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Shell (SHEL) Investors Demand Aggressive Emission Reduction

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Shell plc’s (SHEL - Free Report) investors, managing assets worth more than $4 trillion, have teamed up with climate activist group Follow This to increase pressure on the company to drastically reduce its greenhouse gas emissions.

The coalition, consisting of 27 investors, includes major players such as Europe's largest asset manager, Amundi SA, Scottish Widows, Candriam, Rathbones Group and Edmond de Rothschild Asset Management. Collectively, they hold around 5% of Shell's stock, according to Follow This.

The investors and activists plan to co-file shareholder resolutions, urging Shell to align its emissions reduction goals with the Paris Climate Agreement. Notably, the resolution focuses on Scope 3 emissions, which encompass the greenhouse gases emitted when consumers use oil products that constitute a significant portion of the overall emissions from oil companies.

The resolution, akin to previous attempts by Follow This, is set to be presented for a vote at Shell's upcoming annual general meeting later this year. In May last year, a similar resolution proposed by the activist group garnered the support of 20% shareholders, concluding in a contentious annual general meeting marked by protests attempting to storm the stage.

Diandra Soobiah, head of Responsible Investment at British pension scheme NEST, stressed the importance of Shell establishing a credible Scope 3 absolute emission target. According to her, doing so would showcase leadership, signify Shell's commitment to business transition, and contribute to creating tangible real-world impact.

In response, Shell maintained that its climate targets align with the 2015 Paris agreement, aiming to limit global warming to "well below" 2 degrees Celsius above pre-industrial levels by 2100. The company described the Follow This resolution as unrealistic and simplistic, asserting it would have no impact on mitigating climate change, potentially harming customers and conflicting with the interests of the company and its shareholders.

Wael Sawan, Shell's CEO since January 2023, outlined the company's evolving approach toward meeting its ambition to become a net-zero carbon-emitting entity by 2050. Sawan emphasized a change in Shell's pathway and announced the upcoming release of the company's first energy transition strategy update in early 2024. This update will undergo an advisory vote at the upcoming annual general meeting.

Zacks Rank & Key Picks

Shell currently carries a Zacks Rank #3 (Hold).

Some better-ranked stocks in the energy sector are Sunoco LP (SUN - Free Report) , Oceaneering International, Inc. (OII - Free Report) and Enbridge Inc. (ENB - Free Report) . While both Sunoco and Oceaneering International sport a Zacks Rank #1 (Strong Buy), Enbridge carries a Zacks Rank #2 (Buy) at present. You can see the complete list of today’s Zacks #1 Rank stocks here.

Sunoco is among the biggest motor fuel distributors in the U.S. wholesale market in terms of volumes. By distributing more than 10 fuel brands via 10,000 convenience stores under long-term distribution contracts, the partnership will continue to generate stable cash flow. 

SUN’s earnings beat estimates in two of the trailing four quarters and missed twice, delivering an average surprise of 28.33%.

Oceaneering International is a leading provider of integrated technology solutions, active at all phases of the offshore oilfield lifecycle. Its strong relationship with high-quality customers provides revenue visibility and business certainty. OII is well-positioned to supply equipment for deep-water projects.

Enbridge has an extensive oil and liquid pipeline system that spreads across 17,809 miles. A significant portion of the midstream operator’s earnings is generated from transportation operations, driven by a string of long-term contracts. ENB anticipates substantial cash flows from recently completed midstream projects.


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