Specific issues we have engaged on with Shell are arctic drilling, shale gas, Nigerian oil pollutions, remuneration of the Board, gas flaring and, lately, the CO2 challenges Shell is facing.
Over the years, the company has seriously improved its responsiveness, has taken decisive action, and is showing good progress on our engagement objectives. Our engagement with the company continues.
Breach of the UN Global Compact
One of the most heard criticisms towards Shell’s exploration operations relates to devastating gas flarings and oil pollutions of the Niger Delta in Ogoniland, Nigeria. Various NGOs including Friends of the Earth and Amnesty International have made allegations of a breach of international norms on environmental pollution, which qualify as a non compliance with the UN Global Compact Principle on Environmental Conduct. The UN Global Compact requires companies to embrace, support and adopt a number of core values within their sphere of influence in the field of human rights, labor standards, the environment and anti-corruption measures.
Systematic and severe breaches of the UN Global Compact constitute financial, operational and reputational risks for a company and its stakeholders (e.g. shareholders). Companies must therefore avoid breaching these principles. If they do commit a breach, they should remedy it and prevent future occurrences.
For breaches of the UN Global Compact Principles we run an enhanced engagement program. This is an intensive, three-year program, aiming to effectuate a change in conduct of companies with severe controversial behavior. In 2010 and 2011, we started the engagement with Shell on two UN Global Compact breaches: oil spills in the Niger Delta and gas flaring in Nigeria.
Oil spills in the Niger Delta
Key points of this engagement include:
Royal Dutch Shell has been criticized for frequent oil spills in the Niger Delta which have caused serious damage to the environment, human health and local livelihoods.
NGOs allege that the company has failed to take sufficient preventive measures and appropriate actions including swift clean-up, remediation and compensation.
Shell Petroleum Development Company (SPDC) holds a 30% stake in concessions in the Niger Delta, the majority within the joint venture is owned by the Nigerian government.
Key points include:
Royal Dutch Shell has been criticized for its gas flaring activities in the Niger Delta because the combustion of associated gas produces highly toxic pollutants including greenhouse gas, particulate matters, nitrogen dioxide, Sulphur dioxide and so forth.
Emission from gas flaring has led to severe damage to the environment, human health and local livelihoods.
The gas flaring breach has currently been lifted. Gas flaring by Shell has been significantly reduced, as the company has invested a lot in the infrastructure necessary to deal with the gas without burning it.
Results of our engagement: Shell ready to clean up its act
After three years of engagement, Shell has taken responsibility for cleaning up most of the backlog of spills at legacy sites in the Delta. These efforts however are not easily recognized by the world because there is a huge increase in number and volume of spills due to sabotage. While Shell tries to combat thefts on its pipeline with innovative techniques such as optic fibre, the company estimates that fixing the problem goes much beyond Shell’s capabilities. Shell now considers that theft and sabotage have reached an industrial level in Nigeria and they are still growing. Consequently Shell started engaging with the Nigerian, UK and Netherlands governments to find a way to fix the problem.
A hugely complicated factor is that the tremendous pollution in Ogoniland, part of the Niger Delta, still exists and although Shell is willing to play its part and is cleaning its right of way (the area on and around the pipeline), it is the main responsibility of the Nigerian government to clean up the entire area. Shell is leading discussions with the Nigerian government and other groups with the aim of setting up a USD 1 billion fund to clean up the area but the company has limited power in this complicated matter. Due to the ever increasing professional theft of oil from this region, it is currently impossible for the company and the relevant parties to clean up the mess in the Niger Delta. We therefore think that the company is no longer in charge itself to meet our commitment target. It is now in the government’s hands. Consequently, we consider the dialogue with the company successfully closed on this topic.
In addition to these two engagement topics, we also talk to Shell about other issues, such as arctic drilling, remuneration and CO2 emissions.
Arctic drilling: Prepare for environmental incidents
In 2015, Shell announced to restart drilling in in the Chuckchi Sea in the Arctic area. The environment risks are the most challenging issues. The main point of contention is the oil spill response. As US regulations require the response time to a spill to be only 60 minutes, Shell needs to take every support with them, which means 28 support vessels, 2 helicopters and other equipment as the infrastructure from the mainland is simply not there. Only in 2030 is the exploration site expected to be in production if all challenges have been dealt with. Later in 2015, Shell decided to shut down its drilling activities in the Arctic. Consequently, we have closed our dialogue with the company on this issue successfully.
Lead investor at Shell’s AGMs: sustainable remuneration and environmental issues
Within Eumedion, the forum for corporate governance and sustainability, we are the lead investor for the Annual General Meetings of Shareholders (AGMs) of Shell. This means in practice that we speak and/ or make a voting statement at the AGM of Shell, not only on behalf of Robeco but also on behalf of other institutional investors. We use our representation at the AGM as an engagement instrument where we have direct access to the whole board of Shell.
The topics we addressed over the years are a more sustainable remuneration policy and environmental challenges. In 2016, at Shell’s Extraordinary General Meeting, we expressed that we recognize the strategic merit of the acquisition of BG Group and the potential to achieve greater financial results than either company could likely generate on its own in the long term, particularly in the midst of an evolving and challenging energy industry. Our representation at these AGMs continues.
The dialogue continues on CO₂ challenges
We continue our dialogue with Shell on the risks the company is facing in the light of climate change management and stranded assets. If global warming treaties are actually signed and implemented after COP21, stranded assets will become an unprecedented problem. Research by Nature magazine published in January 2015, suggests that one-third of oil reserves, half of gas reserves and 80% of coal reserves might go unused up until 2050. Divestment, however, is not a solution. For reserves held by corporates, divestment simply means that one institution is buying what another is selling.
A better solution is to encourage carbon companies to change their business models. Such approaches have been echoed in recent shareholder resolutions such as the ‘Aiming for A’ campaign in the UK, which has successfully persuaded Royal Dutch Shell and BP to disclose their climate strategy and the resilience of their operating portfolios to carbon limits. Robeco also voted in favor of the ‘Aiming for A’ shareholder resolutions. We will continue our constructive dialogue with Shell on structural solutions to the carbon challenges the company is facing.
当資料は情報提供を目的として、Robeco Institutional Asset Management B.V.が作成した英文資料、もしくはその英文資料をロベコ・ジャパン株式会社が翻訳したものです。資料中の個別の金融商品の売買の勧誘や推奨等を目的とするものではありません。記載された情報は十分信頼できるものであると考えておりますが、その正確性、完全性を保証するものではありません。意見や見通しはあくまで作成日における弊社の判断に基づくものであり、今後予告なしに変更されることがあります。運用状況、市場動向、意見等は、過去の一時点あるいは過去の一定期間についてのものであり、過去の実績は将来の運用成果を保証または示唆するものではありません。また、記載された投資方針・戦略等は全ての投資家の皆様に適合するとは限りません。当資料は法律、税務、会計面での助言の提供を意図するものではありません。 ご契約に際しては、必要に応じ専門家にご相談の上、最終的なご判断はお客様ご自身でなさるようお願い致します。 運用を行う資産の評価額は、組入有価証券等の価格、金融市場の相場や金利等の変動、及び組入有価証券の発行体の財務状況による信用力等の影響を受けて変動します。また、外貨建資産に投資する場合は為替変動の影響も受けます。運用によって生じた損益は、全て投資家の皆様に帰属します。したがって投資元本や一定の運用成果が保証されているものではなく、投資元本を上回る損失を被ることがあります。弊社が行う金融商品取引業に係る手数料または報酬は、締結される契約の種類や契約資産額により異なるため、当資料において記載せず別途ご提示させて頂く場合があります。具体的な手数料または報酬の金額・計算方法につきましては弊社担当者へお問合せください。 当資料及び記載されている情報、商品に関する権利は弊社に帰属します。したがって、弊社の書面による同意なくしてその全部もしくは一部を複製またはその他の方法で配布することはご遠慮ください。 商号等： ロベコ・ジャパン株式会社 金融商品取引業者 関東財務局長（金商）第２７８０号 加入協会： 一般社団法人 日本投資顧問業協会