USS response to Open Letter call for support on Shareholder Resolution

So USS have refused to support Shareholder Resolution 21 at Shell’s AGM on May 19th. Their response is below. This is of course incredibly disappointing and we will continue to press USS to provide us with a pension that doesn’t rely on carbon intensive investments. We are asking for a meeting with Simon Pilcher Chief of Investment Strategy at USS as we were promised in January. Thanks all for continuing support.

Here is USS’s response:

Thank you for your email of 10th May and for forwarding the petition by USS members calling for USS to support the shareholder resolution at Shell’s forthcoming AGM.

Upon careful consideration, we have decided to vote against this resolution which is calling for Shell to set and publish targets aligned with the goals of the Paris climate agreement. This is because we do not believe that there is a sufficiently large gap between what the company has already committed to compared to the Paris Agreement. Indeed, we believe that voting for the resolution would be counter-productive and potentially undermine the management team who has responded to engagement and made significant progress in its approach to climate change in recent years.

I detail below the reasons for our decision:

As you know, USS has been one of a number of investors (under the auspices of the Climate Action 100+) to engage with Royal Dutch Shell (RDS) over recent years to encourage the company’s alignment with the Paris goals.  We believe that such active engagement and stewardship is a key responsibility of being an asset owner.   The outcomes of the CA100+ engagements have included two joint statements between the company and investors, the latest of which was in April 2020.  The key points of the RDS commitments in its April 2020 statement are as follows:

  • RDS plans to become a net-zero emissions energy business by 2050 or sooner (covering scope one, two and three emissions)
  • An ambition to be net zero on all the emissions from the manufacture of all their products (scope one and two) by 2050 at the latest;
  • Accelerating Shell’s Net Carbon Footprint ambition to be in step with society’s aim to limit the average temperature rise to 1.5 degrees Celsius in line with the goals of the Paris Agreement on Climate Change. This means reducing the Net Carbon Footprint of the energy products that Shell sells to its customers by around 65% by 2050 (increased from around 50% as stated in 2018), and by around 30% by 2035 (increased from around 20%);
  • A pivot towards serving businesses and sectors that by 2050 are also net-zero emissions

USS supports the position that there needs to be a transition to a low carbon future, a process by which oil and gas companies can achieve the Paris goals.  This transition will require the use of fossil fuels for the foreseeable future as policy makers set the framework for a low carbon future, society shifts its preferences, and the use of low carbon alternatives grows to replace existing energy sources.  RDS has made a commitment to align with the Paris climate agreement (beyond most companies in the sector) including targets and realignment of remuneration to incentivise this shift.  They have also committed to working with the users of its products (responsible for 85% of emissions) to develop lower carbon alternatives. We do not believe there to be a large gap between the company and the requests made by the resolution.

In summary, USS supports the approach which RDS is adopting and, as a result, the scheme will not be supporting Resolution 21 as we believe that it would send the wrong message to management and would be counter-productive to our active engagement approach which has made significant progress with the company towards it meeting the Paris-aligned climate targets.

I know this will come as a disappointment to you and your supporters but please be assured that, as long as we continue to hold Shell in our portfolio, USS will monitor carefully the actions of Shell to ensure that they adhere to their commitments and will continue to engage robustly with the board and senior executives on a regular basis.

Kind regards

Dr Daniel Summerfield

Head of Corporate Affairs

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