Nest calls for Shell to adopt climate targets on behalf of millions of UK pension savers

NEST, which invests the pensions of over 6 million UK workers, has today signaled its support for a shareholder resolution at Shell which asks the company to set greenhouse gas intensity targets aligned with the Paris climate goals.  
 
The pension scheme, which last year established a bespoke investment fund to manage the risks of climate change within its members’ portfolios, has nearly £7million invested in Shell on behalf of UK workers. 
 
The resolution was filed by Dutch investor group Follow This and the UK responsible investment charity ShareAction. NEST is pre-announcing its support for the resolution to encourage other investors to follow suit. 
 
NEST will also vote against the company’s pay report for the second year running. It voted against management in 2017 for failing to link executive pay to targets to move towards a low carbon economy. Shell announced ‘ambitions’ to reduce greenhouse gas emissions following shareholder pressure last year, but executives’ incentives still do not support the company’s public commitments. In spite of this, the company is proposing to pay its chief executive Ben van Beurden €9m, in a year when there are also investor concerns about safety issues in its supply chain.
 
Commenting on its voting decisions, NEST chief investment officer Mark Fawcett said,
 
‘We commend Shell’s ambition to reduce its carbon footprint but believe it can and should go further in the interests of all shareholders, including 6 million UK workers who invest in the company via their NEST pension. 

‘Climate change is driving one of the biggest economic trends of our generation and the oil and gas industry are particularly vulnerable to change. We want to see companies successfully navigating the transition to a low carbon economy and that means them being part of the solution rather than the problem. 

‘We think that concrete targets, against which executive incentives can be set, are a sensible way to measure progress and enable investors to assess ongoing risks. We hope to see investors joining together on this vital issue to signal not just to Shell but to the wider oil and gas industry that setting long-term and intermediate targets provides, rather than hinders, the flexibility to adapt and change in line with the internationally agreed Paris goals in a staged and progressive manner.’ 
 
In 2017 NEST established, in partnership with global fund manager UBS, a climate aware fund that aims to align its members’ investments with the 2015 Paris agreement. It underweights companies in the highest emitting sectors that are not making the necessary changes to meet the Paris commitments and overweights companies that are showing leadership or working on solutions such as renewable energy and green technologies. The fund also has a voting and engagement strategy to help encourage companies that are not making sufficient progress to do more to future-proof their business models.
 
NEST sees this resolution as aligned with the objectives of its climate aware fund.

Notes to editors:
Background information:
For more information on the resolution see: https://shareaction.org/wp-content/uploads/2018/03/InvestorBriefing-FollowThisResolution.pdf 

NEST will vote in favour of the Follow This shareholder resolution at this year’s AGM at Shell. Whilst NEST recognises and commends the progress Shell has made in setting a net carbon footprint ambition that covers scope 1-3 emissions it would like to see the company transform this into targets that are in line with the Paris Agreement. NEST believes this is important because targets aligned to a two degree trajectory will show leadership and a concrete commitment to meeting the Paris Agreement which is a key objective of its climate aware fund. It is also important that NEST supports the industry’s push for targets across the oil and gas sector so investors can better assess and compare the progress companies are making in transitioning to a low carbon economy. 
 
NEST believes the terms of the resolution are achievable by an industry leading company like Shell who has already reported and estimated its carbon emissions. Investors need to signal that setting long-term targets and intermediate objectives should provide not hinder the flexibility of companies to adapt and change their business in a staged and progressive manner.   
 
Last year NEST voted against executive pay largely due to concerns that insufficient progress had been made in linking executive remuneration with the move towards a low carbon economy. This would be difficult to achieve without the use of targets.