By David Meyer
December 3, 2018

A year ago, Royal Dutch Shell said it was going to halve the carbon intensity of its operations and products by the middle of the century. That followed investor pressure, and now the energy giant’s shareholders have scored another major win.

Shell issued a big announcement Monday: Not only will it be setting short-term targets in line with its longer-term “Net Carbon Footprint” ambition, but it will also be linking these targets with executive remuneration. Greener Shell = richer executives, or at least that’s the plan — the link will be subject to a shareholder vote at the company’s 2020 AGM.

The move is not entirely unprecedented — Statoil’s head of Norwegian production and development gets more money when absolute carbon emissions fall — but the scale of Shell’s proposal, which reverses a previous aversion to hard targets, is something else. According to the Financial Times, the link between long-term financial incentives and emissions reductions could affect up to 1,200 Shell executives.

The institutional investors that forced the shift were led by the Dutch asset manager Robeco and the Church of England Pensions Board.

“Shell appreciates the long-term relationship with its institutional investors and acknowledges the positive role that can be played by ongoing engagement,” the company said. “Shell acknowledges and agrees with the importance attached by its investors to the issue of climate change, and also agrees that Shell’s future success is contingent on its ability to effectively navigate the risks and the opportunities presented by climate change.”

From 2020, Shell will institute three-to-five-year Net Carbon Footprint targets that are supposed to help it achieve its longer-term goals: a 20% reduction in the footprint by 2035, and a 50% reduction by 2050. Shell said it would “seek third-party assurance” that it was meeting its targets, and would publicize its assurance statements.

As for the planned link between executive pay and the meeting of those targets, details are lacking for now, but the idea is for measures and targets to “evolve as time progresses over the years to 2050.”

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