Brunel leads engagement with Shell over natural gas plans

Several Local Government Pension Scheme (LGPS) organisations are collaborating in a bid to put pressure on oil giant Shell over its plans to expand liquified natural gas (LNG) output.

Brunel Pension Partnership – the LGPS pool for 10 pension funds based in south-west England – has joined other LGPS funds and the Australasian Centre for Corporate Responsibility (ACCR) to co-file a shareholder resolution with Shell.

The resolution calls for the oil and gas company to disclose how its LNG growth strategy is consistent with its climate targets.

Greater Manchester Pension Fund (GMPF) and the Merseyside Pension Fund are also a part of the group backing the resolution.

Owen Thorne, responsible investment manager at Merseyside Pension Fund, said: “We are in the midst of a rapid energy transition creating material risks to the business models of existing oil and gas majors.

“Given the direction of travel, investors urgently require enhanced disclosure to reconcile the high demand forecasts set out by Shell with the fundamentals of energy markets and the views put forward by independent energy forecasters.”

A spokesperson for GMPF said: “As an active owner, we want to ensure that the strategies of energy companies are aligned with reducing carbon emissions, can be realistically achieved, and ultimately protect shareholder value.

“As such, when putting forward an LNG demand outlook that is more than 300% above the International Energy Agency’s 1.5-degree scenario, the onus is on Shell to explain how this position can be considered credible in the context of the company’s existing climate commitments.”

Shell plans to grow its LNG business by between 20% to 30% by 2030, with LNG projected to account for nearly one-third of its upstream hydrocarbon production by the end of the decade.

Investors are raising concerns about the robustness of the company’s demand projections and the potential financial and climate risks associated with its strategy.

LNG misalignment “deeply concerning”
Vaishnavi Ravishankar, head of stewardship at Brunel, said the pool was “deeply concerned about the apparent disconnect between Shell’s LNG growth strategy and its stated climate targets and Paris-aligned pathway.”

“We need to see further transparency to assess Shell’s alignment with climate goals, particularly in the context of recent removal of its interim 2035 climate target,” Ravishankar continued.

“We are committed to engaging with Shell to enhance the ambition, transparency, and credibility of its climate transition efforts.”

The filing follows direct engagement between Brunel and Shell and seeks additional clarity from the company on its LNG outlook.

Research recently released by ACCR highlighted concerns around demand projections, which it said were misaligned with International Energy Agency scenarios.

Last year, the Pension Protection Fund (PPF) co-filed a climate resolution urging Shell to align its medium-term emissions reduction targets with the 2015 Paris Agreement on climate change.

The resolution was published in January 2024 and marked the first time the PPF had co-filed a shareholder resolution.

At the time Claire Curtin, head of environmental, social and corporate governance and sustainability at PPF, said the action was taken as companies in the oil and gas sector had been pulling back on climate transition commitments and refocusing efforts on oil and gas production.

Higher LNG demand predicted
Shell confirmed that it had received a resolution from ACCR ahead of the company’s annual general meeting (AGM), which is scheduled for May 2025. It said the group of shareholders represented 0.25% of total shares.

A spokesperson for the company said: “Shell’s shareholders have strongly backed our strategy to deliver more value with less emissions at successive AGMs, with the growing role of LNG at the heart of this strategy.

“We are confident in the future role of LNG in our strategy, as we transform to become a net-zero emissions energy business by 2050.”

According to Shell, global demand for LNG is estimated to rise by more than 50% by 2040, as industrial coal-to-gas switching gathers pace in China and other countries in south and south-east Asia.

In a trading update today (8 January), Shell trimmed its forecast for LNG production and said it expected fourth-quarter results for this part of the business to be lower than the previous quarter.