Royal Dutch Shell will link its carbon transition targets to remuneration of top management, the company said in a joint statement with investors on Monday.
In efforts to meet the 2015 Paris Agreement goals — aimed at keeping global warming below 2 degrees Celsius — Shell is developing a new remuneration policy that will be based on the company's decarbonization efforts, subject to a shareholder vote at the 2020 annual general meeting.
"The final plan design is being discussed with shareholders, including details relating to the appropriate remuneration structure and appropriate measures and metrics," the statement said.
Net carbon footprint-related measures will be adopted to balance leading and lagging performance metrics over a three- or five-year period. Shell intends to publish an update on its progress toward lowering its net carbon footprint on a yearly basis. In addition, every five years Shell expects to review decarbonization trajectories. The targets will continue to evolve until 2050.
Shell's plans were backed by investors in the Climate Action 100 Plus initiative, representing more than $32 trillion in assets.
"This is an important step, as Shell's management is making further progress toward contributing to achieving Paris' climate goals. That Shell has now embedded its ambition in its remuneration policy offers confidence that Shell is really committed to it," Corien Wortmann, chairwoman of the €408 billion ($462 billion) Stichting Pensioenfonds ABP, Heerlen, Netherlands, said in a separate news release.
Adam Matthews, director of ethics and engagement at £2.3 billion ($2.9 billion) Church of England Pension Board, London, said in a separate news release that the joint statement "sets a benchmark for the rest of the oil and gas sector and shows the benefit of engagement — aligning institutional investors' long-term interests with Shell's desire to be at the forefront of the energy transition. Shell have also made important commitments to review the corporate climate lobbying of trade associations in line with the investor expectations we had developed with Sweden's AP7 and the Institutional Investors Group on Climate Change. The review will be published early next year and Shell should be applauded for this step."
Anne Simpson, investor director for sustainable investments at the $344.4 billion California Public Employees' Retirement System, Sacramento, and chairwoman of the Climate Action 100 Plus initiative, said in yet a separate release: "The commitment by Shell to fully respond to the engagement shows the value of dialogue and global partnership to deliver on the goals of the Paris agreement on climate change. Shell is setting the pace, and we look forward to other major companies following their lead."