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Shell (SHEL.L) was dealt a bloody nose by shareholders calling for more transparency over how increasing gas production aligns with its climate commitments.
The oil major saw 20.56% of votes supporting a resolution put forward by shareholders at its annual general meeting (AGM) held near Heathrow Airport on Tuesday.
The proposal called for the board to disclose whether and how its liquified natural gas (LNG) demand forecast, production and sales targets are consistent with its climate targets.
While not legally binding, support for shareholder resolutions can put pressure on business leaders to respond to the matters raised, and more than 20% of dissent against the board can be considered a rebellion.
Previous shareholder resolutions focused on climate received similar levels of support over the last five years, ranging from 18.6% to 30.5%.
Responding to the results, Shell said the board will meet its obligation to explain what actions it will take to consult with shareholders to understand the reasons why just over a fifth supported the resolution.
In his opening address, chair Sir Andrew Mackenzie defended Shell’s recent shift of focus back towards fossil fuels.
“Shell believes the world needs more liquified natural gas to replace coal in Asia for energy security, and to complement and enable renewables,” he said.
“So we expect LNG will play a critical role in the transition.”
Sir Andrew also argued that Shell expects all demand to stay strong for the “foreseeable future”, meaning continued investment in fossil fuels will be needed.
“Let’s be clear, no business can operate outside the rules of supply and demand.
“So for the energy transition to succeed, there must also be demand for low carbon options from customers who are willing and able to pay for it.”
During the nearly three-hour meeting, the board was repeatedly challenged about its impact on the planet and commitment to cutting emissions to zero overall by 2050 – known as net zero.
Asked whether Shell would meet the demands of the shareholder resolution, chief executive Wael Sawan said: “There is not a company that discloses more or better information on LNG than Shell.”
Mr Sawan then made a plea to shareholders not to support “these sorts of resolutions”.
“What they are undermining is the ability of the board that you have elected to be able to drive the strategy of the company to do their job,” he said. “Challenging and providing input is very welcome but let’s have those engagements and not do it through the resolutions.”
The resolution was co-filed by Brunel Pension Partnership, Greater Manchester Pension Fund, Merseyside Pension Fund and the Australasian Centre for Corporate Responsibility (ACCR) with the support of activist group ShareAction and more than 100 individual investors.