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Shell (RDS.A) Rejects Emissions Reduction Target Proposal

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European oil giant Royal Dutch Shell plc (RDS.A - Free Report) was recently criticized for failing to set an annual greenhouse gas reduction target in line with the Paris climate agreement.

The company’s shareholders rejected a proposal by a climate activist group which demanded that the Anglo Dutch oil giant should set and publish annual targets to reduce carbon emissions. While approximately 94% shareholders voted down the proposal in the annual general meeting, 5% of them refrained from exercising their rights. The voting result is a temporary impediment for the environmental activists as they believe that the disclosure of risks from climate change would become mandatory for the energy companies in the coming years. These activists have been putting pressure on various oil majors like BP plc. (BP - Free Report) , Chevron Corp. (CVX - Free Report) and Exxon Mobil Corporation (XOM - Free Report) among others for lowering carbon emissions.

The CEO of Shell, Ben Van Beurden, who found the proposal unreasonable, believes that binding emission targets could mar the company’s prospects. According to the board, setting annual targets would be unfavorable for the company as it will lead to restriction and reduction of production and sales. However, Beurden does not want to pull out of the Paris Agreement addressing climate change. He believes that achieving the Paris Climate Agreement goals require more coordination and active support from the government. However, Beurden promised to engage in chalking out ways to become more transparent in his plans to handle the climate change.

In the meeting, Beurden insisted that the company has already taken several initiatives to lower emissions by investing in renewable energy projects.  Shell’s acquisition of LNG leader BG Group was also part of the company’s strategy to shift from oil to gas, which leads to around 30% lower emissions than oil. He even insisted that the government should adopt clear carbon pricing policies and support carbon capture and storage technologies. This is likely to reduce emissions from thermal power plants. Beurden assured to reduce carbon intensity to half by 2025 by shifting its focus to lower carbon fuels. The company also plans to transform its service stations to retail destinations.

Notably, in the same meeting, an increase in the CEO’s pay package was met with little opposition. Nearly 93% of shareholders approved both the 2016 remuneration report and its future remuneration policy.

Zacks Rank

Headquartered in Netherlands, Shell is one of the largest integrated energy companies and is engaged in production, refining, distribution and marketing of oil and natural gas. Shell, operating under the Zacks categorized Oil & Gas-International Integrated industry, currently carries a Zacks Rank #5 (Strong Sell).

Royal Dutch Shell PLC Price


The company has a dismal earnings surprise history. Shell posted an average negative earnings surprise of 15.05% in the trailing four quarters.

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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