Oil giant Shell braces for shareholder revolt over climate plans after record profits
Shell reported adjusted earnings of $39.9 billion for the full-year 2022.
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LONDON — British oil giant Shell‘s annual general meeting Tuesday looks set to be an acrimonious one, with climate-focused investors seeking to ramp up pressure on the energy major after an extraordinary run of record profits.
Follow This, a small Dutch activist investor and campaign group with stakes in several Big Oil companies, has tabled a resolution at Shell’s shareholder meeting. The meeting will be held online and in-person at the ExCel London exhibition center from 10 a.m. U.K. time.
Climate Resolution 26 calls on Shell to align its climate targets with the landmark Paris Agreement and commit to absolute carbon emissions cuts by 2030. These cuts, Follow This says, should include emissions generated by customers’ use of their oil and gas, known as Scope 3 emissions.
It echoes a 2021 ruling by a Dutch court that Shell should reduce its global carbon emissions by 45% by the end of the decade, which the company has appealed.
For the first time, Dutch pension managers MN and PGGM — both Shell shareholders — have endorsed the resolution. The institutional investors lead engagement with Shell on behalf of the world’s largest climate-focused investor group Climate Action 100+, which represents $68 trillion in assets.
It comes as investors increasingly see a warming planet as a growing risk to their portfolios. The burning of fossil fuels, such as oil, gas and coal, is the chief driver of the climate crisis.
Meanwhile, the Church of England Pensions Board, Britain’s Local Authorities Pensions Funds Forum, the the U.K.’s National Employment Savings Trust, and shareholder adviser PIRC have said they will either vote against or recommend a vote against the re-appointment of Shell Chairman Andrew Mackenzie.
Adam Matthews, chief responsible investment officer at the Church of England Pensions Board, reportedly said earlier this month that it had “lost confidence in the direction of the company.”
Shell, which is aiming to become a net-zero emissions business by 2050, has recommended shareholders vote against the motion tabled by Follow This. The company described Climate Resolution 26 as “unclear, generic and would create confusion as to Board and shareholder accountabilities.”
“We strongly disagree with the Follow This resolution and with those organisations which have recommended supporting it, or voting against Board members. There must be an emphasis on changing the use of energy as much as its supply, and this is reflected in our approach,” a spokesperson for Shell said in a statement.
“We will continue to invest in producing the energy the world needs today and for the foreseeable future. All of our investments have to provide a rate of return that our investors demand,” they added.
Proxy advisors Glass Lewis and ISS have both recommended that their clients vote against Resolution 26.
It is unlikely that those planning to vote in favor of the resolution will trigger a broader shareholder revolt or succeed in ousting board members, but Follow This says it hopes investors take the opportunity to compel the company to align their 2030 emissions reduction targets with the Paris accord.
At BP‘s annual general meeting last month, support for a Follow This resolution calling for tougher emission reduction targets by the end of the decade came in at 17%, although this was up from 15% last year.
Bumper profits
Big Oil posted bumper profits last year, bolstered by soaring fossil fuel prices and robust demand following Russia’s full-scale invasion of Ukraine.
For its part, Shell reported its highest-ever annual profit of nearly $40 billion in 2022. That comfortably surpassed the $28.4 billion in 2008 which Shell said was its previous annual record and was more than double the firm’s full-year 2021 profit of $19.29 billion.
Earlier this month, Shell posted adjusted earnings of $9.6 billion for the first three months of 2023.
The record profits were seen from within the industry as something of a vindication. Oil and gas giants came under immense pressure from shareholders and activists to invest in clean energy as oil demand cratered in the peak of 2020 Covid lockdowns.
The push toward green reform lost momentum last year, however, alarming investors and campaigners as the world’s leading climate scientists warned of “a brief and rapidly closing window to secure a livable future.”
After ultimately failing with several climate resolutions in 2022, Follow This’ Mark van Baal told CNBC earlier this year that it was clear from discussions with oil majors that they were determined to fend off activist and shareholder pressure and continue with their core oil and gas businesses.
Thanks to Trump’s repeated executive order attacks on US clean energy policy, nearly $8 billion in investments and 16 new large-scale factories and other projects were cancelled, closed, or downsized in Q1 2025.
The $7.9 billion in investments withdrawn since January are more than three times the total investments cancelled over the previous 30 months, according to nonpartisan policy group E2’s latest Clean Economy Works monthly update.
However, companies continue to invest in the US renewable sector. Businesses in March announced 10 projects worth more than $1.6 billion for new solar, EV, and grid and transmission equipment factories across six states. That includes Tesla’s plan to invest $200 million in a battery factory near Houston that’s expected to create at least 1,500 new jobs. Combined, the projects are expected to create at least 5,000 new permanent jobs if completed.
Michael Timberlake of E2 said, “Clean energy companies still want to invest in America, but uncertainty over Trump administration policies and the future of critical clean energy tax credits are taking a clear toll. If this self-inflicted and unnecessary market uncertainty continues, we’ll almost certainly see more projects paused, more construction halted, and more job opportunities disappear.”
March’s 10 new projects bring the overall number of major clean energy projects tracked by E2 to 390 across 42 states and Puerto Rico. Companies have said they plan to invest more than $133 billion in these projects and hire 122,000 permanent workers.
Since Congress passed federal clean energy tax credits in August 2022, 34 clean energy projects have been cancelled, downsized, or shut down altogether, wiping out more than 15,000 jobs and scrapping $10 billion in planned investment, according to E2 and Atlas Public Policy.
However, in just the first three months of 2025, after Trump started rolling back clean energy policies, 13 projects were scrapped or scaled back, totaling more than $5 billion. That includes Bosch pulling the plug on its $200 million hydrogen fuel cell plant in South Carolina and Freyr Battery canceling its $2.5 billion battery factory in Georgia.
Republican-led districts have reaped the biggest rewards from Biden’s clean energy tax credits, but they’re also taking the biggest hits under Trump. So far, more than $6 billion in projects and over 10,000 jobs have been wiped out in GOP districts alone.
And the stakes are high. Through March, Republican districts have claimed 62% of all clean energy project announcements, 71% of the jobs, and a staggering 83% of the total investment.
A full map and list of announcements can be seen on E2’s website here. E2 says it will incorporate cancellation data in the coming weeks.
Read more: FREYR kills plans to build a $2.6 billion battery factory in Georgia
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Tesla has reportedly delayed the launch of its new “affordable EV,” which is believed to be a stripped-down Model Y, in the United States.
Last year, Tesla CEO Elon Musk made a pivotal decision that altered the automaker’s direction for the next few years.
The CEO canceled Tesla’s plan to build a cheaper new “$25,000 vehicle” on its next-generation “unboxed” vehicle platform to focus solely on the Robotaxi, utilizing the latest technology, and instead, Tesla plans to build more affordable EVs, though more expensive than previously announced, on its existing Model Y platform.
Musk has believed that Tesla is on the verge of solving self-driving technology for the last few years, and because of that, he believes that a $25,000 EV wouldn’t make sense, as self-driving ride-hailing fleets would take over the lower end of the car market.
However, he has been consistently wrong about Tesla solving self-driving, which he first said would happen in 2019.
In the meantime, Tesla’s sales have been decreasing and the automaker had to throttle down production at all its manufacturing facilities.
That’s why, instead of building new, more affordable EVs on new production lines, Musk decided to greenlight new vehicles built on the same production lines as Model 3 and Model Y – increasing the utilization rate of its existing manufacturing lines.
Those vehicles have been described as “stripped-down Model Ys” with fewer features and cheaper materials, which Tesla said would launch in “the first half of 2025.”
Reuters is now reporting that Tesla is seeing a delay of “at least months” in launching the first new “lower-cost Model Y” in the US:
Tesla has promised affordable vehicles beginning in the first half of the year, offering a potential boost to flagging sales. Global production of the lower-cost Model Y, internally codenamed E41, is expected to begin in the United States, the sources said, but it would be at least months later than Tesla’s public plan, they added, offering a range of revised targets from the third quarter to early next year.
Along with the delay, the report also claims that Tesla aims to produce 250,000 units of the new model in the US by 2026. This would match Tesla’s currently reduced production capacity at Gigafactory Texas and Fremont factory.
The report follows other recent reports coming from China that also claimed Tesla’s new “affordable EVs” are “stripped-down Model Ys.”
The Chinese report references the new version of the Model 3 that Tesla launched in Mexico last year. It’s a regular Model 3, but Tesla removed some features, like the second-row screen, ambient lighting strip, and it uses fabric interior material rather than Tesla’s usual vegan leather.
The new Reuters report also said that Tesla planned to follow the stripped-down Model Y with a similar Model 3.
In China, the new vehicle was expected to come in the second half of 2025, and Tesla was waiting to see the impact of the updated Model Y, which launched earlier this year.
Electrek’s Take
These reports lend weight to what we have been saying for a year now: Tesla’s “more affordable EVs” will essentially be stripped-down versions of the Model Y and Model 3.
While they will enable Tesla to utilize its currently underutilized factories more efficiently, they will also cannibalize its existing Model 3 and Y lineup and significantly reduce its already dwindling gross margins.
I think Musk will sell the move as being good in the long term because it will allow Tesla to deploy more vehicles, which will later generate more revenue through the purchase of the “Full Self-Driving” (FSD) package.
However, that has been his argument for years, and it has yet to pan out as FSD still requires driver supervision and likely will for years to come, resulting in an extremely low take-rate for the $8,000 package.
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Environment
Podcast: how Elon killed Tesla Model 2, global EV sales surge, and Chinese EVs keep killing it
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