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Climate pressure from employees, shareholders rattles Big Oil

The likes of Shell and ExxonMobil are meeting resistance to ‘business as usual’

A Shell gas station in London this month. (Alastair Grant/AP)

Five years ago, Shell chief executive Ben van Beurden sat down for an interview with The Washington Post and said, “We believe that climate change is real. We believe that the threat of climate change is real. And we believe that action is needed.”

Then he added: “It doesn’t mean we have to kiss hydrocarbons goodbye. In fact, we can’t. But it does mean that we have to make more intelligent choices.”

Today, however, Shell and other oil companies are under fire from those who don’t believe industry leaders are making intelligent choices. Dissident shareholders sought to use annual meetings to press their cases this week. And at Shell’s annual meeting in London on Tuesday, dozens of climate activists wore “Christian Climate Action” T-shirts and rhythmically chanted “We will, we will stop you,” forcing the company’s chairman to halt the proceedings for over an hour.

At the heart of the matter is the disagreement over the purpose of large oil and gas companies. Should they do further exploration to meet demand for their products, especially from the world’s poorer nations? Or should they switch to building renewable energy projects while winding down their traditional businesses to meet climate change targets?

“Pressure is mounting at the climate justice front line,” said Caroline Dennett, a Bristol, England-based safety expert on contract with Shell who quit in protest over the company’s climate policies this week. On her LinkedIn page and in a note sent to 1,400 Shell employees, she accused the company of “double talk” and of expanding its oil and gas operations “against the clear warnings from scientists.”

“Shell is fully aware that their continued oil & gas extraction and expansion projects are causing extreme harms, to our climate, environment, nature and to people,” wrote Dennett, who was hired to help Shell avoid the mistakes BP made that led to a massive oil spill in the Gulf of Mexico. “I can no longer work for a company that ignores all the alarms and dismisses the risks of climate change and ecological collapse.”

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“I would just really love to understand the executive committee,” Dennett said later in an interview. “When they look in the mirror, I just wonder what they see. Do they really believe the strategy they have is really compatible with a livable world?”

Shell’s chief executive, van Beurden, who recently went on “The Problem with Jon Stewart” to make his case, said that shareholder resolutions at this week’s annual meeting showed that “the overwhelming majority of shareholders continue to support Shell” and that the company was “on the right track.”

In London, though, the message was ambiguous. Support for Shell’s climate plan declined 10 percentage points to just under 80 percent. But support also fell for a resolution brought by Follow This, a climate group critical of Shell, to just 20.3 percent of votes cast, down from about 30 percent last year.

“The Company has set ambitious targets in line with the 1.5°C goal of the Paris Agreement,” Shell said in its reply, urging shareholders to reject the Follow This resolution. “Its strategy supports an orderly transition, one that maintains the supply of oil and gas where it is still needed, and that accelerates the shift to low- and zero-carbon energy.”

One indication that oil companies aren’t winning the battles over substance and image is the new set of hurdles they face with recruiting.

Investing in fossil fuels is “a dead end — economically and environmentally. No amount of greenwashing or spin can change that,” U.N. Secretary General António Guterres said recently in a graduation speech at Seton Hall University. “So my message to you is simple: Don’t work for climate-wreckers. Use your talents to drive us towards a renewable future.”

Mark Brownstein, senior vice president for energy at the Environmental Defense Fund, said he has spoken to CEOs of energy companies who “are worried that sticking to business as usual isn’t viable in the competition for the talent of today.” Many of the firms working on renewables are smaller, more innovative and more flexible than the oil giants.

Brownstein, who years ago left a big New Jersey utility to join the environmental group, said that two people had left Shell to follow similar paths: Andrew Baxter, who was the lead author on a recent EDF report, and Shareen Yawanarajah, who is leading energy transition efforts in Southeast Asia for EDF.

The war in Ukraine has played a role in sending mixed messages to oil and gas companies. International sanctions against Russia have tightened oil and gas markets, driving up prices and threatening the security of energy supplies. But governments are also seeking to accelerate the installation of renewable projects such as solar and wind.

“This season, investors are giving Big Oil a kind of climate reprieve, a climate pause,” said Mark van Baal, head of Follow This. “The Ukraine war and the energy crisis has changed the picture for investors, and that’s very bad news for the fight against climate change. Both crises should be dealt with simultaneously by investing these windfall profits in renewables.”

The climate crisis has also affected financial firms that have supported fossil fuel companies.

On May 19, 72 percent of insurance giant Chubb’s shareholders voted against management and in favor of a resolution asking the firm to report on how it plans to map out the greenhouse gas emissions associated with its underwriting and investment activities and still achieve net-zero emissions by 2050.

BlackRock, the largest asset manager in the world, has issued guidance that many critics say is not forceful enough for this era. The company, whose support helped clinch victory for some investment initiatives last year, said it would avoid resolutions that were “unduly prescriptive” or that called for “changes to a company’s strategy or business model.”

Other financial firms and advisers are weighing the dynamics in the new world of ESG — environment, sustainability and governance. In recent years, financial advisers have been able to argue that ESG investing is not only virtuous, but also profitable. Now, however, surging oil and gas prices and the profits they bring have turned climate investing on its head.

Daniel Klier, chief executive of ESG Book, a data firm, said ESG funds were largely made up of technology stocks. “By design, they are low-carbon, but this year, oil and gas will have a knockout year,” he said. “We told the world to buy these funds by saying you’re doing good for the world and your investment. But this may not hold in the short term when the markets are a bit choppy.”

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This week, the conflict over how to invest for climate change spilled into the open at HSBC, a major bank. Stuart Kirk, its top executive for responsible investing since July, gave a presentation titled “Why investors need not worry about climate risk,” playing down warnings of a climate crisis as “unsubstantiated” and “shrill.”

He said international estimates of lost economic output by the end of the century were small enough to be “more or less irrelevant.”

“Who cares if Miami is six meters underwater in a hundred years,” Kirk said, making a case for adaptation. “Amsterdam has been six feet underwater for ages, and that’s a really nice place. We will cope with it.”

HSBC promptly suspended him.

Climate change may also be an influence at ExxonMobil, widely considered to be historically the most rigid and unyielding company in the industry.

A year ago, three energy hands won seats on the ExxonMobil board over the objections of management, which spent tens of millions of dollars to keep them off. The three new directors, elected from an upstart slate put forward by the private equity firm Engine No. 1, were supposed to instill greater financial oversight and a greater sense of climate action.

Christopher James, executive chairman of Engine No. 1, said he is pleased so far. Long an opaque enterprise, Exxon has recently disclosed its political donations. It has also improved its allocation of capital, which has meant increased drilling in places such as the Permian Basin, James said.

Moreover, he said, Exxon has reached outside the company for a person to run an expanded unit for low-carbon solutions to the energy problem. Exxon moved a large number of people to Houston to work on it. That business — which Exxon says could bury massive amounts of carbon dioxide underground in old geologic structures — is key to the company’s future, James said.

Adding the senior outsider at Exxon was virtually “unheard of,” he said. As for the CO2 sequestration and other changes, James said, “in Exxon’s terms, they’re monumental shifts.”

For those trying to distinguish among the big international oil companies, BP and Shell were usually viewed as politically and strategically better than others.

Shell’s van Beurden would not comment this week. In a 2014 interview, he said that “I’m not against renewable resources.” But he also said it was “a fantasy” to argue that renewable resources could supply all the energy needed.

“To just demonize a number of international oil companies that collectively make up 2 or 3 percent of the total world resource base and say ‘Disinvest yourself from that’ is not going to be a solution,” he said at the time.

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But the pressure on Big Oil continues.

“Shell was, a few years ago, visionary,” said Dennett, the safety contractor. Now, she says, “they don’t have a vision for the future that doesn’t involve continued extraction.”

“We’re not talking about turning the tap off right now. That would be catastrophic for society,” she added. But to add new production frontiers while acknowledging climate change, “that’s where the huge contradictions are and why I’m saying they’re ignoring the risks of climate change and not behaving in a safe way, because they’re putting us all at risk.”

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