Five of the Netherlands’ biggest pension funds have cautioned against extreme action by activist shareholders after a resolution was rejected by investors in Royal Dutch Shell.
A Dutch campaign group, Follow This, signed up more than 1,600 small shareholders in the Netherlands’ biggest listed company, and asked the company to take action to reduce its reliance on fossil fuels within the next 15 years.
Follow This tabled a resolution at Shell’s annual general meeting yesterday at The Hague demanding that the group abandon future searches for oil and instead focus on becoming a renewable energy company by 2030. The resolution received less than 3% of the votes after Shell’s board recommended shareholders reject the proposal, calling such a move “strategically and commercially unwise.”
ABP, Europe’s biggest pension at €358 billion ($399 billion), has pledged to work closely with industry funds bpfBOUW (construction), PME (metalworkers), PMT (engineers), and SPW (housing association employees) to improve climate change awareness and action, but the group has urged a more cautious approach from campaigners.
In a statement, the pensions warned of a “real risk” that rising oil prices would prompt companies such as Shell to invest in high-cost projects with “a long payback period.” Instead of increasing production volumes, the investors called for oil companies to limit their focus to “investments and projects that create long-term value.”
They praised the work of Follow This and its founder, Mark van Baal, in bringing such issues to the attention of investors.
However, the resolution was “a very big change in strategy which entails many risks,” the pensions said. “Moreover, it is unclear whether this is the best way for Shell to contribute to the energy transition.”
The pensions added that they “appreciate” action already taken by Shell to improve transparency regarding climate change risks. Shell’s board pledged to improve reporting following pressure applied at last year’s annual meeting by major pension funds including Finland’s Ilmarinen, three of Sweden’s AP funds, the Universities Superannuation Scheme, APG, Norges Bank Investment Management, and the California Public Employees’ Retirement System.
“However, Shell has yet to make clear how it will play a leading role in energy transition and tackling climate change,” the Dutch pensions said. “We see managing these risks as part of their management responsibilities.”
The group also included ABP’s dedicated asset manager, APG, and fiduciary manager MN Services. Together the seven organizations are responsible for more than €500 billion in assets.