Shell Oil Company to Link Executive Compensation to Lowering Net Carbon Footprint

Chris Gaetano
Published Date:
Dec 3, 2018

Petroleum giant Royal Dutch Shell announced that, for the first time, it will link executive compensation with the degree to which the firm is able to meet targets for reducing its net carbon footprint, providing a financial incentive for leaders to meet the company's climate change control goals. The move is the result of pressure from institutional investors such as the Church of England Pensions Board and the European Institutional Investors Group on Climate Change. 

"As institutional investors and in the context of the Climate Action 100+ initiative [a global investor initiative to pressure companies to meet climate change goals], we have engaged with Shell to further build on its ground-breaking Net Carbon Footprint ambition by setting short-term Net Carbon Footprint targets consistent with this ambition and integrating these targets into executive remuneration," said a statement from the investor group. "As long-term investors, we share the desire of the Board and management of the company to seek a positive future for the company which is aligned to the goals of the Paris Agreement on climate change. This has been our motivation for this engagement."

Shell now aims to reduce its net carbon footprint by around half by 2050 and by around 20 percent by 2035 as an interim step. To do so, the company will start setting specific net carbon footprint targets for shorter-term periods (three or five years), with the target-setting process starting from 2020 and running until 2050. This goal will be incorporated into the company's long-term remuneration policy, with measures for each performance period set on an annual rolling basis at the time of the award. Shell is still discussing the specifics of the plan with shareholders, including details relating to the appropriate remuneration structure and appropriate measures and metrics.


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