoy, ESG Analyst at Hargreaves Lansdown:
“Shell and BP have recently started to tip-toe away from their climate-friendly pledges. It's highlighted a key ESG risk at these companies that investors should be considering governance.
An about-face in terms of climate commitments might be expected when times are lean. But given BP and Shell reported better-than-expected profits this month, you'd be forgiven for questioning the need to change course. It calls into question whether their green energy strategies were really a priority, and whether we can expect further retreat.
There's a storm brewing at Shell, where Global Witness is accusing Shell of greenwashing. They say Shell's claims to have spent $2.4bn on its transition strategy are misleading, and that the actual figure is closer to $288m.
This comes on top of a lawsuit against Shell's board of directors alleging they aren't taking climate change seriously as well as comments from CEO Wael Sawan suggesting the impact of net zero has slipped down the list of priorities.
The question now is whether Shell will back out of its transition commitments, which are already being called into question. At the group's 2022 AGM, a fifth of shareholders voted for a resolution calling for the board to adopt climate targets aligned with the Paris Agreement.
Ultimately the group's transition strategy was approved, but a reasonably high proportion of shareholders were unhappy. Shell's most recent results had no indication the group is planning to reduce its climate commitments. But that sentiment could start to grow if the group decides to walks back its promises in the future.
BP plc (NYSE:BP, LON:BP) breaks even around $40 per barrel, well below the current price. If a global effort to cut oil demand is the future, now is a prime time to plough money into parts of the business that will thrive in a lower-carbon environment. It's a big part of CEO Bernard Looney's rationale for maintaining higher-than-promised oil and gas outputs.
He's said they'll use excess oil and gas income to drive BP's transition strategy forward. But is BP putting its money where its mouth is or veering off course and prioritising a short-term boost over longer-term strategic aims?
BP's new climate strategy comes with a pledge to spend over 40% of capital expenditure on“transition growth engines” by 2025.
These are things like renewables, bioenergy and electric vehicle (EV) charging. They're housed in different parts of the business, so pinpointing exactly where the cash ends up isn't possible.
Of the $3.6bn spent the last quarter, around $400m went to low-carbon energy. A significant portion did go to Customers & Products, where EV charging and bioenergy is housed. But this segment is also home to BP's service stations, aviation fuel, and refining and trading businesses, somewhat muddying the picture.”