Engagement success: Royal Dutch shell to back shareholder resolution

Climate change and the threats it poses to society are priority issues for responsible investors in the energy sector. Since 2011, Rathbone Greenbank Investments has been part of a coalition of investors engaging with the top ten carbon emitters in the FTSE 100.

In late 2014, this coalition moved to file supportive, but stretching, shareholder resolutions at the 2015 AGMs of BP and Royal Dutch Shell. Filing such resolutions is a considerable undertaking: at least 100 shareholders with a significant average stake in the company concerned must be found to requisition the resolution.

We were therefore delighted that over 40% of the required names for the Royal Dutch Shell resolution were Rathbone Greenbank clients.

The resolution was filed towards the end of December 2014 and accepted by the company in January 2015. Since then, the investor coalition has been building support for the resolution among larger institutional shareholders.

It is usual in such circumstances for the company’s board to recommend that shareholders vote against externally filed resolutions. This is often justified by the argument that shareholders should trust management to do what is best for all stakeholders in the business, regardless of the individual merits of the resolution in question.

Support for shareholder resolutions typically gather no more than 10-20% of the votes cast. However, even these relatively low numbers can send a signal to company management that change or, at the very least, wider consultation is needed.

In this context, we were therefore pleased to be informed that, following a board meeting at the end of January, the management of Royal Dutch Shell would be recommending that shareholders vote in favour of the resolution filed by Rathbone Greenbank Investments and its partners.

We believe that such a display of management support for an environmental shareholder resolution is a first for global shareholder engagement. This is testament to the constructive, risk-based approach taken by the coalition.

Royal Dutch Shell states in a letter to shareholders that it is committed to transparency and will therefore be happy to provide additional reporting covering the following issues, as requested by the coalition:

  • Ongoing operational emissions management
  • Asset portfolio resilience to post-2035 scenarios
  • Low-carbon energy research & development and investment strategies
  • Strategic key performance indicators and executive incentives
  • Public policy interventions

Long-term investors need to know how companies such as Royal Dutch Shell are responding to the threats to their business models posed by climate change and the increasing likelihood of globally coordinated action to curb emissions by 2050. This kind of outcome is an example of the positive influence Rathbone Greenbank Investments is able to exert on behalf of its clients.