SHELL might have escaped the immediate threat of a windfall tax, but the energy giant is now preparing for a shareholder showdown at its upcoming general meeting later this month, with an activist group pushing the firm to commit to stringent environmental targets.

Activist group Follow This has warned shareholders that Shell's current transition plans are not aligned with the Paris Agreement, and has filed a motion - resolution 21 - calling for the oil and gas major to publish targets that cover short, medium, and long-term emissions in both its operations and the use of its energy products.

The group holds a less than one per cent stake in the energy giant, but City A.M. understands its motion is backed by multiple Dutch institutional investors.

Follow This argues there are strong business reasons for wanting to meet the goals of the Paris Agreement, the international treaty signed between nations in 2015 which pledges to limit temperature rises to below two degrees from pre-industrial levels.

McKenzie Ursch, legal counsel for Follow This, told City A.M.: "What we're requesting is companies really start to take action now and set a meaningful target in the medium term. Without the necessary interim reductions, you keep postponing the need to take action, and if it gets to be 2040 and we're still more or less emitting the same amount of greenhouse gas that we are now, it's going to be cost prohibitive to get to net zero by 2050 in 30 years."

The activist group has based its concerns on independent analysis from Global Climate Insights, which outlines that Shell's current plans would see a four per cent increase in the firm's gas production by the end of the decade, and that two thirds of the company's capex is not compatible with a two-degree limit on temperatures.

Shell has pledged to spend £25bn on the UK energy sector by the end of the decade, but is unclear how much will be pledged to the renewables sector.

Its recent record quarterly profits were powered by soaring oil and gas prices.

Prior to its London move last November, Shell faced continued pressure from the Dutch legal system, culminating in a court order to cut its carbon emissions 45 per cent by the end of the decade.

Earlier this week, Shell chief executive Ben van Beurden presented the firm's annual ESG update to investors, urging them to vote against resolution 21.

He argued Follow This' proposal goes "much further than even the most progressive pathways to net zero in our sector", beyond the routes suggested by both the Intergovernmental Panel on Climate Change (IPPC) and the International Energy Agency (IEA).

Shell is instead pushing for shareholders to instead back resolution 20 - which is an approval of the energy giant's energy transition plans.

The firm is currently committed to reducing net carbon intensity by 20 per cent before the end of the decade, alongside a net zero target of 2050.

Shell regards these plans to be in line with the Paris Agreement, and backed by its shareholders after extensive consultations.

The company has also pledged to engage with investors if resolution 20 does not pass, or receives more than 20 per cent of votes against the motion.

Both resolutions will be put to shareholders at Shell's annual general meeting on 24 May.

(c) 2022 City A.M., source Newspaper