NewsmakersJune 14, 2023

Norway’s Sovereign Wealth Fund Backs Shell, Votes Against Chevron, ExxonMobil on Climate Proposals

Fund manager Norges Bank Investment Management sided with Shell in rejecting a proposal to align greenhouse gas targets with the Paris agreement.

Reported by Michael Katz

Norway’s $1.4 trillion wealth fund voted for shareholder resolutions urging Chevron and ExxonMobil to adopt stricter greenhouse gas reduction targets. However, it also backed another oil and gas giant, Shell—without explanation—on a climate-related proposal.

The uncharacteristic move by the pension fund’s manager, Norges Bank Investment Management, supported Shell’s recommendation to vote against a proposal requesting the company align its existing 2030 reduction target covering Scope 3 greenhouse gas emissions with the goal of the Paris Agreement on climate change.

The pension fund’s vote went against the recommendation of U.K.-based Institutional Investors Group on Climate Change, which voted in support of the proposal. The group stated that “there is insufficient evidence that Shell’s current strategy is aligned with a 1.5°C warming pathway” and that “it lacks sufficient mid-term ambition in its reduction of oil and gas production and/or increase of low carbon targets.”

According to the IIGCC, Shell “does not disclose which scenarios it has filtered out or its method for eliminating outlying values” regarding its methodology to prove it is aligned with the Paris agreement. “This makes it challenging to confirm validity of the approach.” The group also stated that Shell “provides insufficient disclosure to show that its strategy will lead to a global reduction in emissions in line with 1.5°C,” adding that “it is unclear how its oil and gas production will develop by 2030 or if its low carbon activities will grow to represent a significant part of their 2030 energy mix.”

Norges Bank Investment Management did not explain on its website why it voted against the shareholder proposal; it only publishes explanations when it votes against a recommendation made by a company’s management. When asked for a comment, a representative for the pension fund said it does not provide further comment than what is in the voting records published on the website.

The Shell vote was especially surprising in light of the pension fund’s vote in support of climate-related shareholder proposals at both Chevron and ExxonMobil. One vote supported Chevron’s adoption of medium-term Scope 3 GHG reduction targets. The pension fund explained on its website that it went against Chevron management’s recommendation to vote against the proposal because “the board should account for material sustainability risks facing the company, and the broader environmental and social consequences of its operations and products.”

The pension fund also stated that Chevron’s sustainability disclosures “should be aligned with applicable global reporting standards and frameworks to support investors in their analysis of risks and opportunities.” When a firm’s disclosure does not meet the fund’s needs as an investor, it stated, “we will consider supporting a well-founded shareholder proposal calling for reasonable disclosure.”

However, the global fund manager also added that it “will not support a shareholder proposal that appears to impose a strategy or prescribe detailed methods, unrealistic timeframes or targets for implementation.”

The pension fund again countered Chevron brass when it supported a proposal to recalculate the company’s GHG emissions baseline to exclude emissions from material divestitures. It also went against management’s recommendation to vote down a proposal to publish a tax transparency report and voted against electing CEO Michael Wirth as chairman, explaining that it does not believe the roles of CEO and chair should be held by the same person.

“The board should exercise objective judgment on corporate affairs and be able to make decisions independently of management,” stated the pension fund’s online rationale.

Like Chevron, ExxonMobil management also recommended against a proposal to adopt medium term Scope 3 GHG reduction targets and to recalculate its GHG emissions baseline to exclude emissions from material divestitures. Again, the pension fund went against management’s recommendation and voted for the proposals, as well as a proposal for a commission-audited report on reduced plastics demand.