Climate Shell Game

This post updates the guerrilla warfare conducted by anti-fossil fuel activists against corporations by means of shareholder resolutions.

Update Dec. 6 below:  Investor Activism is also Bad for Pensioners


Last year activists took a scalp from Exxon Mobil when a resolution passed requiring the Board to include business risk assessment from global warming/climate change. The cascade of suppositions underlying that proposal reveals the flimsy logic beneath these financial maneuvers. Details are in the post: How Climate Law Relies on Paris

A New Front is Opened

The Exxon success depended on proxy shares voted in large blocks by firms with huge assets, especially BlackRock and Vanguard. This year pressure was applied to wealth funds to pass “2°C Shareholder Resolutions.” This is basically a proposal that corporations subscribe to the Paris accord, and submit themselves to emission reduction targets, not only regarding their own operations, but also emissions arising from the use of their products (Hello petroleum companies!).

Storming Shell Castle

In May this Paris Subscription ploy was soundly defeated at the Shell annual meeting, and activists are disappointed both by the result and the voting by wealth managers.  Reuters reported Shell shareholders reject emissions target proposal.

The flavor of this campaign is in the text of the resolution and management’s recommendation from the Royal Dutch Shell Annual Meeting Shareholder Information:

 2°C Resolution Highlights:

Shareholders support Shell to take leadership in the energy transition to a net-zero-emission energy system. Therefore, shareholders request Shell to set and publish targets for reducing greenhouse gas (GHG) emissions that are aligned with the goal of the Paris Climate Agreement to limit global warming to well below 2°C.

This shareholder resolution is intended to express shareholder support for a course towards a net-zero-emission energy system. The why of a course towards a net-zero-emission energy system is clear: increasing costs of the extraction of fossil fuels, decreasing costs of generating renewable energy, and the global political pledge to stop global warming. The how and the what are up to the management of Shell. It is up to them to set GHG emission reduction targets and to develop activities to attain these targets.

We the shareholders request that the company publish company-wide greenhouse gas (GHG) emission reduction targets according to the following 3 scopes:

Scope 1: direct emissions from the facilities under Shell’s operational control or the equity boundary,
Scope 2: indirect emissions from the facilities of others that provide electricity or heat and steam to Shell’s operations,
Scope 3: emissions that Shell estimates come from the use of Shell’s refinery products and natural gas products.

Shell Management Comments (Excerpts)

Your Directors consider that Resolution 21 is not in the best interests of the Company and its shareholders as a whole and unanimously recommend that you vote against it.

Shell welcomes and strongly supports the Paris Agreement, and supports the aspiration of transitioning towards a net-zero emissions world by 2050. We will work together with governments and stakeholders towards meeting this aspiration and we commit to report on steps taken.

However, this resolution demonstrates fundamental misunderstanding of the necessary solutions to achieving the Paris goals. The resolution is unreasonable with regard to what the Company can be held accountable for and would be ineffective or even counterproductive for the following reasons:

We are convinced we have all the required flexibility to adapt and remain relevant and successful, no matter how the energy transition will play out. We believe that by tying our hands in the early stages of this evolution, this resolution would weaken the Company and limit our flexibility to adapt.

We are already willing and able players in the energy transition in ways that are uniquely suited to our skills, reach and ambition – all with the ultimate objective of maintaining a sustainable business model. We aim to reduce the greenhouse gas intensity of our own operations over time. From this year we are making part of our remuneration conditional on managing greenhouse gasses.

To achieve a net-zero emissions world requires the widespread transformation of the energy system. . .It demands collective action across the energy system. To impose targets on a single supplier in this complex system does not only fail to address the actual challenge (as it will not reduce system emissions overall because customers will simply turn to alternative suppliers); it would also undermine our ability to play an active role in the transition and would hinder long-term value creation for the Company and its shareholders.
The Battle Mounts Against Electricity Companies

The “Blame and Shame” campaign is exemplified in a report today from advocacy enterprise Preventable Surprises, Missing in Action: Missing 55% fail to step up on climate by Casey Aspin, 5 December 2017.  The taste of sour grapes comes through in the summary:

When the world’s two largest money managers, BlackRock and Vanguard, threw their weight behind a successful 2°C scenario resolution at Exxon last spring, the media hailed a shift in attitudes toward climate risk and, more specifically, the risk of assets being stranded by the need for rapid emissions reduction. Preventable Surprises has released a report scoring the ten largest investors in utilities on their proxy voting record in the sector.

It highlights the contradiction between the Exxon vote and those cast in the utility sector, the largest source of greenhouse gas emissions in the US. BlackRock and Vanguard voted against 2°C resolutions at all nine US utilities targeted by shareholders for increased climate risk disclosure. In response to our questions, both asset managers provided statements expressing a preference for private engagement over public proxy votes.

Private engagement lacks accountability, transparency, or metrics. That is why the Task Force on Climate-Related Financial Disclosure (TCFD) recommended this year that all publicly traded companies provide the level of transparency sought in the 2°C scenario resolutions, which ask companies to disclose how they are managing the risks and opportunities that arise from aligning with the Paris Agreement. The TCFD is seeking to reduce systemic risk in financial markets–a goal shared by Preventable Surprises.

It is alarming that the two largest utilities investors could not find a single US utility where climate risk management was weak enough to merit public support for a 2°C resolution. Many coal-dependent US utilities have not only resisted the transition to renewable generation (which is both cleaner and now cheaper in many markets), they also have fought government policy aimed at reducing emissions.

Private engagement does not work in a sector where coal plants are subsidised by ratepayers in highly regulated states, increasing the risk of stranded assets. Fiduciary responsibility dictates that both portfolio risk and planetary risk require more forceful stewardship than the largest investors have shown to date. We hope the owners of the assets managed by Vanguard and BlackRock use this report to discuss with their managers how they are assessing risk in the most fossil fuel-intensive sector in America.


It is no surprise that energy companies are unwilling to vote themselves out of business, even while espousing belief in global warming/climate change. And it appears that wealth fund managers are down with risk assessments, but not for setting emissions reduction targets. They must know that any such commitments will bring the heavy legal artillery lobbing massive lawsuits in the name of accountability.

Update Dec. 6 :  Investor Activism is also Bad for Pensioners

From article at RealClearMarkets: Pension Funds’ Rush to Go Green Costs Retirees Their Green

For index fund managers and pension fund leaders to push an environmental agenda on the companies they invest in potentially entails more risk and lower returns on the wealth of those whose money they hold. According to a report released this week by the American Council for Capital Formation (ACCF), the California Public Employees Retirement System (CalPERS) — the nation’s largest public pension fund – has ramped up its focus on such ventures. The result: environmentally-driven funds made up four of the nine worst performing funds in the CalPERS portfolio and represented none of the system’s 25 top-performing funds this past year. As this focus on ESG-efforts has increased, CalPERS has moved from a $3 billion pension surplus in 2007 to a reported $138 billion deficit today. Yet those who manage the fund remain unwilling to put their own money on the line; the personal investment portfolios of the fund’s Chief Investment Officer and at least two other senior executives report no ESG-related investments at all. What’s up with that?

The ACCF report also highlights the role that CalPERS plays in convincing (some might say pressuring) other large institutional investors to join alongside it in attacking companies it invests in via the submission of shareholder proposals. BlackRock, which generates many millions in management fees from CalPERS each year, and which is currently vying to run the pension fund’s $26 billion private equity arm, voted alongside CalPERS on putatively ESG-related proposals for the first time in its history this past proxy season. According to Bloomberg, the combined assets of BlackRock and Vanguard alone are set to top $20 trillion by 2025. These two own basically everything in the universe. If activist funds like CalPERS are able to force passive funds like those controlled by BlackRock and Vanguard to join its ESG-masked-as-corporate-governance crusade, we’re in for a heck of a ride. And not in a good way.

It may be tempting to urge public pension managers to take a more proactive role and bet against companies whose products some of us, for whatever reason, disapprove of — or for those managers to use their positions to influence the business decisions of firms in which they have a stake. However, it would be much better for government workers, retirees, and taxpayers today and in the future if the investors managing the money of public pensions prioritized sound financial policy above all else.

Climate Activists storm the bastion of Exxon Mobil, here seen without their shareholder disguises.



  1. manicbeancounter · December 5, 2017

    Rising GHG levels are caused by global greenhouse gas emissions. I believe that around two-thirds of GHG emissions are from fossil fuels – the major ones being coal, gas and coal. If you look at the current biggest “suppliers” (Heede, R. Climatic Change (2014) 122: 229.) of global emissions the largest is Saudi Aramco followed by Gazprom, National Iranian Oil Company and Coal India. Exxon is fifth. If Chinese coal companies were a single entity it would easily be World No.1. So where are the activists for these State-owned entities to reduce their emissions? Impose costs and restrictions on Western Oil companies will just benefit foreign interests.
    From the IPCC AR5 less than 1000 GtCO2e of emissions are supposed to be sufficient to breach the 2C barrier. There are three times that amount of potential emissions from proven reserves. I did a rough breakdown.

    Given other sources of GHG emissions at least 75% has to be left below the ground. That includes China, Middle East, Russia, India etc.
    Then there are potential other sources of fossil fuels that are estimated, but not fully proven in extent. They could provide 8000 to >50000 GtCO2e of emissions.
    All the activists are doing is destroying jobs and value in largest successful businesses. They will not stop global warming.


    • Ron Clutz · December 5, 2017

      Maybe stopping capitalistic enterprises is the objective.


    • oiltranslator · December 7, 2017

      Somebody tell this character about water vapor…


      • Ron Clutz · December 7, 2017

        Manic takes the IPCC supposition that rising estimates of atmospheric CO2 come from burning fossil fuels. Even on that basis, killing the energy goose in advanced societies makes no sense. Willis has a good post up on the Solomon islands, whose economy ranks 187 out 212 (comparable to Chad) and main energy source is biofuels.
        Your comment goes to the question of H2O being 95% of radiative activity in the air, and there are natural CO2 fluxes 20 times human emissions.


  2. oiltranslator · December 7, 2017

    This has been going on for soooo long. Petr Beckmann’s “The Health Hazards of NOT Going Nuclear” picks this phenomenon apart with scientific precision. Petr was the smartest person I ever met, and his publications are still available from Amazon, etc. for any who choose to understand.


  3. Linwood Hernandez · December 17, 2017

    It’s nearly impossible to find knowledgeable folks during this topic, nevertheless, you sound like you know what you’re discussing! Thanks


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