Shell under pressure as net zero plan disappoints investors and campaigners

Tom Belger
·Finance and policy reporter
·3-min read
Shell stocks dipped on Thursday. Photo: Rafael Henrique/SOPA/LightRocket via Getty
Shell stocks dipped on Thursday. Photo: Rafael Henrique/SOPA/LightRocket via Getty

Shares in energy giant Royal Dutch Shell (RDSB.L) slid on Thursday, as its plan to reach net zero emissions left investors and climate campaigners disappointed.

The company pledged to be carbon-neutral by 2050, and outlined a series of new plans and targets to help limit its contribution to climate change. It said more than 16,500 staff’s pay was linked to its emissions reduction targets, and will invest in an extra 25 million tonnes a year of carbon capture and storage capacity by 2035.

It vowed to “rebalance” its portfolio towards a transition to cleaner energy, saying total carbon emissions peaked in 2018 and oil production in 2019. Renewable electricity provision will be doubled by 2030, and Shell hopes for a “double-digit share” of global clean hydrogen sales.

Shell will spend between $2bn (£1.4bn) and $3bn a year on “renewables and energy solutions” as part of its net-zero drive.

The plans were welcomed by the Church of England, which has sought to pressure energy companies to greater action on emissions through its pension fund.

READ MORE: Oil prices higher as OPEC+ curbs supply

Adam Matthews, ethics and engagement director of its pensions board, said Shell’s net-zero target was “industry-leading and comprehensive.” The commitment includes oil and gas produced by others but sold by Shell.

But investors appeared less satisfied by the proposals, with Shell stocks sinking 1.8% in morning trading on the London Stock Exchange.

Spending no more than $3bn annually on cleaner energy sources “seems a low number percentage wise” compared with spending in other areas, said Michael Hewson, chief analyst at CMC Markets UK. He noted total annual capital expenditure added up to $20bn.

WATCH: Shell profits sink to 20-year low

Russ Mould, investment director, at AJ Bell, noted it would invest around twice as much in gas and chemicals and four times as much in oil and gas as renewables.

“Shell saying that its oil production has peaked is a major turning point for the business. However, some people will be surprised that it isn’t being more aggressive with its move towards renewable energy,” he said.

He said the company had “lost a lot of fans” by slashing its dividend last year, but also risked losing further investor interest to other greener companies.

READ MORE: Shell stocks fall despite reintroducing dividend

On the 2050 target, Mould added: “We’re living in a world that demands businesses be environmentally friendly today, not long in the future.”

The company also faced fiercer criticism from environmental campaign group Greenpeace.

“Shell’s climate plan’ is outrageously inadequate. A climate plan that doesn't involve slashing oil production & serious investment in renewables is a plan to keep the status quo not for the major changes we need to tackle the climate emergency,” it said in a statement.

“This just goes to show that we can't rely on oil companies to make the changes we need - the government needs to step in to make sure we have a proper plan to move away from fossil fuels & transition workers into green jobs.”