Publication In the dark: gaps in Shell’s climate lobbying disclosures

Undisclosed lobbying in emerging markets may undermine Shell’s support for the Paris goals and foster unsustainable fossil fuel supply and demand lock-in.

1st March 2024

Executive Summary

Since Shell started reporting on its lobbying in 2019, it has consistently stated its ambition to be “at the forefront of the drive for greater transparency around political engagement.”^[1] It rightly acknowledges the important role of policy engagement in enabling the energy transition:^[2]

By working together, with governments developing effective policies, we can help shift consumer demand to lower carbon products and develop the infrastructure and technology needed to facilitate the energy transition.

However, this report reveals that Shell’s reporting on its lobbying focuses almost exclusively on activities in a small subset of advanced economies, largely omitting its lobbying in emerging markets. This is despite Shell’s ambitions for fossil fuel sales and production being weighted toward emerging markets, where energy transition policies are generally less mature. Shell’s LNG growth strategy focuses on emerging markets, and nearly 60% of Shell’s fossil fuels production between 2024 to 2050 is expected to come from emerging markets.

The report presents evidence of Shell and industry associations it is a member of – but has not included in its public disclosures – lobbying in emerging markets for policies that may foster unsustainable levels of fossil fuel supply and potentially cause demand lock-in for gas in these markets. This risks locking-in levels of fossil fuel demand and supply in emerging markets that are potentially misaligned with the Paris goals.

It argues that investors in Shell need disclosures that are global and proportionate to its business activities, to ensure Shell’s lobbying does not undermine the success of the company’s decarbonisation strategy and long-term value creation, or the goals of the Paris Agreement. More broadly, it is in the interests of diversified investors that companies provide transparent disclosures of their lobbying.

Key Findings

Shell’s disclosures leave investors in the dark about its lobbying in emerging markets

Shell only discloses a fraction of its industry associations (101 out of “hundreds”^[3]) and of these has assessed the climate and energy policy advocacy of an even smaller number (39). All the industry associations Shell discloses are based in a small subset of advanced economies, with none based in emerging markets. Its disclosures do not examine how international associations based in advanced economies lobby in emerging markets.
ACCR has identified 80 associations which Shell has not assessed or disclosed, and that appear involved in climate and energy policy engagement. More than half (45) of these are based in emerging markets.^[4]
Across the associations Shell discloses (101) and the further associations that ACCR has identified (80), Shell has not assessed at least 53 associations where it holds leadership and governance roles. This is despite Shell saying one of its criteria for assessing associations is that “Shell could be considered influential” in them.^[5]
Shell does not disclose any substantial assessment of its own lobbying in emerging markets, and only discloses aggregate lobbying spend where it is obliged to – in the US and EU.
This means there is no transparency over whether a significant portion of Shell’s lobbying is aligned with its own policy positions to support the Paris Agreement.

Undisclosed lobbying in emerging markets may undermine Shell’s support for the Paris goals

ACCR has identified multiple examples of undisclosed lobbying by Shell and its industry associations in emerging markets. These activities may risk locking-in levels of fossil fuel demand and supply in emerging markets that are potentially misaligned with the Paris goals.

On the demand-side, we identified lobbying by Shell and its industry associations to stimulate and lock-in potentially unsustainable levels of fossil fuel demand. This includes efforts that correspond with Shell’s publicly-stated LNG growth strategy, which relies on Paris-misaligned demand projections for emerging markets. We found lobbying to:

expand and create markets for gas in India
build long-term LNG demand in Southeast Asia, and
oppose the transition away from fossil fuels in China, Mexico and South Africa.

On the supply-side, we found Shell and its associations advocating for expansion of fossil fuel production and exploration across emerging markets in Asia, Africa, South America and the Caribbean. This lobbying:

focused on fossil fuel production as a source of economic growth while overstating the climate benefits of gas, and
disregarded impacts of long-term fossil fuel production for the climate.

Almost 60% of expected fossil fuel production by Shell through to 2050 is in emerging markets,^[6] where corruption risk is generally higher and energy transition policies are often less mature.^[7]

Positive policy action is key to Shell’s decarbonisation strategy, but benchmarks show only mixed support for this in its lobbying

Shell sees positive climate & energy lobbying as “a key part” of its strategy and its net-zero 2050 target.^[8] Indeed, government policy and regulation have played a significant role in Shell’s capital allocation. A majority of Shell’s “renewables and energy solutions” are located in advanced economies,^[9] where policymakers have rightly taken the lead in incentivising low carbon technologies.
Yet Shell scores a C, indicating mixed alignment with Paris, on the Real-World Climate Policy Engagement measure of the Climate Action 100+ Net Zero Company Benchmark.
- Shell also has the highest “engagement intensity”^[10] with climate and energy policy among CA100+ companies, which highlights the materiality of the issue for investors. Climate lobbying by Shell’s industry associations is less aligned with the Paris goals than its direct lobbying, suggesting they are a negative drag on Shell’s ability to properly align its lobbying with Paris.
- Shell also only scored 36% on the Review Indicator, meaning it does not exhibit “robust, high-quality review processes” for identifying Paris-misaligned lobbying.

Key Recommendations

To provide investors with a global view of its lobbying, Shell should:

Disclose a comprehensive list of all industry associations and other third party lobbying organisations globally, including:

where the organisation is domiciled and its main jurisdictions of operation
any payments made to the organisation (in exact terms, rather than wide ranges)
leadership and governance roles, and
whether the organisation engages with climate or energy policy.

Disclose its total lobbying spend and lobbyist headcount for each jurisdiction it lobbies in, to provide insight into its direct lobbying footprint.

Ensure alignment reviews are proportionate to activities and include all material lobbying, by:

including lobbying in markets with significant sales and production (current & projected)
prioritising markets whose size or policy settings are more material to Shell’s decarbonisation
explicitly cross-referencing assessments by external stakeholders, such as InfluenceMap, to ensure potentially misaligned associations are not omitted from review
explaining what activities are excluded from the review and why they are not material.

These actions are feasible. Shell already requires “staff to record memberships of industry associations and similar groups” in its Code of Conduct Register,^[11] and industry peers have demonstrated the viability of enhanced disclosures. For example:

Total publishes a full list of associations that notes roles, location, and payment ranges
AGL, a CA100+ utilities company, has disclosed exact fee payments (rather than ranges)
BP and Enel (to a greater extent) have reviewed some associations in emerging markets
Equinor mandates that it conducts reviews of associations with InfluenceMap scores which are “misaligned” or “potentially misaligned” with the Paris Agreement.^[12]

Shell should adopt each of the actions recommended above. Together, these will help investors better understand how well aligned Shell’s lobbying is with its decarbonisation strategy and support for the Paris goals.

Download In the dark: gaps in Shell’s climate lobbying disclosures | 03/2024

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