Shell shareholders have overwhelmingly approved the oil and gas supermajor’s revised plan for navigating the transition to net-zero energy. The outcome signals many of the world’s largest investors don’t prioritize follow-through on climate commitments with the same urgency as sustainability professionals. 

Calls for companies to disclose climate transition plans have accounted for the majority of climate-related shareholder proposals this year. From a climate and credibility standpoint, the plan blessed in late May at Shell’s annual meeting in London is a downgrade. It reduces Shell’s 2030 carbon intensity and Scope 3 emissions targets and dispenses with a 2035 interim target aligned with the goals of the Paris Agreement.

Still, Shell was the first energy company to put its transition plan to a shareholder vote. It plans to publish an update every three years. 

What getting it right looks like

Companies subject to the European Union’s Corporate Sustainability Reporting Directive, including U.S. companies with large EU subsidiaries or those that meet certain revenue thresholds in EU markets, will be required to disclose climate transition plans. The plans are meant to outline a company’s strategy to evolve its processes, operations and business models to meet public emissions reduction targets within a specified timeframe and to offer details on how it will achieve them.

The Transition Plan Taskforce (TPT), launched in 2022 at COP26, is the key organization stewarding corporate transition plan disclosure development. It has published a framework to encourage corporate transition disclosure that is credible, useful and consistent.

‘A bet against’ customer progress on carbon targets

Shell’s transition plan commits to halving its Scope 1 and 2 emissions by 2030 compared to 2016 and to reducing the carbon intensity of its products, rather than calling for an absolute emissions reduction. Shell plans to invest $10 billion-15 billion between 2023 and 2025 in low-carbon energy solutions, including sustainable aviation fuel, biodiesel, bioethanol and renewable natural gas. 

The plan does not reflect the TPT framework’s oil and gas sector guidance, which recommends companies work toward reducing emissions or contributing to an economy-wide transition by reshaping their business model. By focusing on carbon intensity for Scope 3, Shell is allowing for an increase in overall emissions. The company says investment in oil and gas is necessary as demand is expected to decline more slowly than the decline of oil and gas fields. Some have described that decision as "a bet against the world meeting its carbon targets."

The ‘complex reality’

Shell's decision to focus on oil and gas in the near term, while planning for a longer-term future in renewables, reflects the "complex reality" of the current financial system, said Wilhelm Mohn, global head of active ownership at Norges Bank Investment Management, manager for Norway’s $1.6 trillion sovereign wealth fund and Shell’s third largest shareholder after BlackRock and Vanguard.

"We operate within a financial system and a financial m