Institutional investors in Europe are disappointed with Shell's new strategy to continue investing in oil and gas production and selectively pour capital into renewable energy solutions, to the point of some investors considering removing it from their portfolios.
Earlier this week, Shell laid out plans to raise its dividend by 15%, effective from the second quarter 2023 interim dividend, as the UK-based supermajor pledged to grow its gas business and extend its position in the upstream.
"It is critical that the world avoids dismantling the current energy system faster than we are able to build the clean energy system of the future. Oil and gas WILL continue to play a crucial role in the energy system for a long time to come with demand reducing only gradually over time," Shell's chief executive Wael Sawan said on Shell's Capital Markets Day on Wednesday.
"Continued investment in oil and gas is critical to ensure a balanced energy transition," Sawan added in the pivot to ensure today's energy needs, similar to what BP announced earlier this year.
Shell will continue to be committed to oil and gas, with a focus on LNG growth, where it is the world's leading trader, the company's top executives said, but also reiterated the commitment to net-zero emissions by 2050.
But fund and pension managers in Europe are unhappy with Shell's new strategy. The UK's largest fund manager, Legal & General Investment Management (LGIM), will ask Shell to detail how it plans to reach net zero by 2050 if it grows its upstream and LNG businesses.
"There is a sense that oil and gas companies want to keep their options open in case the world misses the net zero by 2050 deadline," Stephen Beer, senior manager for sustainability and responsible investment at LGIM, told Bloomberg in an interview.
"In our engagements with Shell, following its recent announcements, we will be assessing how it matches with our expectations."
Another institutional shareholder, the Church of England Pensions Board, is now "reviewing our remaining investments in the company," Laura Hillis, director for climate and environment at the Church of England Pensions Board, told Bloomberg.
"The new CEO has set a path that will increase Shell's absolute emissions and goes against the previous path the company was pursuing," Hillis added.
By Tsvetana Paraskova for Oilprice.com
Tsvetana is a writer for Oilprice.com with over a decade of experience writing for news outlets such as iNVEZZ and SeeNews. More
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Comments
Their new strategy is to continue investing in oil and gas production convinced that this is critical for the global economy and also for avoiding another disastrous global energy crisis.
Of course institutional investors in Europe are disappointed with Shell’s new strategy. They would rather bury their heads in the sand like an ostrich and ignore the fact that the notions of a total energy transition and net-zero emissions are myths.
Dr Mamdouh G Salameh
International Oil Economist
Global Energy Expert