The scope 3 emissions of oil and gas companies are attracting increasing attention from investors.
This week, 27 investors jointly submitted a resolution calling on Shell to set stricter climate targets and align the mid-term targets with the Paris Agreement.
The climate resolution is led by the non-profit organization Follow This, with an investment group represented by 27 investors holding a total of approximately 5% of Shell's shares and representing assets totaling approximately $4 trillion, including Amundi, Europe's largest asset management company, and The National Employment Savings Trust (NEST), which manages nearly a quarter of British workers' pensions.
Shell stated, "The Shell board of directors has previously stated to shareholders that the resolution 'Follow This' is unrealistic and overly simplistic. It will not have any effect on mitigating climate change, will have a negative impact on customers, and will go against the interests of the company and shareholders."
Shell also stated that as the world transitions towards a low-carbon future, targeted investments in oil and natural gas are still needed in the coming decades to meet global energy demand.
"We urge Shell to establish credible Scope 3 absolute emission targets," said Diandra Soobiah, responsible investment manager at NEST
Shell's current climate target is to reduce emissions from Scope 1 and Scope 2 by a total of 50% by 2030 compared to 2016, and there is currently no absolute emission target set for Scope 3.
Scope 3 emissions, also known as value chain emissions, include emissions generated by supply chain, transportation, and consumer use. Currently, Scope 3 emissions account for over 95% of Shell's total emissions.
Shell Chairman Andrew Mackenzie previously stated that the board had considered setting an absolute emission target for Scope 3, but found that it would go against the economic interests of our shareholders and would not help alleviate global warming.
At Shell's upcoming annual general meeting in May, all shareholders will vote on the Follow This resolution. Mark van Baal, founder of Follow This, stated that it is expected that the number of shareholders supporting the resolution will increase before the meeting.
In May of last year, Shell's annual shareholder meeting held in London was once chaotic as the company's investors rejected new climate targets and protests caused the meeting to be postponed.
Last year, 20% of shareholders voted in favor of the Follow This climate resolution. Follow This has updated the climate resolution this year, which includes replacing last year's 2030 target with a mid-term target with an unclear timeline.
According to a report by the International Energy Agency (IEA), the development and use of oil and natural gas account for approximately 15% of global energy related emissions, equivalent to 5.1 billion tons of greenhouse gas emissions. Among them, the emissions of Scope 1 and Scope 2 generated by oil and gas activities account for nearly 15% of the total energy related emissions, while the use of oil and gas leads to an additional 40% of emissions.
The International Energy Agency stated that many oil and gas companies have announced climate targets to reduce emissions in Scope 1 and Scope 2, but most of the commitments do not match the rate of decline in the Agency's net zero emissions scenario by 2050, and they plan to use offsetting to achieve climate targets.
The International Energy Agency mentioned in its report that oil and gas producers have the opportunity to address emission issues through a series of measures, including addressing methane emissions, using low emission electricity to power upstream facilities, equipping carbon capture technology, and expanding the use of low emission electrolytic hydrogen in refineries.
But only by reducing the use of more fossil fuels can we significantly reduce value chain emissions. According to the Financial Times, one of the difficulties in reducing emissions in Scope 3 is that it is unclear who should be responsible for reducing fossil fuel demand. The Financial Times cited data from the IEA, showing that the average oil demand in 2023 reached 102.2 million barrels per day, the highest annual level in history. This also means that energy companies may be more supportive of continuing to invest in oil and gas than in previous years.
A survey released by non-profit think tank Carbon Tracker last year showed that the progress of large oil and gas companies in achieving net zero carbon emissions targets seems to have stagnated or even regressed. Its survey shows that most large North American oil and gas companies have not yet set Scope 3 targets, and these companies believe that customers should be responsible for their emissions.
Carbon Tracker stated in its report that if the company's management is not committed to reducing emissions in Scope 1 and Scope 2, it is not focused on its own efficiency and profitability, and the management that is not targeting Scope 3 does not recognize the key indicators of future structural changes in demand.