In focus

Shell, Chevron, ExxonMobil: how we’re voting at oil and gas AGMs

We urgently need to transform our economy to avoid the most catastrophic effects of climate change on people and the planet, and adapt to future temperature rises.

The global average temperature reached about 1.2 degrees Celsius above pre-industrial levels in 2021 and, according to our latest Climate Progress Dashboard, is on course for a temperature rise of over 3 degrees by the end of the century without concerted action.

Kimberley Lewis, Schroders’ Head of Active Ownership, says: “Demand for action and transparency over climate change commitments is at an all-time high.”

We should be able to avoid the worst impacts of climate change if we manage to limit temperature rises to around 1.5 degrees Celsius above pre-industrial levels.

We could achieve this by reducing emissions to “net zero” by 2050. This means reducing emissions to an absolute minimum and finding ways to counterbalance them (including the outright removal of greenhouse gases from the atmosphere).

Governments are taking action. By the end of COP26, the annual United Nations climate change conference, 151 countries had submitted new or updated climate plans to reduce their emissions by 2034. The final agreement also committed countries to deforestation and methane targets, and to phase-down coal power and phase-out of “inefficient” fossil fuel subsidies.

Companies’ long-term success depends on their ability to transition their business models to a net zero or 1.5 degree pathway, and adapting to a changing climate is vital to ensuring those businesses thrive.

For companies that have already committed to act, engagement and voting is our route to holding them to account for their progress.

Kimberley Lewis says: “At the start of 2021 we wrote to FTSE 350 chairs asking for them to publish transition plans, and we expanded that engagement to Europe and the US.

“We will continue to ask portfolio companies to establish targets, focusing on the most exposed companies.

“Schroders has itself committed to transitioning toward net zero, and the influence we can apply through engagement will be critical to delivering that goal.”

What shareholder proposals has Schroders been supporting at oil & gas AGMs?

Schroders pre-declared its voting intentions for three oil & gas majors – Chevron, ExxonMobil and Shell – this week to encourage a faster shift towards net zero.

Schroders has already recently supported similar resolutions at BP, ConocoPhillips, Occidental Petroleum and Phillips 66.

This follows last week’s commitment to supporting workers’ and digital rights ahead of tech companies’ annual general meetings of Amazon, Meta and Alphabet.

Tim Goodman, Head of Corporate Governance, says: “For Chevron, ConocoPhillips, ExxonMobil and Phillips 66 our decision to vote for these shareholder resolutions reflects our aspiration for these companies to show more ambition and transparency in their transition to net zero.

“While most of these companies now have an ambition to achieve net zero greenhouse gas emissions by 2050 or sooner, their ambition is limited to their operational (Scope 1 and 2) emissions only. These companies are lagging behind peers in setting net zero targets that take into account the carbon emissions of the oil and gas that they sell.”

Carol Storey, Active Ownership Manager, Schroders, says: “For BP, Shell and Occidental Petroleum our decision to vote for these shareholder resolutions is a signal of our desire for these companies to continue to demonstrate their focus on reaching net zero.

“All three have an ambition to achieve net zero greenhouse gas emissions by 2050 or sooner across Scope 1, 2 and 3 emissions relating to operations and the use of energy products and are making progress in setting interim climate targets. We also support the climate reports BP and Shell’s management have presented to shareholders, reflecting the progress they have made in strengthening and broadening their climate targets and developing their decarbonisation strategies.”

Schroders’ engagement on climate change issues

In February Schroders published its Engagement Blueprint. The business has set out four climate expectations it believes large and medium companies need to adopt to align their business models with the transition to a net zero economy.

Where possible, these expectations are aligned with those of collaborative initiatives in which we participate such as the Institutional Investors Group on Climate Change and the investor-led initiative Climate Action 100+.

Our long, short and mid-term expectations span climate risk and oversight; climate alignment – decarbonising and minimising emissions; climate adaptation; and carbon capture and removal. 

Schroders has joined the Net Zero Asset Manager initiative and committed to the Science-Based Targets initiative. Our Climate Transition Action Plan sets out how we will manage our business toward net zero emissions in our own operations and value chain, and primarily our clients’ investments.

This article is issued by Cazenove Capital which is part of the Schroders Group and a trading name of Schroder & Co. Limited, 1 London Wall Place, London EC2Y 5AU. Authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and the Prudential Regulation Authority. 

Nothing in this document should be deemed to constitute the provision of financial, investment or other professional advice in any way. Past performance is not a guide to future performance. The value of an investment and the income from it may go down as well as up and investors may not get back the amount originally invested.

This document may include forward-looking statements that are based upon our current opinions, expectations and projections. We undertake no obligation to update or revise any forward-looking statements. Actual results could differ materially from those anticipated in the forward-looking statements.

All data contained within this document is sourced from Cazenove Capital unless otherwise stated.