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Proxy Report - 22/05/2018

During tthe year under review, the Company has been involved in litigation related to pesticide use, climate change, investments in Nigeria and an accident in Pakistan.

Item 2: Approve the Remuneration Report.

The structure is unsatisfactory. Although performance is weighted toward the long-term, the bonus exceeds guidelines, qualitative criteria exceed our limits, the severance provisions exceed guidelines and an excessive loss of office payment has been made during the year. There is overlap between the performance conditions used for the STI and LTI with cash flow from operating activites accounting for 30% of the bonus and 25 of the LTI. Actual and potential incentive pay is grossly excessive. In addition, the accrual rate used to calculate the pension contribution is not disclosed.

Item 18:

Approve share buybacks. Although FCF covered the dividend this year, we believe that Shell should prioritize debt repayment as it pays down its massive debt pile resulting from the BG acquisition.
Moreover, we are concerned by the fact that shareholders were not offered the opportunity to vote on the dividend.

Item 19: External Resolution.

Shareholders are asked to approve a shareholder proposal submitted by Follow This, a Dutch group representing shareholders that collectively hold 645,314 shares in Shell. The resolution requests that the Company set and publish targets that are aligned with the goal of the Paris Climate Agreement to limit global warming to below 2 degrees

Despite our misgivings regarding the lack of detail in the resolution, we do believe that oil majors such as Shell should play a fundamental role in promoting a low-carbon future and this starts by honoring the commitments under the Paris Agreement. Although the Company has made progress in reducing its GHG emissions in recent years, the lack of long-term targets critically undermines this process and fails to appropriately incentivize executives. Case in point is in 2017 where both Scope 1 and Scope 2 emissions increased.

We additionally find it unacceptable that Shell did not make an attempt to link investments in New Energies to executive compensation. Moreover, a target annual budget of $1-$2 billion for said investments is abysmally low considering a capital budget that can easily exceed $20 billion in a given year. Shareholders should also note that, like most of its oil major peers, Shell is not a signatory to the Science-Based Targets Initiative.

As we concluded last year, the unwillingness to set tangible reduction targets for GHG emissions makes it difficult to truly measure Shell’s progress towards transitioning to cleaner energy and alludes to the fact that its strategy to reduce its carbon footprint rests heavily on the transition towards natural gas, especially after the BG acquisition.