Good morning. Good morning. I'm Chad Holliday from Shell. On behalf of all my colleagues in Shell, we send our sincere thoughts to the people of Manchester this morning who have experienced such a tragedy overnight. Our prayers and support go out to everyone impacted by this terrible event. Would you please join me in a moment of silence in honor of the people? Thank you. We will now start into our program. I am delighted each of you could be here this morning for the annual meeting of Royal Dutch Shell. Before I go any farther, I'd like to say a few words about health safety in our venue today. First, as you see, anything you consider to be unsafe or have concerns about, please bring it to the attention of what our uniformed security staff you can see in around the hall.
Second, should there be any need to evacuate the building, an announcement will be made across the speaker system in the room about leaving by the nearest exit. Please take a moment to observe the exit nearest to you at this point. You'll then be directed to an assembly point and then given further instruction from that point. Let me start by introducing your board and saying a few words about the non-executive directors and their qualities to serve on the board. First, Ben van Beurden, our Chief Executive Officer. Jessica Uhl, our Chief Financial Officer. Jessica, welcome to your first AGM as a board member. Linda Szymanski, our Company Secretary. Linda, welcome to your first AGM as our Company Secretary. Hans Wijers, our Deputy Chair and Senior Independent Non-executive Director, Chair of the Corporate and Social Responsibility Committee, and Member of the Nomination Committee.
Hans has been a Non-executive Director since 2009, has a broad range of business, economic, and political experience, having served as Minister of Economic Affairs here in the Netherlands and Chief Executive Officer and Chairman of AkzoNobel. On the row behind me, starting from my right to left, Sir Nigel Sheinwald from the U.K., a Member of the Corporate and Social Responsibility Committee, effective tomorrow, a Member of the Remuneration Committee. Sir Nigel is a former senior British diplomat who served as Ambassador to the U.S. Prior to this, he served as a Foreign Policy and Defense Advisor to the U.K. Prime Minister and Head of the U.K. Cabinet Office on Defense and Overseas Secretariat. He also served as British Ambassador to the Permanent Representative to the European Union in Brussels.
Linda Stuntz from the U.S., a Member of the Audit Committee, Member of the Nomination and Succession Committee. Linda is a founding partner of a law firm in Washington, D.C. Her practice includes energy, environmental regulation, as well as matters relating to government support for technology development. She served as Deputy Secretary of the U.S. Department of Energy and played a principal role in developing and enacting the U.S. 1992 Energy Policy Act. Gerrit Zalm, a Member of the Audit Committee, Member of the Remuneration Committee. Gerrit has a strong breadth of financial and investment and political experience from his former service as Minister of Finance here in the Netherlands and Chairman of the Managing Board of ABN AMRO. Euleen Goh from Singapore, Chair of the Audit Committee. Euleen is a chartered accountant and has qualifications in banking and taxation.
She held various senior management positions at Standard Chartered Bank and was chief executive officer of Standard Chartered Bank Singapore. Gerard Kleisterlee, chairman of the remuneration committee and member of the audit committee. Gerard has previously served as CEO of Philips and a member of the supervisory board of Daimler and a member of the board of Dell. He currently serves as the chair of Vodafone Group. Finally, Guy Elliott from the U.K., a member of both the corporate social responsibility committee and the nomination and succession committee. Guy joined the board in 2010 and has a wealth of financial investment experience serving as chief financial officer of Rio Tinto until 2013. He also served as a non-executive director of Cadbury. Patricia Woertz, who's been a non-executive director since 2014, stands down from the board today at the close of this meeting.
Unfortunately, Pat could not join us for this session. As you may have read in the notice of the meeting, we have arranged for this meeting to be webcast. We welcome all those that are joining us via the web in this session today. In accordance with the company's articles of association, as stated in the notice of the meeting, the meeting will be held in English. However, there will be Dutch translation facilities available. If you need a headset, please ask for assistance from any of the ushers in the room. With that introduction, I now declare the annual general meeting formally open and suggest with your permission, the notice of meeting will be taken as written. With that introduction, we will have two presentations. I'll start off with a review of the company, then turn it over to Ben.
We'll work from the standard because we'll be using some slides. First slide. Back up one slide. In just a few minutes, Ben will describe our 2016 performance and the path forward of our company. He'll hit the highlights that we think are very critical for you to know as a shareholder. I'm pleased to tell you today that the board is very proud of the accomplishments of our management team and all the men and women of Shell during 2016, including the BG acquisition. I will focus my comments today on the Shell strategy and how we're navigating that strategy in a highly dynamic external environment, and what's critical to us in accomplishing that. What we know for a successful strategy is board and management must be fully aligned, and I can assure you today that they are fully aligned on the strategy.
Moving on to the next slide. The cautionary note. Now you've had plenty of time to read that. I do take note it is important, and please consider all of our public information as you're making decisions about our company. Next slide. Energy is the golden thread that connects economic growth, social equity, and environmental sustainability. A beautiful statement by the former Secretary General of the United Nations that could have been written by an outstanding speechwriter. Knowing the Secretary General who grew up in Korea without access to electricity like we have in this room, and hearing him personally tell the stories of studying at night by candlelight, and he wouldn't have a candle every night, only when there was an exam the next day he was sure to have a candle.
This was a statement written by someone that knows the importance of energy to a developing world. As we're here today with 1.1 billion people without access to electricity as we know it, and 2.4 billion cooking on a stove that will probably reduce the quality of our life, we're in a very different age. It's in the context of this statement we must navigate our strategy at Shell. To be successful in that environment, you must have the ability to question. Next slide. As Ben described, we must not cling to our old beliefs, but be willing to question to tackle the energy challenge ahead. Ben made this statement, he's made similar statements many times, but this was particularly at our Powering Progress Together session in June of last year in London.
This is what's necessary if a company is going to tackle the challenge that the Secretary-General gave to all of us, is being willing to challenge old beliefs. If you come away with nothing else from this meeting, I hope you come away with the conclusion Shell is open to challenging old beliefs because we know it's critical. Next slide. The energy challenge. Four points are described here that speak to what we must do to create that golden thread the Secretary-General described, but let me make it very simple for you. Between now and 2060, we have to increase the energy supply by about 60% in the world. That's because the population's going to go from 7.4 billion to over 10 billion. Also, each one of us will be requiring more energy. 60% increase.
While at the same time, we need to drastically reduce our greenhouse gas emissions toward net zero if we're to meet the goals the nations of the world set forth at Paris. That doesn't mean we'll have no greenhouse gases, but it does mean we'll find ways to capture and store or sequester them in nature as we go forward. That is one of the major challenges the world's ever faced, to somehow meet the increasing needs of everyone for energy while we significantly reduce the greenhouse effect. With that background as outstanding, let's move to the next slide, which is the Shell strategy. The big hexagon on this chart, world-class investment case. Ben and his team described this to the world at the Investor Day last year. It is the hallmark of what we must do.
You say, "Well, why is that the biggest?" Because if we aren't financially stable, if we're not vibrant, we will not have the resources to meet the other things we think are so critical as a company. We must have the free cash flow. We must have the returns on investment so we can return a good dividend to you and return on what you're doing. We are not a full world-class investment yet, but that is the goal. Ben will talk more about it this morning. It's critical we get there in the near future to accomplish everything we must have to lead this energy challenge. We will be a leader externally, moving to the other hexagon, not only in value that we create for society, but influence.
You must conduct yourself the right way to have a right to have influence. We must have that financial stability to be considered in the world. We can't only say what others should do. We have to improve our own carbon intensity. We're very much focused on that as one of the four pillars of our strategy. For energy unit produced, we have to find ways to reduce our carbon intensity totally. Shared value with society. If you recall back what the Secretary-General said, must be social equity. If we can't find ways to share value with society broadly as we accomplish the objective, we will not be the world-class company we plan to be. Next slide. We communicate extensively about what we're doing in the company. I point to these particularly two reports.
One is our sustainability report we've now issued for 20 consecutive years, as long as any company we track in having a sustainability report. We urge you to look at that report. It's very easy to follow. It's online, it's simple. I think it will tell you a lot about what we do as a company. As you see things you think we should add to that report, tell us, because it's constantly changing, improving to meet your needs. The other report is available outside. I'm holding a copy up here. These are examples of what we're doing for a cleaner energy world. We're doing today. This is one example. We will have many to come out, but I think it's important to look at the concrete examples of things we're doing as we move forward to make the world a better place. Next slide.
September 27th, 2015, a Sunday, New York City, United Nations building, 193 countries coming together to agree on 17 sustainable development goals for the next 15 years. It's very difficult to get 193 countries to agree on anything. This was a very important step. If you'll scan across those, it describes part of the challenge we in Shell and all of us face together as a collective society to move forward together. The goal is to complete each one of these issues or make substantial progress by 2030. That's what we must work on as a company. If you look at our sustainability report, we will give you progress on most of these that we've had across the company. Let me turn to the next slide and give you an update on just four. Number 7, affordable and clean energy for all.
Of course, many, many people in Shell work on this every day of the week. I'd like to talk about one new program we just started this year. It's a Kickstarter innovation program. We now have people making submissions from 12 different countries where they have ideas to get access to energy to that 1.1 billion people that don't have it today. We're sorting through those. We're finding the best way Shell could help. Not to be a part of Shell, but to provide investment, provide coaching, provide counseling, provide mentors to make it a success. It's a very new program with us. We'll have the first one up and running before the end of the year. Number 8, decent work and economic growth. It's so important for social equity. It's so important for the backbone of the world.
For over 35 years, Shell's had what we call a LiveWIRE program, where we have facilities, we help people develop businesses. Last year alone, over 3,000 people were impacted by something from this 35-year-old program inside Shell. Number 11, sustainable cities. By 2050, two-thirds of us in the world will be living in cities. If we don't get the cities right, we will not achieve the sustainable development goals we need as a world. Shell shares our planning expertise with many cities around the world. Particular example on this chart, the city in India, where we're helping them convert from coal facilities to power the textile industry in that city to a combination of solar and gas-fired in a mini grid. This is just one example of what we're doing today to move the energy effort forward. Finally, number 13, climate change.
Shell fully supports the Paris Agreement, we'll do our part to support its implementation. One example of our part is our carbon capture and sequestration facility in Canada, where last year we captured 1 million tons in our first year of operation. Next slide. We're still developing our role in the energy transition, I want to stress to you we are not waiting to move down that path. 20 years ago, if you'd looked at this first picture and said, "Shell LNG out to fuel trucks on the roads here in the Netherlands," you probably would have thought it was impossible. Now, through a terminal in Rotterdam, we're filling trucks throughout Northwest Europe, and we're also serving the marine industry. Next year, the very first oil tanker in the world will be powered by LNG from Shell.
In the following year, two ships from Carnival Cruise Line will be powered by LNG in the largest carrier of pleasure craft in the world. These are steps people thought would not be happen. They're happening today, Shell gas, Shell LNG is an important part of those steps forward. The middle picture is from Wuppertal, Germany, where we're filling out a fleet of filling stations with our partners in Germany over the next several years so hydrogen can fuel the cars. As I saw this, it brought back a real clear memory. 20 years ago, on the streets of Washington, D.C., I had the honor to drive Toyota's experimental hydrogen fuel cell car. I'll never forget. I was very nervous that I was doing it. There was a police car in front and a police car in back just to make sure I was okay.
As I looked at that vehicle at that point in time and all the technical hurdles it would have to come over, I would not have guessed now, 20 years later, that car would be sitting outside this building. I've also now driven one in the state of California. I didn't have to have police cars around me. Another way to power your electric car is through hydrogen, Shell is starting with experiments here in the Netherlands and also in California, and obviously Japan is making big steps in that direction. The important thing is that we start down this road. We're not predicting that hydrogen will take over, it is one alternative that we must consider as we move forward. Last, biofuels and R&D in general. In our Raízen facility in Brazil, we're now using the waste from the sugarcane to make fuel for automobiles.
We have two prototype facilities in the U.S. around using waste products there that don't have other practical uses. Particularly in this example on the picture is a biofuels facility prototype in India, in Bangalore, where we take garbage and run it through our plant and can put it directly into your fuel tank. These are prototypes, but they're steps in the right direction to move us forward. Let me wrap up on the next chart. Picture yourself a student. She's in her early 20s. She's just graduated from university. We make a proposition for you. Think about where you want to spend your career. What about in a company that's dedicated to energy solutions in a world that has to have a 60% increase in energy, while at the same time we must make drastic reductions in greenhouse gases?
Can you think of a more exciting career starting here today to be a part of that journey with a company that will question old beliefs and find the right solutions? As well as we in Shell can sell that story to those new graduates, we attract them, they decide to vest their career with Shell, we will deliver on what we described for you today. Thank you very much. Ben, over to you.
Thanks very much, Chad. Ladies and gentlemen, welcome also from me. As Chet has mentioned, we set out our strategy quite clearly last year at our Capital Markets Day to reshape Shell to become a world-class investment case. As Chet also said, we want Shell to be a leader to reduce our carbon intensity, we want to contribute to shared value for society. We need to succeed in each of these areas if we indeed want to deliver on that world-class investment case. Following the completion of the BG deal in 2016 and the subsequent integration of BG into Shell, which we completed in 2016, our recent results are showing that that strategy to become a world-class investment case is beginning to pay off.
I think we are making good progress in reshaping the company towards this goal with a focus on delivering higher returns on capital employed and a higher free cash flow per share. Of course, free cash flow is that amount of the cash flow statement where the dividend is being paid from. Of course, we need to reduce debt. The strategy that we outlined in 2016, I believe, is working. Following the successful integration of BG, we are pushing ahead to also transform Shell rapidly at all layers through a consistent and a disciplined execution of our strategy. I think we are firmly on track to deliver on our 2020 expectations that we set out at our Capital Markets Day last year. Of course, 2016 was a bit of a transition year, but 2017 will be the year in which we follow through on delivery.
Again, this is not just about managing the down cycle and the difficult period that the industry is in. This is about transforming the company through reshaping the portfolio and a structural change in our culture and in our ways of working. We want Shell ultimately to be a more competitive and a resilient company throughout the cycle. One thing that hasn't changed is the priorities for cash. First of all, reducing debt, then paying dividends, followed by a balance between capital investment and share buybacks. At least $25 billion of buybacks in the period of 2017-2020. That's of course subject to debt reduction and some recovery still in oil prices. We are pulling on some really powerful financial levers to manage our overall financial framework within the company.
We continue to reshape Shell's portfolio to transform the company with some $20 billion of divestments already completed or announced. That will strengthen, of course, the balance sheet as these divestments are completed. Another lever, our capital investment program. We will manage this capital investment program in the range of $25 billion-$30 billion per year. For 2017, this includes investing around $25 billion. We continue to reduce our operating costs. Of course, very importantly, we also continue to focus on the delivery of new projects that are still in the final stages of execution. We expect that about $10 billion of additional cash flow from operations will be added by the end of next year compared to where we were in 2014. Most of the $10 billion of additional cash is yet to come.
Of course, our financial framework is a key element of our overall strategy. In our last quarterly results, which were reported a little bit earlier this month, we delivered and sustained the cash flow momentum that you have seen in the previous two quarters, so three very strong quarters in a row. If you look at cash flow from operations over a four-quarter rolling basis, that was altogether some $29 billion. If you exclude working capital movements, so the valuation of our stocks, et cetera, because of oil price fluctuations, then the underlying cash flow from operations was around $34 billion. Let's talk a little bit about health, safety, and environment. On this slide, you will see some of the metrics that we monitor, and in this slide included are also the BG assets from the 1st of February 2016.
I hope you will agree with me that in the main, we are on a path of continuous improvement in our metrics. We are quite positive about the progress that we are making, but we are absolutely not complacent in this area. There is still room for improvement before we can say with certainty that we have achieved our Goal Zero of no harm and no leaks. Of course, we also have sustainable development metrics that we focus some of them actually also in our annual scorecard, on safety and on environment. In 2017, the bonus scorecard for all employees in the company has been updated to also include the environmental metrics to include greenhouse gas management metrics as well. Let's move to some important areas. First of all, natural gas in the Netherlands.
As you will know, NAM, the Nederlandse Aardolie Maatschappij, is a joint venture with Exxon, and we partner with that venture also with the Dutch government. And of course, although NAM is an independent venture, Shell fully understands that the whole earthquake situation that we currently have in Groningen presents a very significant concern for local communities in Groningen. NAM is working very hard to ensure that there is safe gas production. They are striving to deliver on their promises and to fulfill the key commitments that have been made to the residents of the region. And there is increased understanding of the situation, and NAM will continue to study how seismic risks can be developed, and in the longer term, to reduce the uncertainties in the future.
Shell fully supports NAM in that effort, and it also supports the National Coordinator Groningen to make progress in what will be a multi-annual program to manage this very important case. Let's move to flaring performance. In 2016, the company achieved a 35% reduction in flaring in our integrated gas and upstream businesses, where most of the operational flaring takes place. So the startup of some gas capture facilities in Iraq, for instance, and in Malaysia, which happened towards the end of 2016, were major contributions to that 35% reduction. Also in Nigeria, flaring intensity levels in SPDC, they decreased also with 35% in '16 compared to the year before. That was partly due to improvements in assets, but frankly speaking, also because of production outages that we have because of the challenging security situation there.
We have made progress on a number of gas gathering projects in Nigeria, but I should also say that the planned start-up dates that we had for two gas gathering projects in Nigeria, they have continued to be delayed because of security issues in the Delta throughout 2016. Also, these are joint venture projects because of lack of funding of our government partner for most of the year. These projects have been under construction since 2012. Let's move to the shareholder resolutions, which I'm sure you will be having questions on as well. In 2015, the board supported the Aiming for A resolution. Shell continues to progress the work in this area. Last year, you will remember we had a resolution from Follow This, which asked us to become a renewables energy company.
This year, Follow This has submitted another resolution number 21, and I will come back to that resolution in a bit more detail later in this AGM. What I would like to do at this stage is provide a little bit more context when it comes to these resolutions and to climate change in general. I hope you will bear with me as I talk you through how we see the energy transition. Before I do that, let me say again That our company, your company, is a very strong supporter of the Paris Agreement. We believe it's the right way forward to coordinate a global response that is needed to limit global warming to less than two degrees centigrade. Paris is a major step forward.
First of all, it clearly sets a goal to reach, both in terms of emissions and also a limit to warming, but it also bounds countries together in a process of national contributions towards that common aim of reducing global emissions. At the same time, the work is not done. We have to realize that this is only the beginning of what will remain a very and extremely complex and ambitious journey. Designing and implementing the policies that can deliver these ambitions is a significant challenge for the entire world. Let me explain that a little bit further. Part of the challenge is dealing with all sources of greenhouse gas emissions. This is not just a fossil fuel story. It's also not just an electricity story. This chart here gives a breakdown of the world's greenhouse gas emissions in 2015.
The pie chart on the left is the breakdown of emission sources. Total emissions in 2015 was 52 gigatons, that's 52 billion tons of greenhouse gases, mostly methane. Out of this 52 billion tons, a quarter was related to land use change, agriculture, and livestock. Okay? Clearing lands, cows, lambs, who emit greenhouse gases, whether we like it or not. Another 7% of these 52 gigatons of emissions was related to industry such as cement. When you make cement and concrete, CO2 gets emitted. Building a house means that, or building a concrete bridge actually produces greenhouse gases. Altogether, that's about 7% of the total emissions. That leaves about 68% of these greenhouse gas emissions that are related to energy. Around two-fifths of that energy section is actually related to electricity.
That's altogether a quarter of the total greenhouse gas emissions in 2015 came from electricity generation. That's the orange section in this pie chart. Then a further 17%, less than a fifth of these total emissions actually came from cars, transportation, shipping, planes, et cetera. In order to keep global warming to well below two degrees Celsius, the world needs to stop adding to the stock of greenhouse gases in the atmosphere. The Paris Agreement says this should happen during the second half of the century. At the same time, as Chet says, the world will see its population grow from 7.4 billion people today to nearly 10 billion people by 2050. This population growth will take place at the same time as the UN Sustainable Development Goals that Chet mentioned are progressively being met, hopefully.
That's an achievement that is raising the standards of living. Even without the UN goals being met, people will seek better lives anyway, and rightly so. That will increase global energy demand as well. This population growth, together with the rising living standards, is likely to cause the consumption of primary energy, oil, gas, coal, nuclear, hydro, renewables, et cetera, to double by the end of the century. Of course, at the same time, while we are talking about energy now for a moment, remember there is also non-energy emissions. More people with better standards will eat more, will eat more meat, and therefore, also the agricultural part of greenhouse gas emissions is to rise consistently with that rise in population and the rise in living standards.
With the right policy framework, a world which has ceased adding greenhouse gases to the atmosphere could become a reality. Even though this sounds quite daunting, it could become a reality. This is what we mean by a net zero emissions world. This chart here shows how such a world would source its energy needs. Again, bear in mind, this is a world that has a much larger energy system. You see the pie chart growing from 2015 to the net zero energy world that we are talking about later in the century. It has nevertheless stopped adding to the atmospheric stock of emissions. It is worth noting that electricity in this world is largely generated from solar, from wind, and nuclear. A very significant part of the transport system will have turned to electricity or to hydrogen.
There remains an important role for fossil fuels as well, particularly for oil and gas. Fossil fuels in this net zero world will continue to be used in those sectors where there is actually no medium-term prospect of decarbonization. Think of aviation, think of shipping, think of metallurgical processes that require carbon in order to make steel, nickel, and other metals. The chemical industry that actually produces materials, where we may have high temperature heat in order to do chemical conversions. These are the sort of areas that at the moment, and for some foreseeable time, only hydrocarbons can do the job. Therefore, in this net zero world, we will still have about 20 gigatons of greenhouse gas emissions potentially. We will have roughly doubled the energy system, but we will have reduced the greenhouse gas emissions from 52 gigatons to 20 gigatons.
That's the challenge that we have. What about that 20 gigatons? How are we going to deal with that? First of all, we have to deal with it. This is, after all, a world in which we want to have net zero emissions. How is this going to be done? First of all, some of that carbon that sits in that 20 gigatons that I mentioned is just going to be ending up in materials that we use every day, like bitumen on the road, like the cell phones in your pocket, plastic items that we have in your homes, these electric cars that we will be driving, and solar panels. These all contain carbon. That's still part of the 20 gigatons that need to be produced.
Secondly, we will need to have carbon capture and storage to extract the CO2 from the industrial and the power generation facilities and then store it underground. The CO2 emissions that cannot be avoided, we will have to capture them and store them. As Chad already mentioned, we have one of those facilities in Canada. This technology is proven. It works. It has stored 1 million tons last year, and it will continue to do so, but this needs to grow very significantly in years to come. There is no hope we can live in a world with less than two degrees C temperature rise without extremely large-scale adoption of carbon capture and storage. Of course, we can also have nature do the work for us.
We will have to rely, and we will have to design systems where natural forests and other biotopes will store and capture and store CO2 from emissions. Finally, this net zero world needs to combine nature's ability to take CO2 from the atmosphere and combine it with CCS. This means you grow plants for biomass, use that biomass to generate energy and make products, and then capture the CO2 and store it. Net, this means that we take CO2 out of the air and store it underground. That's negative emissions. I hope you will agree if I change this picture that achieving this net zero world that I just described is a major challenge for society, it will require what I think is an unprecedented level of collaboration in all aspects of society, government, general society, NGOs, and indeed industry.
This is not just a major challenge in the Netherlands or in the developed world. The same challenge needs to be repeated in all other parts of the world as well, who are quite often much less advanced in technology, in adoption, in economic prosperity, et cetera. This is not just for us. This is for the world. Of course, that includes also a role for us in Shell. Also bear in mind that this task that I just described is just too big for any single entity and certainly a single company to take on. So far I've set out what is the context. I thought it was important to do that. I thank you for bearing with me on it. I told you what the world needs to do. I've shown you a potential route in very sort of high-level terms.
I want to talk about what Shell can do in this space. First of all, I know that many of you will be expecting that and asking us to do so as well, we can help grow the share of renewables in the power generation mix. We are doing this already by developing projects such as the Borssele Wind Farm here in the Netherlands. We're also doing this by developing renewable power markets through our trading arm. Like for instance, we are doing in the U.S. We are the largest renewable power trader in the U.S., enabling the growth of renewables in that country. Currently, coal is still the fastest-growing fuel for power. It's also a very carbon-intensive fuel, of course.
Natural gas produces half the amount of CO2 when you make power from it, therefore we can play a role by providing strong cost-competitive supply of natural gas to help enable that shift away from coal towards lower carbon power generation. Of course, we're also helping to open up new gas markets around the world in areas like shipping, freight in general. We are helping countries shifting from coal to a lower carbon variety, natural gas. Of course, we should also help industry, not least ourselves, to reduce the emissions, focusing on efficiency in our refineries, efficiency in our chemical plants. From this year onwards, which I already said, we will have greenhouse gas management as an element of our remuneration and our scorecard for all our staff. We should do more. We should advocate.
We are encouraging governments to put a price on carbon so that the power sector and consumers and all other industry members are further incentivized to improve energy efficiency and reduce carbon emissions. A government-led carbon pricing mechanism, if it indeed resulted in a material price on carbon, would also increase the number of projects to capture and store carbon emissions underground. Whether you like it or not, the reality is without strong financial incentives, industry in general will simply not compelled to move as fast as society needs them to move. That's why we are advocating for a price on carbon. We're also working with governments in a more detailed and close-up fashion to develop the right policy metrics to reduce emissions from transport and from residential sectors.
This requires regulation on how to make cars and appliances and buildings, but also consumer behavior. Unfortunately, also your behavior, my behavior, more carbon efficient. Very difficult things to achieve, but nevertheless, things that are very necessary and where I think we can also play a role. To use our trading arm to help build a market that can match the remaining emissions with those who can capture and store them. Without an active emissions trading market, the commercial levers to realize net zero emissions will simply not be there to function. I think altogether, and these are just a handful of things, and I can go into a lot more detail, but I won't have the time for it now. There's a lot that we in our company can do, will do, and are doing to move the world along to this path of decarbonization.
We can't do everything. We cannot do it single-handedly. Let's go a little bit deeper and take out a few businesses and show you what else we are doing. First of all, it's a very important thing to note that we want the company to be resilient. We want to have a business strategy that will allow us to navigate the energy transition successfully and indeed come out as a winner. Our strategy reflects the acceleration of our growth in gas, of course, after the completion of the BG deal. As we look how the world could implement the goals of the Paris Agreement, we see that resilience in our strategy. Our strategy to become a world-class investment case means continuing to focus on advantaged assets at the lower end of the cost curve, at the lower end of the carbon curve.
Let me deepen that resilience argument a bit and zoom in on a few of the businesses to just bring this to life a little bit more. With our very large-scale integrated gas business, so our liquified natural gas business mainly, and our ability to develop new markets for gas, we are very well positioned to help governments secure a lower carbon, cleaner energy system. Again, as I said before, gas emits less CO2 compared to coal, and also there are benefits, of course, when you consider air quality. Look at some pictures from China and India where indeed coal firing provides for very, very poor air quality. Take chemicals, another business in our portfolio, actually one of our growth priorities. Chemicals is the fastest growing hydrocarbon demand sector at this point in time. Has an annual demand growth of 3.7% over the last 10 years.
That means that it doubles every 10 years in terms of size as a sector. Why is it? It is because the key drivers for growth in chemicals are very fundamental. It's again increased population, rising standards of living, urbanization, et cetera, and these will continue. According to a study that has been done by the International Council of Chemical Associations, the biggest opportunities to reduce carbon dioxide emissions over the lifetime of a product are in areas such as insulation, high-quality packaging materials, synthetic textiles, automotive plastics, light-weighting material, low-temperature washing powders, et cetera. Many petrochemical products will play a role in that set of examples. A large majority of Shell's petrochemical output actually comprises ethylene-based products such as styrene and higher olefins.
That may not mean very much to you if you're not in chemistry a little bit, but these are products that are being used in making insulation material, styrene, for instance, and higher olefins sits in the low-temperature washing detergent that you use at home. Significant reductions in greenhouse gas emission from residential sectors. Of course, on top of it, we reduce our greenhouse gas intensity in our chemical plants. Now the energy transition also gives us opportunities to change our business models, to do things differently or to make money in a different way. One of the areas is marketing or retail. You're all familiar with our retail stations around the world. By this year or last year, we set some really strong ambitions for what we want to achieve by 2025. They're on this chart. They're clear in my mind.
They're bold, the retail leadership team is working hard to implement them. By 2025, our ambition is that 50% of the margin share in our retail business will come from anything but fuels, from our general retail offering. We plan to do this by making our gasoline stations a retail destination, increasing the share of products that we sell beyond fuel, especially expanding our food and drink product offering, increasingly partnering up, of course, with high-quality brands across the world. Secondly, we want to take a leadership position on cleaner fuels, we aim to significantly increase the amount of low-emission fuels that we offer to our customers around the world. We want to reduce the carbon intensity of operations, we aim to achieve this through low CO2 design, low CO2 equipment and operations, as well as embedding a low carbon mindset in our retail organization.
Our fourth ambition is about innovation to ensure that every customer feels like a guest when they interact with Shell, whether it is at a Shell station, the Shell app, or online. Lastly, reducing waste. It's a very important global social cause we have in retail. We have an extraordinary opportunity to make a significant impact on our people, our communities, and our business by leveraging our presence in more than 43,000 retail locations worldwide These are some examples of what we are doing in retail. Elsewhere in our oil products business, for example, we have been high-grading our refining footprint, again, to make it a better, higher quality, lower carbon emitting footprint over a number of years. As you've also seen, our refreshed strategy saw us introduce New Energies as a strategic theme.
New Energies is a longer-term business where Shell looks to invest in a measured way to gain insights as to where we see the potential for material businesses in time. It's not driven by investment targets or by volumes, and it will be aligned with our world-class investment case ambition that I mentioned so often before. In this New Energies business, we have four emerging themes. Advanced biofuels, where we aspire to build a very material biofuels business manufacturing and blending, and also focusing on de-risking and developing our technology portfolio for biofuels. Second, hydrogen. Chad already mentioned it. We are developing some early options to competitively position Shell for this emerging fuel. We've been doing it for 20 years, so you can be a bit too early in these areas as well.
Our initial focus on hydrogen is in mobility in the core markets of Europe and North America. Here we do it in partnership with a number of other players, like car companies, industrial gas companies, and governments to address market adoption. We are building, third one, an integrated position in the growing renewables power value chain. This ranges from exploring opportunities in offshore wind, in solar, in emerging markets, but also selective energy storage and conversion of energy together with partners that we operate in renewable power generation. We are extending, of course, our power trading and marketing footprint to leverage these integration systems. Of course, we are exploring things like electric vehicle charging opportunities to enable load balancing on the grid and to save money for customers. That also ties into the fourth theme here, which is customer solutions.
We are testing new customer service models through both business incubation, venture capital investment, focusing on mobility services, B2B services, and what we call behind the meter solutions for renewable power and heat. This strategic theme is one of the areas where we focus very much on the longer term. That was a long expose on what we are doing in climate change, I had the impression that we were going to get some questions on it, I thought I better address a few points here up front. Let me finish with another very important part, which is our strong track record on dividends. The dividends, of course, are the company's main route to return cash to you, our shareholders. In 2016, we paid a quarterly dividend of $0.47 per share. That's $1.88 in total per share in the year.
That's an annualized figure of around $15 billion of dividend declared. We recently announced our quarter one dividend per share also to be $0.47, in line with the same quarter last year. All of this, I hope, underlines a very strong commitment to our dividend track record. Thank you very much, ladies and gentlemen. I hand over to Chad.
Thank you very much, Ben. Very helpful. We've now come to that part of the meeting where we have the opportunity to ask questions or make comments. You may have seen the notice of meeting or in the leaflet that you're handed when you came in today, there are 21 resolutions for you to consider. Most of them are mainly a routine nature for a listed PLC. However, we have a resolution submitted by a group of shareholders, which we'll come to later. To ensure orderly discussion, please ask your questions when the appropriate resolution is called. For example, if you have a question on remuneration, please ask it around resolution number two or number three. Likewise, if you have any questions around the shareholder resolution itself, please raise those questions around resolution number 21.
For all the questions and comments of a general and operational nature, including those on climate change or renewable energy, I invite you to raise those when we consider the first resolution concerning the annual report of accounts. Additionally, I want to ask my fellow directors from time to time to help me answer the questions, but if you could direct your questions to me as the chair of the meeting, and I will call on them appropriately. Voting will take place at the end of the meeting using the white paper poll card, which if you're entitled to vote, you received at registration. You'll be asked to deposit the signed poll card in any one of the ballot boxes located at the exits to the auditorium.
The votes will be counted by the company registrar, Equiniti, and I will formally appoint them to act as the scrutineers of today's meeting. If you wish to ask a question, please go to one of the designated question points. If you need assistance, please ask one of the ushers to give you a hand. To allow as many shareholders and proxies to speak as possible, I'll keep the meeting to a reasonable length. I would ask questions and comments be as brief as possible and relevant to the day's meeting. If I believe your question is excessively long, I may ask you to close. I intend, where possible, to all questions or comments of a similar nature be grouped together. As a means like resolution one, for example, all the questions and comments around dividends will be taken together.
I think this will make for a more efficient meeting as we move forward. As chair of the meeting, I have a duty to ensure today's proceedings are conducted in a proper and orderly manner, and I will do my utmost to ensure all views are given a fair hearing. To help me fulfill these responsibilities, I would ask you to respect these procedures. Now, before we begin the questions, some of you may have seen recent media reports into Shell's involvement in Oil Prospecting License 245 in Nigeria. Given this matter is under investigation, you'll appreciate that I will not make comments on specifics and regret that we cannot answer questions on this today. However, I would like to make three points. First, while the focus of recent media coverage on the 2011 settlement, it did not focus on the history leading up to that settlement.
At the socially responsible Investor Day Shell had 24 April, our legal director provided a summary of the facts and events spanning more than 10 years relating to Shell's investment in this settlement. This material is on our website. You can see it on the slide behind me, which is open to everyone. The summary captures a series of complex transactions and disputes over 10 years among multiple parties, including the Nigerian government and Malabu Oil and Gas. These disputes were exasperated by the fact the Nigerian government had ultimately awarded OPL 245 to two different parties, a Shell subsidiary and Malabu. These competing legal claims are central to the disputes that followed into the 2011 settlement.
I hope this information helps clarify why certain Shell companies entered into the 2011 settlement, and why, based on our review of the prosecutor of Milan's file and all the information and facts available to Shell, we do not believe there is a basis to prosecute Shell. Furthermore, we are not aware of any evidence to support a case against any former or current Shell employee. Secondly, I want you to know we are taking this matter very seriously and are cooperating with the relevant authorities. This includes where appropriate, having shared our key findings of an investigation conducted by Debevoise & Plimpton, an international law firm. We have also accurately reported on OPL 245 in all of our annual reports. Finally, I want to emphasize that Shell attaches the greatest importance to business integrity.
It's one of the core values and central tenets of the business principles that govern how we do business. Thank you for your understanding on this. With that, I'd like to proceed to Resolution number 1. Resolution number 1 is ordinary resolution concerning the 2016 report and accounts. The purpose of the report to directors and accounts of the company at year-end December 31, 2016. Be received. A full, unqualified auditor's report and set of pages 104 to 114 of the annual report are available for you. We're now open to take questions on Resolution number 1, and we'll start with microphone number 1. If you could introduce yourself, please.
Thank you, Mr. Chairman. My name's Matt Crossman. I'm the stewardship director at Rathbone Investment Management. Personally, can I just thank you for your introduction of the meeting. As someone who was born and raised in Manchester, I very much appreciate your kind words at the start. I'm here today representing a coalition of investors under the banner of the IIGCC, the Institutional Investors Group on Climate Change, and I've got a short statement to read and then a question, if I may. This statement is supported by the following members. That's Kempen Asset Management, Nordea, BMO Global Asset Management, Rathbone Greenbank Investments, CCLA, HSBC, AXA Investment Management, BNP Paribas, Hermes, Legal & General Investment Management, The Pensions Trust, and finally, Metaxis Asset Management .
We're supported generally by some of our Dutch members in general with this engagement, but they're choosing to do their own thing as and around the special resolution. Mr. Chairman, as long-term institutional investors who manage retirement savings and investments for millions of people, climate change is one of the biggest systemic risks that we face. Any gaps, weaknesses, or delays in climate change policies and responses by companies will increase these risks to our investments. At the 2015 AGM, over 98% of those shareholders backed calls for enhanced reporting from our company on the risks that climate change poses to the business. It's the opinion of many that this successful resolution provides sufficient framework for the company to provide more robust evidence of its efforts to address the effects of climate change on our company.
The 2015 resolution binds the company to providing more information on ongoing operational emissions management, we note that there's broad agreement that setting public targets is a useful and practical step in embedding sustainability within the business. This is something reflected in the recently updated IIGCC expectations of oil and gas companies. We note that BG, in fact, had an operational emissions target prior to the merger. This is something that investors like to see in terms of helping us understand risk. We're very encouraged by moves from the board this year to begin to integrate GHG reduction goals within the remuneration framework. However, we would encourage a clearer commitment to establish these goals as group-wide targets.
We'd further welcome any move by the board to set a clearer timeline for expanding the scope of these GHG targets in the remuneration scorecard beyond the current level of 60% of Shell's operations. Bearing these factors in mind, Mr. Chairman, the institutional investors here are voting various different ways on the resolution. For the current business, we note that emerging new opportunities around energy may play a more material role in the future and appreciate the companies building up capabilities in this area through the New Energies division, we're asking for greater clarity on the level of the company's ambition in this area. I'm moving to my question.
Mr. Chairman, in this context, we're asking that the company continue to work with the IIGCC to develop a robust response to the operational emissions part of the 2015 resolution, pay due regard to the elements of Resolution 21 which have merit, namely emissions around Scope 1 and 2. Will the board therefore commit to setting a public group-wide emissions target on Scope 1, 2 emissions, and also clarify how it takes account of Scope 3 emissions in ensuring that its strategy is sufficiently flexible to adjust to low carbon scenarios? Thank you.
Thank you very much for your statement and question. Ben, would you like to address the question?
Thank you very much, Mr. Crossman, and thank you for your support. Again, I will make the point more generally. I would like to stress that we get it. We understand what needs to happen. We understand that we have a role to play in reducing greenhouse gas emissions also in our own facilities and reducing our footprint. We have made that very clear also through the introduction of metrics in our scorecard. The reason why we have taken refineries, petrochemical plants and flaring, which adds up to about 60% of our total Scope 1 emissions, is because it is relatively straightforward to set targets for them. We can look around at other refineries, we can benchmark, we can say what is best in class, and that is where we aim to be.
It is a little bit more difficult for the rest of our portfolio, where quite often there are no easy comparisons to come up with sensible targets. That is why we limited initially to just this. Of course, we will see how we can increase the scope of our total emissions to introduce into that framework of target setting, but we had to start somewhere, and this, we felt, was the best way to do it. And to attach a very significant part of the total bonus pot of all employees to it, 10%, not insignificant, means that everybody focuses a little bit more on this than they would otherwise already be doing. Yes, there is a commitment to continue to drive that better.
Where we have always had more reluctance is to somehow, in that very complicated set of assets and considerations that we have, to boil it all down to the single number target. We believe there is more risk for unintended consequences, unintended consequences that actually are adverse. The fact that we push back on having a single target with unintended consequences doesn't mean that we are against Paris, against climate change, against taking the right measures in our portfolio. We just want to be thoughtful and intellectually honest, and that is our approach. That may be requiring a little bit more dialogue with our investors and other members of the community to understand or to make sure that everybody understands what we are doing, and we are committed to that as well.
We are committed to have an ongoing dialogue to show how we can demonstrate that actually we are making progress without reducing the whole complexity of the decision down to a single number management, which ultimately we think will have negative consequences, not just for the company, but probably also for the energy system as a whole.
Just a very brief follow-up, if I may. You mentioned in your comments your support for the Paris Agreement. Can we expect to see an update of your scenario work with the Oceans and Mountains level scenarios that you've produced in the past to reflect the framework of the Paris Agreement?
I don't think we have plans to update and publish the scenarios as we currently have them, Oceans and Mountains. I can say about scenario approach, this is very much a live topic at the moment because we're also working with the FSB Task Force on climate-related disclosures to understand how we can demonstrate that our portfolio is resilient in a variety of worlds that can come about as the world tackles climate change. What we do here, which is very much in line with the thinking of the Task Force, is we develop a number of scenarios. We don't know how the world will develop, but we do know how the world could develop under different scenarios if we are to meet the Paris goals of 2 degrees C.
These scenarios we use to then test the decision frameworks, our portfolios, to understand whether we have weaknesses in our portfolios that may become stranded assets or to understand what are the right decisions to take as we make our investments. Whether or not we will disclose this scenario thinking or to what degree, I think is still open at this point in time. Very much will also depend on what exactly the Task Force will recommend and how we can best seem to be responding to it.
Thank you. Microphone number two, identify yourself and your question, please.
Good morning, ladies and gentlemen. My name is Robert Vreeken from WeConnectU. We're public affairs and investor relations. Two or three years ago, I was very glad to see the new CEO, Ben van Beurden, because communication entered Shell, things became more transparent, and also the first step have been made. I then advised you to become the worldwide market leader in the field of solar, wind, hydrogen, water supply, which is very important, and now also LEV, light electric vehicles, because those are very important for urban development. Currently, the cost related to wind and solar is already lower than gas extraction and oil, and obviously, this has a huge impact on follow-up steps. The first steps have therefore been made. It's important for this to grow exponentially. I have recommended some leading Dutch innovations to you, asking you to upskill them.
Well, things are not moving that fast. You have, for instance, given the Shell award to a seat heating system, although this saves 95% on CO2 exhaust. Also, the Netherlands have the possibility of saving 95% on gas and water using a very economic system, which is great because in most countries where you work, major water problems may be solved. We have LEVs, light electric vehicles. In most cities, this is supposed to be the solution, combined with spin-off systems. For instance, we have electric bikes. 80% of all rides is less than eight kilometers, and therefore on longer strikes, an electric bike is the solution. Hardly any energy consumption. Then we have [inaudible] , little cars. A full tank only costs one euro, and the energy cost is EUR 0.01 per kilometer.
This allows you to save 75% on parking space, and therefore 75% of the costs in cities. Then we have something else which is really important, cybercrime. We all see that things are absolutely not well arranged worldwide, maybe with Shell, but certainly not with government. We have an additional challenge coming up, which is the Internet of Things, which is even less well protected. Many facilities will be facing the Internet of Things to a certain degree. My question is the following: How are you going to manage this? What is Shell going to do to keep things in order worldwide? That covers my questions.
Thank you. Ben?
Thank you, Mr. Vreeken. If you don't mind, I will give the reply in English also for the benefit of everybody listening in on the internet. I think the points you make are very relevant, very pleasing. Thank you very much for your initial compliment. I think, yes, you're absolutely right. Developments in solar and wind, in new vehicle technologies, all these things are happening. They drive, certainly in developed economies, a large part of the energy transition. They're the right things to happen as well. For us, then quite often the choice is to what extent do we need to participate in this?
We need to participate in it, in my mind, if we have something to add, if we have a competency that is very close to that new business opportunity, or sometimes we are prepared to participate in it to make it happen, so to speak, like things I mentioned before, CCS. If we do not participate in it may not happen as fast as we would like it to be. Some of the examples that you mentioned, I think are examples that are indeed very worthy. They are perhaps very good business opportunities for other enterprises, but they do not closely fit the core competencies of our company.
Therefore, you will have seen that we are more prepared to incubate and help others be successful in that area than to adopt it and to ourselves get involved in energy efficient showers and light electric vehicles in cities, et cetera. I hope you will respect and understand that every part of the industry and the economy needs to play to its strengths. On your point on cybercrime, that's a very important point indeed. Cybercrime is one of the key threats that this board recognizes that can hurt us, hurt us in many different ways. Our installations, of course, can be attacked, but also through our retail networks can impact the privacy of our clients, et cetera. We take it incredibly seriously. Cybercrime is a regular feature on the agenda of this board, on the executive committee's agenda.
Every quarter, I have an in-depth session with our head of information technology together with our CFO, Jessica, to really understand what is the progress, what is going on, what are the incidents, how are we responding to it, et cetera. The number of attacks we have on a daily basis, they rank in the many thousands. So far, we have been able to counter these quite effectively. We don't have 100% success rate, but it's pretty close to 100%. This is a continuous arms race. We need to stay ahead of everybody else. Therefore, let me reassure you again that this is something that is right on the top of our risk register and is being managed very actively. Thank you.
Number 1.
Good morning, Chairman. My name is Charlie Kronick. I am a shareholder, but I also represent Greenpeace. First of all, I wanted to thank Ben van Beurden for what was a frankly amazing presentation on the challenges of climate change. I was just at the BP AGM last week, I can tell you, they've got a lot of catching up to do. The question I wanted to ask was very specifically about scenarios, I'm following on from the SRI presentation you mentioned that took place in London a few weeks ago, where your Executive Vice President for Strategy, Guy Outen, gave a presentation about scenarios, which I read with great interest. I'm going to quote him here because I thought it was so interesting.
He said, "They are meant to stretch the thinking of our board and executives and inform decision-making." Obviously, you won't be surprised to hear that we couldn't agree more with that, particularly in the context of the warning from Pierre Wack, who was the original head of scenarios at Shell in 1970s, who said, "Forecasts are not always wrong. More often than not, they can be reasonably accurate, and that what makes them dangerous. Sooner or later, forecasts will fail when they are needed most in anticipating major shifts in the business environment that might make whole business strategies obsolete." This is where I want to follow up on the specific scenarios which Matt asked about. In the most recently published full set scenarios, the New Lens Scenarios, there were two plausible futures put forward.
One was where there were technological and economic breakthroughs in new unconventional oil scenarios, and the other were technological and economic breakthroughs in unconventional gas scenarios. Neither one of those scenarios really challenged the overall dominance of fossil fuels in the energy future, which I have to admit, you did acknowledge in your opening presentations, but they do include a rather disproportionate dependence on CCS, particularly in the area of negative emissions. When you think about the development of CCS so far and its dependence on a carbon price, those do seem to be rather optimistic assumptions built into your scenarios. My question is really a pretty simple one. In responding to Matt Crossman, you suggested that you may or may not reveal future scenario sets, whether complete or partial, depending on external circumstances.
It just seems, particularly given the really demanding targets of decarbonization, or at least a net zero decarbonization by 2050 at the earliest to have a chance of getting to well below two degrees. Doesn't it seem absolutely appropriate that the business would reveal both the scenarios and the assumptions behind them to shareholders and to other stakeholders? Frankly, it would be very difficult to tell if stress testing was really helpful if it didn't show if your assumptions were very stressful. Thank you very much.
Thank you for your question. Ben, would you respond, please?
Thank you very much, Mr. Kronick. I thank you for your compliments. Well, we have an open mind. Let's take a look at it and see how much is relevant for sharing. As I said, we have a number of scenarios that we have developed recently as sort of a wider set of variations compared to Oceans and Mountains, which are the scenarios that you refer to, the New Lens Scenarios, to stretch our thinking and really, again, to make sure not that we have a projection or a prediction about what could happen, but to test whether the choices that we make are resilient. Quite often it sort of, if you forgive the sort of complexity of the sentence here, it is about trying to understand how we minimize maximum regret.
How can we make choices that we're not going to regret later, in the absence of certainty how the future will look like? We have four scenarios that sort of span aggressive and less aggressive government action, which will ultimately be one of the main determinants of whether we will succeed in tackling climate change or not, also whether or not there will be significant technology breakthroughs, yes or no. We have a fifth scenario that says, irrespective of how we think the world could respond and policymakers could do things and technologies can develop, let's just assume that somehow we will get to net zero. Don't know how, but we will use the norm of net zero as an outcome to work back what this means. That scenario is available. It's in this book. It is at the entrance in the hallway.
I suggest you take it away because it describes what I think is still, at this point in time, the most demanding scenario for the world. This assumes and this describes what we need to have achieved by 2070 in order to have a two degree C increase in temperature. This is one of the scenarios that we test our current decision-making against, together with the four others that I mentioned.
Thank you very much.
Number two, please.
My name is Mrs. Wida. I am a longtime stakeholder, also a longtime psychologist. I would like to ask you about what kind of measurements will be taken in relation to the many people who have problems to adapt to the new ways of life created or dictated by the climate transition. The reasons people have may be different, but they all are victims, mostly poor people. There are also lots of people who just do not want to adjust quickly to new ways of life. Maybe because they have other opinions about the climate. To which extent is Shell prepared to burden itself with investments in climate-related projects? Thank you.
Thank you very much for your question. Getting the populations of the world to go with us in this climate change, this energy transition, is very important. I think you bring up important points that each community around the world will see these changes differently, and we'll assure you we'll take that into account in all our planning. Thank you very much. Number one.
Good morning. My name is Angélique Laskewitz. I am the director of VBDO. This is the Dutch Association of Investors for Sustainable Development. We have two questions relating to the sustainable development goals. Our first question is on the SDG 13. The SDGs explicitly call upon businesses to contribute to realization. VBDO applauds Shell for recognizing its responsibility and for reporting on its contribution to these goals. For 11 selected goals, Shell outlines in general how its strategies, activities, and ambitions contribute to reach these goals. This is a great achievement. Concrete actions and targets for the most material goals still miss. This first question is on this climate action. Climate action is of high materiality for Shell. Shell already makes effort to address climate change, shifting more towards low-carbon, renewable energy sources. The company didn't set concrete time-bound targets yet.
This is also observed by your own external review committee. The RRC recommends setting targets to indicate the intent pace of Shell's transition to a lower carbon portfolio and to report on these targets. VBDO fully supports this recommendation. Our question is Shell willing to set concrete time-bound targets for its contribution to climate action, SDG 13, and will these targets be included in your next annual report? The other question is, other SDGs of high materiality for Shell are SDG 14, life below water, and SDG 15, life on land. Shell recognizes the value of natural capital and makes efforts to protect and restore biodiversity and natural habitats. Shell is active in various partnerships and projects to enhance natural capital. This is laudable. VBDO would like to see a more company-wide overview of Shell approach and actions for natural capital protection and restoration.
This would also include targets. Is Shell willing next year to report on concrete action and targets for its contributions to Life Below Water and Life on Land? That's for the question. Thank you.
Thank you very much. We appreciate you studying our sustainability report so closely to look at our progress about all 17 Sustainable Development Goals. I think Ben has addressed overall and answered the first question. Our views on targets, that we need targets, but we have to make sure they're meaningful in the course of what we have. Of course, the board will continuously consider not only what we report, but also what are appropriate targets. We have a number of sub-targets already, and you raise additional ones, and we'll certainly consider those. Thank you very much for your points. Number two.
Good morning. My name is Barnaby Pace. I'm a proxy shareholder for Melanie Strickland. Thank you very much for your short presentation on the OPL 245 case this morning just before the questions. I appreciate Shell telling some of their part to the story and including it in the presentation to all their shareholders. My question is not about the case specifically. I understand given that Shell is facing trial in the case, it's a legal case, you shouldn't be commenting on it. It's more about the policies and procedures about how Shell is informing investors about the case and its business integrity policies. My organization is Global Witness, and we've been raising concerns about Shell's conduct with respect to a deal for oil block OPL 245 in Nigeria for around nine years now.
Two years ago at the 2015 Annual General Meeting, I asked whether Shell knew its payment for this block would go to Malabu Oil and Gas, a company owned by Dan Etete, a convicted money launderer. I was assured by Mr. Van Beurden that the deal was, and I quote, "Morally okay and entirely transparent." This is consistent with Shell's repeated response over the past six years that the deal was a settlement with the Nigerian Government, as you said, and that they only paid the Nigerian Government.
On the 10th of April this year, following the publication of Shell's internal emails contradicting this public denial of dealing with Dan Etete and showing that Shell executives were told money would also flow to a vast bribery scheme, Shell's Vice President for Global Media Relations, Andy Norman, told The New York Times that over time it became clear to us that Dan Etete was involved in Malabu, and that the only way to resolve the impasse was through a negotiated settlement, was to engage with Dan Etete and Malabu, whether we liked or not. He added Shell knew that the Nigerian government would compensate Malabu to settle its claim on the block. This is a significant change in Shell's position in response to the allegations of corruption around this deal and how this deal took place over the course of its history.
Given Ben van Beurden's unequivocal statement at the 2015 annual general meeting and Shell's insistence over the past 6 years that it was only paying the Nigerian government, could you please answer the following two questions for me? The first question is, why has it taken 6 years to confirm that it knowingly, in Andy Norman's words, it engaged with a convicted money launderer in this case? Question two, in light of this admission, does Shell still hold the belief that the transaction was, in Ben van Beurden's words in 2015, morally okay?
Thank you for your comments. As I said at the outset, we won't be able to talk about specifics of that case here or answer questions. I would refer you to the presentation by our Legal Director that was given in April, and in great detail, plus there's a full transcript. It describes the position on the case quite well.
I read it with interest. I was wondering if you could comment why the change in informing investors about what they knew has changed.
As I say, because of the nature of this case, we're not able to make comments. That's why I gave a very complete description of the current status as we started and referenced the other material.
Well, regardless of the legal case, is it morally okay to make money through a convicted money launderer?
Shell has the highest standards of conduct. Our business principles are critical. I'm very proud to work with this company every day and the job we do for our customers. Thank you very much for your questions.
Thank you.
Number one.
Good morning. My name is Luke Amanas. I'm a proxy for Mrs. Patricia Dorothy Smith. I'm also mentioning the OPL 245 case, but my questions will be on general policies. Regarding the policy for independent investigations into allegations of breaches of the company's anti-corruption policies, that's what I'm focusing about. I understand that an independent investigation into the Nigerian OPL 245 corruption case was only concluded in 2016, five years after the deal was done and three years after criminal investigations into the deal were first publicly reported. Who has responsibility for approving the instructions or terms of reference for such corruption investigations? How is the independence of an investigation assured through these processes? Is the timescale for the OPL 245 report usual, and does it represent good risk management? Thanks a lot.
I can't speak directly to this particular case that you talk about, but let me talk in general. The Board takes its obligations around governance very seriously. We work on this through a number of committees, including the Audit Committee and the Corporate and Social Responsibility Committee. The Corporate Social Responsibility Committee actually goes and visits sites and understands firsthand what's going on in the environment. We have a very extensive control framework within the company, a strong compliance department and internal audit department to support that. On occasion, we will have external reviews, as we had in this case, which are referred to by open comments. When we find that's appropriate, we'll deploy that.
Thank you.
Number two.
Thank you. My name is Paul Tang. I've been a shareholder since last year. I'm also a Member of the European Parliament. Being a politician, I'm well trained to speak briefly, shortly, and I will try that. Shell company, I expect to be a leading company, also leading in corporate social responsibility. You set the standard. What I haven't heard today and what I would like to hear is the responsibility on corporate taxation. The principle is very simple. Companies pay taxes where they make profits, and companies are transparent about it. The first more general question is it part of your corporate social responsibility, and where can I find it? I cannot find it in the policy of corporate social responsibility. Then two more specific questions because there was a reason why I became a shareholder in the first place.
First, there are 31 subsidiaries in Bermuda, 29 on the same address. I don't suppose there's oil in Bermuda. Shark oil I've read, but no oil. Are these there because of tax purposes? Seems likely, right? The second question, my hypothesis is that Shell hasn't paid corporate taxes in my country, in the Netherlands. I hope you will say it's not the case, but that you also make clear that you will reveal the numbers, the data on this, how much corporate taxes Shell has paid and will pay in the Netherlands in years to come. I hope you will answer this specific question also specifically.
Thank you very much for your questions. Thank you for your brevity of getting three questions out very fast. You lived up to your commitment.
I did my best.
You asked a number of specific questions. I'm not sure we have the answers to all those today. Jessica, could you talk about taxation in general as best you could to the questions?
Thank you, Paul, for the question. Shell absolutely recognizes the role of taxation in society, I'd say it's part of our creating shared value agenda for the company. In 2016, we paid or collected on behalf of government some $55 billion in taxes. We paid corporate taxes in excess of $4 billion. We recognize the role of taxation in terms of bringing wealth and sharing wealth in the countries where we operate. We're very actively involved in various bodies in terms of increasing transparency on taxes paid. We believe in transparency. We believe it supports improving accountability and improving governance where we operate.
We take that agenda very seriously and are contributing in various forums to improve transparency, as well as various movements in terms of ensuring appropriate taxation, consistent taxation, again, with the goals of supporting society, also limiting double taxation to make sure that there's attractive investment environments as well. We absolutely seek to follow all laws with respect to taxation. Our corporate structures and our tax structures reflect the way we choose to run our operations for commercial reasons, for partner reasons, et cetera. Those aren't always immediately clear to people, the intent is always to follow the letter of the law, the spirit of the law, and to have our tax practices consistent with our principles in terms of creating shared wealth. Thank you.
Can I? I appreciate that you underline transparency. I think that's the key to corporate social responsibility with regard to corporate taxation. I have two specific questions, and I think that's part of transparency. What about Bermuda? What about the Netherlands?
I tried to address that to some extent already in terms of our corporate structures reflect a number of factors. When you operate in 90 countries and you have different partners, different businesses, different business models, that may not always be obvious why corporate structures are created one way or another. They reflect a series of decisions that we make to try and make the best decisions on behalf of our shareholders, but also on behalf of governments and on behalf of our partners. That's the intent. In terms of where we pay taxes, it's a reflection of our earnings. When we make a lot of investments in a given country, when oil prices halve over the last couple of years, that can impact the level of earnings we make and therefore the level of taxes that we make.
Again, we absolutely follow the spirit and the intent of law. We believe in appropriate taxation and the role of taxes that are played in society. Again, the circumstances of the business and our earnings drive when and where we pay taxes. Thank you.
Okay. I don't get to specific questions, specific answers. Far for transparency.
I'm trying to be as specific as I can. Thank you.
Thank you. Number one.
Thank you, Mr. Chairperson. My name is Liesbeth van Tongeren. I'm a shareholder. I want to commend Shell for publicly acknowledging at its AGM the, as you called it, the earthquake situation in Groningen and the ensuing misery for the population there. I want to commend Ms. Van Loon for publicly apologizing to Dutch Parliament for the situation in Groningen and the ensuing misery for the population. My question is about, Mr. Holliday said we should challenge old beliefs. A fair part of the shareholders believe that a company like Shell can only influence Scope 1 and Scope 2, their own operations and the people that they are in direct contact with, and that they cannot influence Scope 3, the customers.
Other shareholders feel that they can indeed, and some of the examples that Mr. Van Beurden gave in his excellent presentation show that indeed Shell is influencing its customers. I would like to hear, if possible, from Mr. Van Beurden to what extent he believes Shell can indeed influence Scope 3.
Ben?
Thank you very much, Mrs. Van Tongeren. Let me make it a little bit broader first and then come into very specific Scope 3 arguments. If you talk about Scope 3 in general, this is not any more the technically correct definition of Scope 3, let's talk about emissions from our customers. In many cases, we do this, for instance, to, as I said, develop gas markets, for instance, in countries where the predominant use of coal for power generation or coal for general industrial activity exists. By developing gas markets, which is a very complicated affair, gas markets don't happen automatically. They take a lot of work planning, risk management, et cetera. We actually move these customers from coal emissions to gas-based emissions, thereby significantly improving not only the number and the amount of emissions, but also air quality.
Technically speaking, we wouldn't get any credit for that because they're not our Scope 3 emissions that reduce. That is Scope 3 emissions of the coal companies that reduce. Our Scope 3 emissions actually went up as a result of it. Nevertheless, we work to achieve this for the benefit of that particular country and hopefully the benefit for society. In many other cases, it's a bit more direct. Take, for instance, the case in Brazil or in other markets where there is a very significant part of biofuels in the mix. By actually pushing biofuels further into the mix, quite often also working with car manufacturers to try and understand how they can adjust technologies and an engine design to allow for a higher percentage of biofuels in the fuel mix. We indirectly also influence, of course, the adoption by customers of lower carbon fuels for cars.
We can go one step further, we will by, for instance, understanding how we can compel customers to actually adopt fuels that have higher quality and lower emissions. Perhaps a little bit later this year, we will be looking at ways and means on how we can introduce fuels that have offsets associated with them. As a number of companies do in different segments, is to make available for the customers the choice to use products that somehow will have less or no carbon emissions associated in general. We also work, of course, as I said, with governments to understand how policy design can be improved to discourage the use of highly energy-intensive appliances, how to work on the improvement of infrastructure for electricity and transportation, et cetera. They're all a combination of direct and indirect.
Ultimately, the biggest driving force for changing customer behavior, particularly where there's consumer behavior, so the general public, will need to come from government, from politicians like yourself because they are mandated to do so. We are not mandated to somehow tell customers they cannot use our products. We can work with governments and politicians like yourself to just say, "If you design policies like this, you get the desired effect. If you design policies like this, we will be there on the day to invest in the consequential infrastructure or supply of products that are going to be needed." We have not been mandated by society to take care of consumer behavior.
Yes. What, of course, some shareholders are trying to do is to mandate you, to ask you with a specific resolution to take a lead in that. Not to go it alone, but to take a lead in becoming a company that together with governments, given the size of Shell, together with governments, goes in the direction of becoming the first, instead of an oil major, a green major. One of the reasons some of the institutional investors will not support the resolution is that they say the company cannot influence Scope 3. What I gather from your words, which I agree with, companies can indeed, to some extent, influence Scope 3. I hope some of the institutional investors present will consider your wise words before they cast their votes. Thank you very much.
Thank you. Number two.
Good morning, everyone. My name is Rachel Owens, and I'm a proxy for Ian Phillips. I'd like to thank the chair for the one-minute silence as a British person. My question relates to Shell's risk factors referred to on page 15 of the annual report, including violation of anti-bribery and corruption laws. Shell's risk management system and the internal controls, which are overseen by the board and the audit committee, are designed to tackle these risks. On page 72 and 80 of the annual report, it notes that the board and the audit committee carry out a routine annual review of this system. However, on page 80, the audit committee report identifies significant issues but fails to identify corruption issues as one of those significant issues.
In 2010, following a deferred prosecution agreement with the U.S. authorities, under which Shell paid a $30 million fine and was effectively put on probation over bribery allegations in Nigeria, Shell committed to reforming its anti-bribery and corruption system. I have two questions, Chairman. Can you please confirm whether the board or the audit committee has undertaken or intends to undertake a separate review of its anti-bribery and corruption policies and practices? If such a review has taken place, can you please explain what changes have been made to Shell's anti-corruption policies in light of recent developments? Many thanks.
Thank you very much. Let me comment on your question, then I'll turn it to Euleen Goh, the Chair of our Audit Committee, to add anything she would like. We routinely review those procedures and practices, and we have reviews not only at the Audit Committee but with the full board. Again, particular aspects, even with the Corporate Social Responsibility Committee. We must refresh those all the time because the challenges are constantly with us. Euleen, would you like to add to the questions?
Thank you for the question, thank you, Chad. We have a Chief Ethics and Compliance Officer, and the Audit Committee hears a report from that officer on a yearly basis at least. Certainly, this is a topic that we keep under constant review as the world changes. I can assure you that we have kept this review updated. In particular, we have spent quite a lot of time in training our people in this particular aspect. Let me assure you that this is a topic that is under close supervision by the Audit Committee and by the board.
Can I just quickly come back and ask whether the Board would consider including the issue of corruption as one of the significant issues identified on page 80 of the annual report?
I would suggest that we would certainly put something in if there is a significant material report that we need to put up
We will consider that on a year-on-year basis, depending on the materiality of the subject.
Thank you.
Number 1.
Thank you, Mr. Chairman. My name is Jasper Janssen, and I represent the Dutch Investors' Association. I have three questions which are related to finance. The first is on the scrip dividend. In the past seven years, the share count of Shell increased by over 25%. Exxon, in the same period, reduced the share count by 17%. I understand the effect of the BG deal, but there is a significant impact of the dilutive effect of the scrip dividend. My first question is, what needs to happen before Shell removes the scrip dividend? My second question relates to the share buyback program, as you mentioned a little while ago. To my understanding, the share buyback program will get initiated if the debt is reduced and you need the I'm sorry, we need a somewhat higher oil price.
We wondered if you could be a little more specific on the higher oil price and maybe give a ballpark figure. My final question relates to the first quarter results, which looked pretty impressive. If you look at the return on capital employed, was only about, I guess, 3.8%, which is still a lot below the cost of capital, which I think is about 8%. My question would be, how long would it take before Shell generates a return that is at least equal to the cost of capital, 8%? Those were my three questions. Thank you.
Thank you very much. Very complete questions. Jessica?
Thank you for your questions. Going in order, the first question with respect to the increase in the number of shares, of course, a significant contribution of that was the acquisition of BG, which we think was a wise use of equity. Hopefully you're seeing the results of that strategy and that acquisition coming through in terms of the improved performance you've been seeing in the company for the last three quarters. In terms of removing the scrip, what we're looking for, what we've laid out is our financial priorities, our cash priorities. Our first priority is debt reduction. Second priority is our dividend. The next priority is removing scrip. What we're looking to achieve from a debt reduction perspective is to bring gearing to 20%. We're at about 27% today.
When we see our way through to 20%, we'll be looking to remove the scrip. We want to remove it sooner rather than later. We appreciate the dilutive effect and would like to remove that as soon as it's financially wise for us to do so. Your second question on share buybacks. As I walked through the cash priorities, as I said before, debt reduction, dividend, scrip, we're looking to repurchases as we had spoken about during the BG acquisition period. Again, it needs to be a balance between repurchasing stock and ensuring sufficient investment to achieve our strategic ambitions. We need to find that right balance between the repurchases and capital investment going forward. Again, the commitment is there to address the dilutive effect of the BG acquisition and scrip.
That's absolutely the intent when we have the financial framework in the place where we'd like it to be from a gearing perspective. I think you're seeing a company that's generating sufficient cash flow at a relatively low oil price. I think things are trending in the right direction in terms of the cash generation of the company to support those ambitions, even at today's oil prices.
Maybe one follow-up on this one, because my question was, could you be a little more specific about the somewhat higher oil prices? What should we think about? Is it $5, $10, $20?
The cash generation of the company is a series of activities, if you will, I'm reluctant to say one price gives us an answer. It's a combination of things in terms of the performance of the business, the macro environment, margins in our downstream business. I wouldn't want to give one number as giving you one answer. What I'm trying to give is a sense of the cash flow we need from the organization to support the financial framework and to point to our current results and the current price environment to give a sense of the cash flow generation of the company, which gives us increasing confidence in terms of our ability to work through those priorities over the near term. On the ROACE point, it is below where we would like it to be.
We are committed to do all we can, pull all the levers that we have from a capital efficiency perspective, from a cost efficiency perspective to generate industry-leading returns across our portfolio. We're not content or happy with the below 4%, we are committed as a leadership team to generate industry-leading returns as soon as possible.
Thank you very much. Number two?
Good morning. My name is Ava Lee, I'm here as a proxy for Pamela Coleman. My question refers to page 61 of the annual report, the section on governance. I note that none of the current directors are experts in anti-corruption. Given the risks of corruption in the industry and the specific allegations leveled at Shell in Nigeria, has the board's Nomination and Succession Committee appointed a nominee with specific anti-corruption expertise? If not, why not? If so, when is the recommendation expected to happen?
Thank you very much for your question. I chair the Nomination and Succession Committee. We look at a broad range of criteria. Although we do not have someone that their whole career has been anti-corruption, we have people that have a broad range of knowledge of that, from government service to ambassadors, to broad range in business interests, to much work inside financial institutions that deal with corruption all the time. I think we have a board that has the capability to evaluate corruption, that we bring in experts as necessary. We have many experts inside the company. I'm quite comfortable that we have the depth on the board to deal with any corruption issues. Thank you.
Given that the OECD has named the oil mining and gas industry as one of the most corrupt on the planet, do you not think it might be worth bringing in someone specifically with those expertise?
I understand and take your point. We'll certainly consider it, right now I feel very comfortable that we have a balance of knowledge in the board that can bring in any specific expertise we need. It's better formed that way rather than having just a corruption expert on the board or an expert in any one field. We need board members with broad-ranging capabilities who can talk to all the subjects that come up with the board. Thank you again.
Thank you.
Number 1.
Good morning. My name is Louise Rouse, and I'm a shareholder. I have a question which is one of clarification in relation to the speech that the CEO made at CERAWeek, I think is how it's pronounced, in Houston. Oil Spring break, I think might be another way to describe it. I'd like to begin, as you did, Mr. Chairman, by quoting a UN General Secretary. Ban Ki-moon was a signatory to a letter, along with a number of other former world statespeople, where it said, "Developing countries must grow by using clean energy that decouples economic growth from greenhouse gas emissions." Just as we're trading what former UN general secretaries think about climate change.
In 2014, Shell responded to shareholder queries about the risk of stranded assets, saying, with some legitimacy, that they did not see governments taking the steps now that are consistent with 2 degrees temperature increase restrictions. In Houston, Mr. van Beurden, you are quoted as saying, "Shell's strategy is clear and resilient to the envisaged implementation of the Paris Agreement." I just want to clarify. The lawyer in me immediately zones in on the words envisaged implementation. I just want to know, when you say the strategy is resilient to the envisaged implementation of Paris, do you mean it is resilient to well below 2 degrees with an ambition to 1.5, or do you mean the NDC contributions plus 3 degrees?
If the latter, given that most people in the world are not lawyers, do you feel that there is a tendency for what is commonly called a man on the street to misunderstand what you meant?
Ben?
Thank you very much. Let me preface my comments by saying that I am not a lawyer, I was not intending to be clever with my words. What I meant to say is that the company strategy is resilient to whatever the outcome of the Paris process is. Now, if I understand your question correctly, forgive me for interpreting it a little bit, yes, indeed, the intention of the stated ambition of Paris is to have a global temperature rise of well below 2 degrees C, in other words, 1.5 degrees C. The 2 degrees C has been mentioned, then we have the international contributions that are being made. If we need to get to 2 degrees C, we need to get to a net zero society by 2070. Yep. That is basically what is described in this scenario.
It will be a very ambitious journey for society, I think it will be a very ambitious journey for participants in society like ourselves to get there. I think we can do it. If we need to get to 1.5 degrees C, we need to have that net zero emission society 20 years earlier, 2050. I think that is in the realm of fantastic if we were to achieve that. If we as a society would put our minds to it and would do it, if indeed governments and consumers and everything else would come together and achieve that, I am quite confident that we will be able to not only navigate that transition, but will come out as a winner.
To be perfectly honest, I do not think it very likely with the way we are going, which brings me to the third point, which is the national contributions that have been made. If you just add up everything that every government in the world that came together in Paris has pledged, we're not going to be close to two degrees Celsius. Not going to be even close to three degrees Celsius. A whole lot more needs to happen to just get close to the more modest ambition of Paris, which is the two degrees Celsius. The problem that I have with this is that I'm also a global citizen, that I also have a family.
I also have children who also ask me, "Papa, what are you doing about it?" The problem is that quite often I find that the whole discussion around climate change is characterized into something extremely simplistic
Leave the fossil fuels in the ground. Just install a few more solar panels and we will be fine. Those people in Africa, why would they need energy? It can't be done that way. It is a lot more challenging and a lot more complex than we somehow like to believe. Yes, we need to step up our efforts quite a bit. We want to play a role in stepping up those efforts. That's why we are intensifying the way we engage with governments, trying to do the right thing. For one thing I'm sure is that whatever route the world takes, we will be happy and we will be ready to follow that route. Partly it's also because it will not happen overnight.
With the best will in the world, we will not get to a net zero emission by next year or by next decade. If you then look at the amount of regret that we will have in our portfolio because of the energy transition, it is actually very small. We will be able to comfortably adapt the portfolio, the strategy, make the right decisions to whatever, in the end, global governments will decide to do. I hope it will be less than two degrees Celsius, though.
Okay. Just to clarify, the statement in the speech was as in a speech, sort of a statement that is not meant to be a fixed sort of, it's resilient to this particular thing, but rather, as you said, it will be resilient to whatever is the outcome because we as a company are sufficiently able to adapt. That's what you meant by that? Okay. Thank you very much for the clarification.
Thank you. Number 2.
Hello, my name's Thomas O'Neill, and I'm here by proxy representing InfluenceMap. Now, my organization completed a study last year where we found that Shell was spending $22 million a year lobbying against climate change and energy policy. Now, most of this money flows through a series of trade associations, such as the American Petroleum Institute, which opposes the UN Climate Treaty, and the Western States Petroleum Association, which opposes emissions trade legislation in California. Now, given the clear misalignment between your statements to investors and the actions of these trade associations, which are operating with your brand, what can Shell do to manage this risk in the next six months? Can you commit to distancing yourself from public policy that doesn't represent you?
First, thank you very much for your question. We're in some associations because we need to be, because they take a broad range of actions, such as safety. We might not agree with every statement they make. We're active in there trying to influence those organizations to come to policy positions we would take. That doesn't hold us back in any way. It's been so eloquently described this morning, taking very strong positions ourselves and using our energy accordingly.
Would you be prepared to distance yourself from the position of the American Petroleum Institute on the UN Climate Treaty?
We evaluate each organization to make sure our value add is appropriate, it's the right thing to do. We have dropped out of organizations in the past. Not appropriate to comment today on our membership in any one organization, but your point's taken.
Thank you.
Number one.
Thank you, Mr. Chairman. My name is Jopperman. I work on our global footprint and impact, and I have a question about security and responsibility, safety as well. Last year, I asked you a question about the report by DARA in Madrid. It's titled Climate Vulnerability Monitor, and it's a report about the 400,000 climate deaths per year, which is a part of the total amount of 5 million people almost killed every year in the chain of fossil fuels. Coal and gas and oil are really very dangerous besides the climate change issue. My question was last year, do you know this monitor? You asked me, after checking your 10 directors, "No, we don't know the report." I offered you at the lunchtime, 10 folders referring to that monitor. Now I have a new question, which is now more important.
Did you study, any of you, that monitor, the Climate Vulnerability Monitor? What is your reaction on the conclusions that almost 5 million people are killed every year in the fossil chain? Do you feel responsible for this whole chain and the, well, we could call it a global social drama?
First, thank you for giving us copies of the report, we did study it. I would say one example of how it influenced our thinking was my presentation this morning, where I like to talk about all 17 Sustainable Development Goals, which shows that as a company, we must think about all aspects of our products and what they do. I won't comment the individual numbers that you talk about, but what I can assure you, Shell's a responsible citizen that thinks about the full impacts of what we're doing and reports on it through our corporate sustainability report.
Don't you think that you have to respond to that report? I think it's too vague to just tell me you have seen it or you have studied it. It's a real killing chain, gas, oil, and coal. We must run besides the climate issue to run to shorten and to stop the whole chain of fossil fuels.
I think we can expect from you a reply to this Climate Vulnerability Monitor.
We speak to the subjects that you talk about in our corporate social responsibility report. We can't respond to every study that's made. We do appreciate you raising the point. All shareholders had a chance to hear your point of view. Thank you very much.
Okay. I will hope you will put it in the notes of today. Remember, we talk about ecocide nowadays. This is one serious example, the whole chain of fossil fuels. Thank you.
Thank you very much. Number two.
Thank you. Good morning, Mr. Chairman. My name is Juliet Phillips, I'm a shareholder. As Ben van Beurden mentioned in his opening speech, Shell's future resilience hinges on the long-term value of its gas portfolio. I have some concerns about this. The majority of forecasts point to the LNG market remaining oversupplied for years to come, with prices remaining subdued. On top of this, predictions of bullish demand for gas are increasingly being called into question. The International Gas Union's 2016 World LNG Report predicts weak demand from Asia and stagnant growth in China. Looking further into the future, there's a question around the role of gas as a transitional fuel. The quickening pace of renewable penetration could leapfrog the need for gas, the increasing digitalization of the global economy and developments in additive manufacturing are killing demand from the transport sector.
In light of these challenges, one can question the prudency of allocating vast sums of shareholder capital into expensive, long-lived projects like the Prelude project, with estimated costs of over $10 billion. If Shell cannot envision itself beyond oil and gas for years to come, as has been alluded to in the statements today around renewables, would the company instead consider returning cash to shareholders in order to ensure that value isn't destroyed given these prevalent conditions? Thank you.
Thank you for your question. Ben?
Thank you very much for that question. Let me first of all say that we are great believers in the long-term future of natural gas. We see in the foreseeable years still a demand growth in oil, we see much stronger demand growth in natural gas. As a matter of fact, we see demand growth in gas to be twice as high as the demand growth in oil. Within gas, we see the demand growth in liquefied natural gas to be twice as high as the average of gas. In other words, there is a four times higher demand growth for LNG. A lot of people can argue, when will oil peak? It will probably peak when demand peaks, but the peak for natural gas is many years, if not decades, further into the future.
As a matter of fact, we believe the energy system of the future, by the end of this century, will still and should still have a very significant percentage of natural gas in it. As you will remember the pie chart that I showed, it is simply not possible to serve every societal need with renewables. We will also need molecules of one sort or other, and these molecules be better gas molecules than coal molecules, in our view. We think that there is a very long-term healthy future for natural gas. Now, like any other commodity, natural gas market also cycles. Therefore, there will be periods when there is faster or less fast demand growth, but there is still demand growth.
At the moment, we are indeed in a phase with many new supply projects coming on, that there is more supply coming on than there is demand growth in the near term. Actually, the markets are still balanced. A lot of people think that somehow natural gas is looking for a destination because it can't find a market to land in. As a matter of fact, quite the contrary is true. The market of last resort, which is the European LNG market, is still relatively tight. We will see that all the way through to the early part of the next decade, that situation, but sort of relatively healthy supply, but nevertheless, a balanced market will remain. Then I think, which is the case with many of these very large-scale investment markets, you will see a tightening in the supply-demand situation again.
Now, in the interim, if you will study our strategy and our investor presentations, we have decided to focus a lot of our investments in LNG, not on bringing new supply on. Of course, we finish what we started, like Prelude and Gorgon and other projects, but a lot of our investments are actually on strengthening the existing energy chains and also developing new markets. Whether it is developing new markets in South Asia, in the Middle East, in Latin America, developing new customers in China, which has a very small percentage of gas in its energy mix at the moment, trying to grow it. This is where, at this point in time, the dominant part of our investment dollars will go. Indeed, you're right.
There is a cycle, and we need to understand how to respond to that cycle, and we need to understand when we are ready again to take long-term supply investment decisions, that they are targeted at that point in the cycle where demand is also strongly rising again.
I am concerned. As we've heard other shareholders mention, you have taken some conservative outlooks on renewables in other markets, and there's so much capital being allocated into these gas projects at the moment. Do you have a strategy in place for a low gas scenario where these bullish predictions don't come forward?
Yes, we do. As I mentioned earlier, we have four scenarios with different government intervention profiles and technology development profiles, and then the net zero emission scenario as well. They all have different outcomes for gas. Therefore, we have to understand, if you want to take decisions on gas, how will that play out in these different worlds that we envisage? We cannot pick the world that we like. We have to pick the world that others will create for us, we are all collectively, and we have to understand how these investments behave. Therefore, we need to be prudent, which we are, with some of the investment decisions that we make. At this point in time, it means we focus more on developing gas markets than we focus on supplying new gas into those markets.
Thank you.
Thank you very much. Number one.
Morning, Mr. Chairman. My name is AG Saño, I'm a proxy. I'm also from the Philippines, one of the countries most vulnerable to the effects of climate change. In that context, I'd like to thank you for taking on this issue in a proactive manner, as seen in your presentation earlier, and for laying out a more ambitious future for the company in terms of climate issues. I'm not focusing on the future, but more on the past. I'm a victim of and a survivor of the strongest typhoon that ever happened in human history. In 2013, I almost died, but obviously I'm here. My best friend and his whole family perished in this event.
In 2015, along with 17 individuals and about 14 NGOs from the Philippines, we filed a petition with the Commission on Human Rights in the Philippines versus the top 50 polluters of the world. My statement will be about to pass. Yes, we filed it in 2015, the companies, just like Shell, are stopping this first ever national inquiry into human rights and climate change from moving forward. Today, I am simply challenging you to ensure the company to be part of the solution by fully participating in this national inquiry. We, the petitioners, come from the Philippines, like I said, we are one of the most vulnerable countries, bearing the brunt of the impacts of this big issue. Mr. Chairman, our lives depend on this moving forward. I'd like to ask three simple questions.
First, why is Shell seeking to stop the investigation in the Philippines by asking the commission to dismiss this petition? Second, how will Shell respond to requests to participate in pre-hearings, public hearings, and other activities conducted by the same commission? Lastly, when will Shell provide the commission information about the corporate commitments and plans to prevent climate-related human rights impacts? Thank you, Mr. Chairman.
First, thank you very much for being here. I'd like to say on a personal basis, I've attended climate conferences throughout the world, I've never been more moved by the one I attended in the Philippines because of the flooding and such a direct impact. I understand the loss of life that's happened. Ben will answer the specific questions.
Let me add my voice to that as well. I have not been attending a conference in the Philippines, but I'm very much aware of the flooding events and other events that have happened in the Philippines and the devastation it has caused for many people there. Also there, my sympathies go out to your people for that these natural disasters have occurred. I think our position on climate change is well known. We have debated already a few times this morning. We are clear about what society needs to do. We are also clear what role is that a company like us can have in that. We support Paris, and we will do everything in that respect to move this forward because we do indeed believe that these dangers are real and that there is a correlation that we need to be mindful of.
Human rights, we do believe that this issue is outside the mandate of the Commission on Human Rights in the Philippines. That's why we have responded in the way we have. On your second question, will we be responding to an invitation of the commission? We haven't had an invitation of the commission, and when we receive one, we will take a view on it, what actually this commission and the invitation is all about, and then we will respond accordingly. Bearing in mind that we do not believe that this is within the mandate of the commission that you mentioned, even though we have tremendous respect for that commission.
When it comes to when will we provide information and commitment, I think we have done that this morning and on other occasions, and we will continue to do that, not because of the commission, but because we believe that this is what we need to do as a company.
Thank you. I'm still hoping that you change your mind. Thank you.
Thank you. Number 2.
Hello. My name is Simon Taylor. I'm a proxy vote for Andrew Clark. I would like to just begin by thanking you for your statement on the OPL 245 matter this morning. The question I want to put is not to do with the specifics of the case, so I hope you can bear with me. It's more to do with risk management. I noted a couple of days ago that Critical Resource produced a negative CC rating for the block, which they suggest faces the hazard of being lost. That would be consistent with the efforts by the Economic and Financial Crimes Commission in Nigeria to seek the removal of the block from operation. Of course, that return back into holding by both Shell and by Eni.
My question really relates to risk management and the extent to which that situation may be consistent with the CC rating. Can you confirm whether or not you've set aside any provision in light of this potential increased risk, or have you not? Thank you.
I won't be able to speak to OPL 245 or the risk you talk about. What I can assure you is we have a very rigorous process overseen by our audit committee to be sure we set around the proper provisions for every risk, and we're very comfortable it's a good process, it's working effectively, and we audit it periodically. I have great confidence in that process. Thank you.
Thank you.
Number 1.
Thank you, Mr. Chairman. My name is Laurie Vandenberghe, and I am here by proxy on behalf of Milieudefensie. Shell strongly supports the Paris Agreement. I'm sure I don't have to remind you that the Paris Agreement sets a target to limit the global average temperature rise to well below two degrees and to pursue efforts to limit the temperature increase to one and a half degrees. According to research published in scientific journals such as Nature and to the IPCC, if we are to keep a chance to stay well below two degrees, two-thirds to four-fifths of all proven fossil fuel reserves need to remain underground. Shell acknowledges this. According to David Hone, Shell's chief climate change advisor, it is certainly the case that current proven reserves will take us well past two degrees if completely consumed and the CO2 emitted.
Even though we thus have already found more fossil fuels than can be burned in a well below two degrees world, Shell still spends billions a year looking for more. In a 2015 report, Carbon Tracker found that in a 450 scenario, $77 billion of Shell's capital expenditure on oil and gas would be unneeded. I have two questions. First, considering the carbon budget, how do Shell's continued investments in exploration that will further enlarge the world's proven hydrocarbon reserves align with Shell's strong support for the Paris Agreement? Second, if Shell is not able to exploit all of its proven fossil fuel reserves, what financial implications does this have for shareholders? What are the financial risks of continued investments in deep water and in shales in the context of goals set out in the Paris Agreement that imply a limit to oil and gas production? Thank you.
Thank you very much for your question. I believe Ben has addressed much of it in his earlier comments and answers to questions. Let me simply say we have a rigorous process of scenarios, as Ben's described, to look at different alternatives, as you point out, and we keep good track on what our proven reserves are and how we would utilize them. The board is very comfortable that we're taking a very prudent approach to that, but I assure you we'll continue to monitor that and adjust our investment program as necessary as we go forward. Thank you for your question.
Okay. Thank you.
Number 2.
Hi, my name is Sandra Slegers. I'm a proxy for The Hague Fossil Free. I have a question regarding your gas strategy. Now that it's acknowledged that gas is at least just as bad as a fossil fuel as that coal and oil, what are the implications to your gas strategy? Maybe we should call gas for what it is, methane. Methane is one of the most dangerous greenhouse gases. Methane traps 86 times more heat than CO2. Because it's so potent, only a small amount of methane leakage, 1%-3%, will make gas as bad as diesel and coal. Unfortunately, gas does leak more than 3%. A review of more than 200 studies by Stanford University confirms an average methane leakage of 5.4%. That's almost twice as bad for the climate as coal. At some sites, gas leakages was found around 12%.
That's four times as bad as coal. Those numbers are from the U.S. Do you think it's any better in Russia, Iran or Iraq? You claim methane is a solution to climate change. You claim methane is a bridge fuel. Really? A gas 86 times as bad as CO2? Are you sure about gas? Are you convinced that what you do is best for your future as a company? For our future as humanity? What if you're wrong? You say you have aligned your business to the Paris Agreement. You say you mind climate change. If you do, don't tell us, show us. Show us by moving straight to the sun, the wind, and the water before the sun by global warming, the wind by extreme weather events, and the water by sea level rise moves us.
My question to the board is, in your business case for gas, do you take into account an average methane leakage of 5.4% and a global warming potential of 86 to 106 that is relevant for the one and a half degree, the goal of Paris?
Thank you very much for your comments. We think it's very constructive to bring up different points of view. We firmly believe natural gas is a part of the solution, but the point you make, if it's not handled properly with methane leaks, it can be detrimental. We're keenly aware of that. We support work in our facilities to make sure they're the best in the world. Secondly, we support regulation throughout the world to be sure the entire industry is doing the right thing, as you said, throughout other countries. We're still absolutely committed that natural gas is a part of the solution and are committed to bring that solution.
Did you read the report of the Stanford University of last April, in which they claim that technology for reducing methane emissions is just between 15%-35% effective, there are many unknowns when it comes to methane emissions? Do you acknowledge that you can't control methane emissions?
I have not read the specific Stanford report, but we have extensive work with Stanford, including next week. We have an expert from Stanford coming in to share a number of their results with us. We have studied the technology completely, and I'm absolutely sure Shell can do the right thing. I agree with you totally, we need to make sure the entire world's doing the right thing on methane, and we support that completely. Thank you very much for your questions. Number one.
Dear Chairman, my name is Willemijn Verdaghel, employed by the Dutch asset manager MN, honored to speak on behalf of our clients, the pension funds, PME and PMT. Please allow me to highlight my sincere appreciation for the open and constructive dialogue we've had with you personally, Shell management, and other staff regarding Shell's role in regarding the energy transition. In our intensive engagement over the years, we, along with many other investors, have clearly asked Shell for climate-related targets. In recognition of the systematic risks that climate change poses to both our long-term financial returns and the well-being of our future beneficiaries, we do expect our investee companies to be very clear in articulating their strategy to align with the global two degrees goal. Clear, quantifiable, and time-bound company-wide targets empower investors to understand vision and track progress.
Against this background, we were more than disappointed by Shell's reaction to the Follow This resolution. Stating that it is detrimental to the company illustrates to us a fundamental misunderstanding of the decisive leadership that is required by this generation of business leaders to prevent dangerous climate change for all future generations to come. This reaction also seems inconsistent with all the actions that Shell is already taking and planning to take. We have already branded the resolution to have been a fair ask. Company-wide targets on Scope 1 and 2 emissions are becoming very much accepted in the extractive and oil and gas business. We understand and sympathize with the technical complexities around Scope 3. We believe the resolution allows for the flexibility to craft intelligent ambitions, including metrics around avoided emissions and detailed plans about working with clients to reduce emissions throughout the supply chain.
Combining shorter-term targets as well as aspirational goals could provide a powerful formula going forward. At the very least, we had expected Shell to be more sensitive to the societal signals this resolution communicates and to have indicated an intent to start formulating company-wide targets that may be a better fit in your view. In short, we had not expected to let Shell let the perfect be the enemy of the good and had expected a very different tone at the top. Vision and accountability is what we require of the leadership of companies we invest in. In reflection of the gravity of the issue of climate change, we will vote for Resolution 21. We strongly urge Shell's leadership to commence the development of company-wide targets and stand ready to support Shell in any way we can.
A clear indication by Shell to report along the guidelines of the FSB Task Force on Climate-related Financial Disclosures, therefore indicating the value of targets as a monitoring tool and the materiality of Scope 3 emissions would be seen as a strong and positive step forward. Dear Chairman, in view of this statement by two major Dutch institutional pension funds, do you stand ready to act on these points?
Thank you very much for your comments and statements. Well, it was clearly around Resolution 21. If you don't mind, we would like to respond to that when we get to 21, because we want the proposer to have a chance to make his statements first.
Thank you.
We'll respond then. Thank you. Number 2.
My name is Joeri Aesborn. I'm a member of the City Council of The Hague, within the City Council, I'm a citizen representing The Hague, the Haagse Stadspartij, The Hague city party, one of the ruling parties of the city. The Hague is the city of peace and justice, climate change is one of the prime causes that prevents peace and justice. Therefore, the City Council has decided that The Hague should pursue first the highest Paris goal of The Hague, of one and a half degrees maximum, not the two degrees. Second, that the transition to the fossil-free and sustainable society has to be fulfilled before 2040. I'm here for two reasons. First, to urge you to pursue the same higher goals, second, to explain how important your employees are for the city of The Hague.
The Hague and your board members, Wijers and Zalm, know this, has suffered a lot in the past from a reduced number of employees from the national government of the Netherlands. With the current position of the large oil and gas sector in The Hague, including Shell, we fear for massive loss of employment again, at first in exploration. If Shell is not changing its strategy to a fossil-free, sustainable path
If Shell is not investing in its employees for the skills needed on this fossil-free, sustainable path, we believe The Hague will lose a lot of employment again, this time from the oil and gas sector. This impacts the city in lots of areas, among them housing prices, small businesses, and the cultural sector. I would like to invite the board to support the shareholder resolution 21 and to discuss the employment issue also with us. Please make your employment future-proof, among them our The Hague citizens, by teaching them the skills for a fossil-free, sustainable energy sector. Are you willing to open this discussion? Thank you.
Thank you very much for your comments. They are very clear. We're very supportive of The Hague. I think we could have more detailed discussion offline, we appreciate your comments very much. Thank you. Number one.
Good morning, Mr. Chairman. My name is Anne-Marie Williams, and I'm here by proxy. Shell has made explicit, and we've heard a lot this morning, that it has no plans or doesn't envisage moving to a net zero investment strategy in its investment horizon in the next 10 to 20 years. This comes despite your former CFO, Simon Henry, recently noting that oil demand could peak in as little as five years. A growing body of evidence suggests that this delay could pose a significant risk to shareholder value. In particular, the penetration of electric vehicles has been described by ratings agency, Fitch Ratings, as creating an investor death spiral for oil companies. In recent months, India has announced plans to electrify 100% of its vehicles by 2030. China too has recently unveiled major plans to scale up its electric vehicle fleet by 2025.
In light of these changes, the IEA last week announced that it was looking to revise its oil outlook. Does the board of Shell envisage an investment strategy consistent with a world where the majority of vehicles are electric by 2030? What prevents Shell from committing to a net zero investment strategy by 2020?
Thank you very much for your questions. As Ben pointed out earlier, we use scenario planning at the board level and the management level. We have a wide range set of scenarios that we're considering, actively considering this year. As we see the fact base that one of those scenarios will adjust our plans accordingly. We feel, as a board, very comfortable that Shell has the resources to operate under a broad range of outcomes, and we'll do that. Thank you very much for making the point.
Thank you. Does that include then if the majority of cars are electric by 2030, one of your scenarios takes that into account, does it?
Yes.
Yeah. Thank you.
Thank you. Number two.
Good afternoon, Mr. Chairman. My name is Rolf Herreveld, Head of Dutch Equity, BNP Paribas Investment Partners. I've got a question regarding Royal Dutch Shell's strategy for debt reduction and gearing. I understand it from the finance director that one of the, and also the [inaudible], to bring down the gearing, to put it more comfortably in the gearing range of 0%-30%. It's actually that gearing range, Mr. Chairman, that intrigues me a bit. I don't really understand where the range comes from. I understand why it's there, but I don't know where it's come from. I've looked in the annual report and some others as well, but I can't find anything where it comes from, who decides on it, and why it is between 0 and 30 and not 25 and 50 or any other number, basically.
Most importantly, Mr. Chairman, I'm wondering why does Royal Dutch Shell think that the current range gives the company enough flexibility to realize its ambitions? Ambitions I fully support as a shareholder.
Thank you for your comment. Let me comment from the board perspective, and then I'll ask for Jessica to add to that. Clearly, we want a conservative financial framework. That was on our strategy. It was in the big octagon on the chart I was talking about this morning. We believe that 0%-30% allows us the flexibility to do that, but also take advantages of certain opportunities that may come up. Jessica, could you add?
I think that's the most important principle is the desire to have a financial framework and a balance sheet that is robust and resilient through the cycle. For the nature of the company that we are, the size of the company we are, the nature of our business and our counterparties, governments, and our people we trade with, having credit rating of AA from an S&P perspective is consistent with a gearing of 20%. I think more important, it's not so much the rating itself as it is it reflects the financial resilience and robustness of the company through the cycle, and that's where we believe, given the size of our company and the nature of our operations, the position we would like to be from a financial framework perspective.
If I understand that correctly, it's the board's view, decision to have it between 0% and 30% throughout the cycle. When actually does the board evaluate this range, on a regular basis, once a year, once a decade, once a century? What's the idea?
It's a part of our overall financial planning every year. We have the opportunity to adjust that range. We found that though for several years it to be the right range. I think it's serving us well at this particular point in time. It allowed us to take advantage of the BG acquisition, and then we're making progress, as Jessica described. Thank you very much. We're past the 12:30 P.M. mark. We do want to give everybody a chance to talk about the other 20 resolutions that we have. If you'll be as concise as you can with your question, and we'll try to be concise with our answers. Number 1, please.
Good afternoon, Mr. Chairman. My name is Mandy Dehaas, and I am here by proxy to raise concern about the prudency of Shell's new budget deepwater strategy. Shell has been able to break even costs below $40 a barrel by cutting corners on safety and sustainability. In the Gulf in Brazil, the firm has slashed 25% of its workforce and cut the number of support ships from 61 to 16. If equipment breaks, replacement can now take two weeks to arrive. The company's approach of retapping old wells poses major risk of hydrogen sulfide leakages. Shell describes deepwater as a strategic growth priority, yet in today's low oil price environment, this is only viable by taking considerable cost-cutting risks. Deepwater projects are inherently hazardous and should not be done on the cheap. We cannot afford a Deepwater Horizon.
Shell identifies renewables as a high-risk investment and allocated less than $1 billion to its New Energies division in 2016. In contrast, it allocated $8 billion to deepwater. Will Shell reassess its risk appetite for deepwater going forward and consider redirecting capital as part of a more prudent low carbon strategy? Thank you.
With all due respect, I have to take great disagreement with your assumptions about we've taken safety risk or environmental risk around deepwater. That's quite the contrary, and it's something the board pays a lot of attention to. I personally visited our deepwater operations earlier this year, spent two days understanding exactly what was going on and asking people directly did they have the resource they need. A group of our board will visit our deepwater facilities later this year. We have absolutely no evidence, quite the contrary. We're doing an extremely good job of deepwater, and I'm very proud of our operations there. We'll constantly evaluate the best place to deploy our capital, as Ben described his presentation. We believe deepwater is a place we can contribute to the world and really provide competitive advantage. But we do appreciate your point of view. Thank you. Number two.
Good morning, Mr. Chairman. My name is Janusz Glenda. I came from Poland and I have a question to the page 14 risk factor. There is described risk of erosion of business reputation as a result of the failures to comply with rules. That sounds serious, but it is serious. Like someone said, reputation is lifetime to build and seconds to destroy. Before erosion of reputation it appears, it must be the rule breaches which can go to public opinion. My question is, do you predict increase of the rule breaches, which is based to materialize that risk? And if yes, to what such increase could be related? Does it related to lack of the education trainings to employee, and they cannot properly recognize the rules breaches, or they can properly train, but they don't report rules breaches because of their own reasons?
The employees are well educated and voluntarily report rule breaches, there is a problem on later stages? You can recognize any other issues which could increase these rule breaches and this risk of erosion of business reputation can materialize. Thank you.
Thank you for your question, we take the subject of risk management and how our employees view that very seriously. It's something I know our management team sets an example for every day, particularly the board has extensive reviews with our compliance organization, internal audit organization, plus employee surveys and our direct interaction with employees to understand issues that they may see. We appreciate you raising the point, it's something we'll give good diligence to, I'm very comfortable with the current situation. Thank you.
Thank you.
Number 1.
Good afternoon. My name is Spanjer. Items and a few questions. What are the legal and economic consequences resulting from Brexit for Royal Dutch Shell plc? The license and other paperwork are considerable, and these are valued before 23rd of June 2016. The time of the Article 50 procedure, 29th of March 2017. My question is it not wise to get the legal structure into a Dutch NV instead of plc and start today, the 23rd of May 2017? Chairman, if we don't do that, then we have not only the Panama Papers, we have in the future also the London Papers, because then they said that this is a tax country and Shell is going to a tax country. I don't like it. I hope you don't like it as well. In my view, is an NV structure the best way to start?
The next question is, because you're also in Ireland, and Ireland attempting a referendum to get rid of England and then to try to be a member of the EU. That takes a lot of time. That sort of person, they have to think about a long time. When you are an NV then you are in the European Union. It's, in my view, a little bit easier for doing business in Ireland. My second item is, Shell works a lot in water rights areas, so you can easily build a seaweed plantation next to your platforms. You, chairman, wrote a letter, all types of energy, but seaweed I couldn't find. Why not? I know that sort of technology on my own. I hope we can start together to run that seaweed business. That were my questions at the moment.
Thank you very much. There's an information desk out front. If you'll give your information there, we'll get back to you to follow up on the last subjects, the ideas you had around our rigs. Ben, could you make some brief comments on how we're dealing with Brexit?
Thank you very much, Chairman. Yes, at the time this was still under debate, we were not in favor of the scenario that we are facing at the moment, but we are where we are. We, of course, study how this will play out over the next few years. We will adjust accordingly depending on how these negotiations play out. Let me remind you that we used to be a dual-headed company with a central office in London and in The Hague for many years before the European Union was even born. The whole concept of Brexit, bearing in mind that both the U.K. as well as the Netherlands are actually relatively small countries in our overall portfolio, is not really an issue that really worries me a lot.
If there would be a reason to consider our corporate structure, we will do that. I would not imagine Brexit is going to drive that. As far as seaweed is concerned, we've looked at these technologies, and we believe it's not as competitive as some of our other biofuel technologies that we are pursuing. Thank you.
Okay. Number 2.
Good morning, Mr. Chairman, dear members of the board. I would like to speak to you as a former financial analyst and an investor in Shell. I'm deeply worried. We've talked about climate change a lot. I'm deeply worried about your current investment strategy. As Ali already pointed out earlier, China and India, which are a large part of your scenario of growing oil demand, have recently announced plans to massively switch to both renewable energy and electric cars. One of your main competitors, Total, has recently announced to turn 5,000 gas stations into service stations powered by solar energy and battery storage. I'm worried but also anxious to hear your investment strategy in that regard because your current plan with 10 charge points in the Netherlands is frankly even less than a startup, Fastned, which has 60 and is planning to expand to Germany and London.
In my view, this is currently completely inadequate and completely not in line with the trends we see happening globally.
Thanks for your comments. If you refer back to Ben's presentation, he laid out the five goals for our downstream organization, I think very completely described where we're striving for. I think they're much more complete than anything that might be in place today. I'd ask you to refer to that rather than have us repeat that again, if that would be okay.
I would just like to point out to you that Total is already saving $40 million yearly with that investment strategy. Your current plans are only 0.2% of those plans. I would greatly encourage you to look further into those plans.
Thank you very much for the suggestion. Number one.
Hi, good morning. I'm Desiree. I'm from the Philippines as well. Thank you for your response to my colleague earlier. I just wish to clarify that the legal petition in the Philippines is not a court proceeding, therefore, matter of jurisdiction is a court requirement, and it's not applicable in a non-judicial, non-adversarial investigation of the Commission on Human Rights. I hope that your respect for the Commission on Human Rights is also a reflection of your respect for human rights and human lives. I believe that this is really Shell's opportunity to demonstrate its leadership among carbon majors. To be honest, Filipinos have their lives to lose to climate change, and what has Shell got to lose by showing up in these hearings and participating? We sincerely urge you to reconsider. Thank you.
Thank you very much for your comments. Thank you for making the trip here and having the courage to voice to us your points of view. I assure you we'll take them very seriously and believe me, we have the same goals. We just have to find the right way to get there. Thank you very much.
Thank you.
Number two.
Dear board, good morning. Good afternoon, actually. My name is Simon van de Beek. I'm an organizational psychologist and investor. I have a question specifically for Mr. Wijers, if that's possible. I would like to ask you, what is the exact contribution of replacing oil by natural gas to total greenhouse gas emissions when you include emissions from leakage of methane? That will be my question.
You want Mr. Wijers to answer that question specifically?
If that's possible, please.
Hans, would you like to answer that question?
I don't think I have an alternative unless you stop me from doing it. I would refer to the answer just being given by Ben and by our Chairman, which is that there are indeed, in certain instances, leakages of methane that would negatively impact on the environmental performance of gas. There are a lot of technologies and a lot of processes to actually manage that, and Shell is very committed to reduce that and to control the emissions of methane and committed also in cooperation with other companies to actually manage that risk. It is an important issue. It has to be managed, and there's policies in place to do that.
Fully support Hans' answer. Thank you very much. Number one.
Mr. Chairman, my name is Van Diepen. I am a private shareholder from Amsterdam. I want to make some remarks, and I have only one question for you. If you do agree, I would like to continue in Dutch. I thought there was a very nice introduction provided by Mr. van Beurden. Let me re-emphasize that I am here as a shareholder. I am particularly interested in the future of the company, profit per share, and the share price. This morning, I am facing all kinds of environmental organizations. With all due respect, that's not my cup of tea. Once again, Mr. van Beurden, my compliments for your introduction. I now have a question, a very brief question. If we look at the following page of the annual report, the page on the balance sheets, no number given, you refer to shares held in trusts.
Those are the shares held in a trust portfolio. Well, if I remember my bookkeeping lessons correctly, that's the case. Why do you have so many shares there? That's larger than the number of issued shares. Thank you.
Thank you very much for your question.
Shall I repeat the question?
Excuse me, can you also refer us to exactly which page? It will help us to make the answer more specific.
That's page 119. You make there a note, 22. That doesn't disclose much for me.
Sir, you're referring to note 22?
That's right.
Okay. Your point was that those are material? This is part of our corporate structure.
I guess so. I continue in Dutch, madam. Or French, if you would like. Why you do hold so many shares in trusts? You have more shares in trust, if I look at this, than you have placed shares. That was my very simple and very concise question.
I want to make sure that I understand the question correctly.
Okay.
I think the note itself and the financial statements are relatively straightforward. If you were to go to page 148, which describes the nature of those shares and the basis for why they're in the trust. The share-based compensation that's reflected.
Which page did you say? Almost I forget it.
148. I'm also happy for one of us to spend some time to walk through it with you, if that's helpful.
If that would be okay, we'd be glad to take you through. Okay. I believe here is the answer, look, right after the meeting, Jessica will be available to be able to deal with you, okay?
Correct. Thank you.
Thank you very much for your question. We appreciate you reading the annual report with such depth. It's very much valued.
Thank you.
We have now completed all the questions on resolution number one. There will be a chance to vote for those on your white proxy as you leave. I believe if all works well, the votes that were turned in before the meeting started will be shown on the screen behind us. Could we show the votes on the screen behind us for resolution number one? Thank you very much. We'll now come to resolutions number two and three. They're ordinary resolutions for the approval of the directors' remuneration policy and directors' remunerations report, which are on pages 82 to 103 in the annual report as described. Are there any discussions on these two points? Number one.
Thank you very much, Mr. Chairman. My name is Paddy Briggs, and I worked for Shell for 37 years. I am now a Shell pensioner. Since I retired, I have been active in the interests of my fellow Shell pensioners in various voluntary capacities, including four years as a trustee of the Shell Contributory Pension Fund in the U.K. I would like to place the issue of RDS director remuneration in a broader context than just that of performance and rate for the job. As a pensioner and pensioners representative, I would assert that we are stakeholders in the company and potentially valuable promoters and defenders of the Shell brand and what it stands for. I find it difficult to defend the extraordinarily high levels of compensation received by the directors of the company. The high-priced help has become very high-priced indeed.
That is not my principal reason for speaking to you today and for seeking an answer to a question. I am here because it seems to me that when you pay your chief executive nearly EUR 9 million for one year's work, with a suggestion that this could burgeon with bonuses to almost twice that figure, you need another context in respect of your discretionary expenditure choices. One such context is your 29,000-member pensioner community in the U.K. In 2016, we received an annual average pension of around GBP 16,000. It may surprise you to know that most of us manage to live quite well on this modest amount. This is not a complaint. The Shell pension funds exist to pay our pensions from their resources.
Shell in the U.K. has always taken the view that it has a duty of care to its former employees, which goes beyond what the pension funds are obliged to do. There are various ways this has been done. I would like to draw attention to one. For decades, Shell in the U.K. has funded and supported managerially an activity called the Pensioner Liaison Representative, PLR scheme. Some 40 ex-employees, known as PLRs, in return for a notional salary and expenses, provide support to the 29,000 pensioner community. This includes home visits, which have helped to identify problems that individual pensioners may have. Some of these pensioners are in poverty, Shell has a charity to help those who a PLR identifies as being in financial need. It is a wholly admirable activity and one that Shell can be proud of.
It costs in total a little under GBP 1 million per annum to run, around one-tenth of Mr. van Beurden's annual compensation. At the end of last year, as part of a review of expenditure in the U.K., especially discretionary expenditure, Shell summarily decided to stop the PLR scheme, saving GBP 1 million by withdrawing 40 people from pensioner liaison work and making them redundant. One of the reasons given was the need to adjust to the reality of a lower oil price. I note this reality appears not greatly to have affected directors' remuneration. Discussions have been underway between pensioner representatives and the company to try and find a way to plug the gap caused by the precipitous removal of the PLR scheme.
I would ask this meeting and the RDS board whether they truly believe that canceling this scheme, which costs Shell just some GBP 35 per pensioner per annum, is justifiable in the context of the very high levels of director remuneration this meeting is being asked to approve. I would ask whether Shell's oft-declared gratitude to its former employees, pensioner stakeholders, is so much pie in the sky or flauwekul , as you might say here.
Thank you for your comments. We care greatly about our pensioners. They're very important. Long employment with Shell is highly valued. The board hasn't reviewed the specific action you're talking about. We'll take it away and take a hard look at it. Please make sure we have your information at the front of the desk out here for information so we can follow up with you.
Thank you very much.
Other comments on resolution two or three, number 1?
Good afternoon, Juliet Phillips, shareholder. Just a quick question from me. I appreciate that in the remuneration policy, you've gone some way to include the greenhouse gas-weighted target, which is a good step. Obviously, this only covers Scope 1 and Scope 2, so it's not really linked to the wider strategic changes. It's just focused on operational emissions. My question is whether Shell would go further to incorporate these more strategic long-term changes about changing your portfolio composition into the annual bonus in future years. Thank you.
Thank you. Mr.
Kleisterlee leads our remuneration committee, and it's included that aspect. Would you like to comment, please?
Let me briefly comment on that. Thank you. We firmly believe that remuneration follows strategy and not the other way around. We don't try to drive strategy through remuneration. We try to support the implementation of the strategy. In that context, we have made it part of Mr. van Beurden's personal performance agreement, his individual performance agreement, to drive the New Energies business in Shell and make sure that through the establishment of that division, the board gets proposals where Shell attractively, profitably can invest in renewable energy more than it already has done up till today. Through that mechanism, it is included in the remuneration.
When those activities become significant for the broader operations of Shell, there is the moment where they could appear in the annual bonus scorecard. The bonus scorecard pays for the things that need to be done this year by the broad majority of the Shell population, because Shell only has one scorecard, which is a leading beacon for all employees in Shell as to what has to be done in the year at hand.
I see no further questions on these two resolutions. Could we have the vote in the proxy, please? Thank you very much. We'll now move to resolutions four and five, the appointment of Catherine Hughes and Roberto Setubal as directors to the company. Catherine would be effective June 1, 2017, and Roberto, October 1, 2017. Their full descriptions of both proposed directors are in your materials. Catherine is a Canadian with French dual nationality, with over 30 years' experience in the oil and gas industry. Roberto, besides his very specific experience in Brazil and South America, a very important region to the company, he brings a career of banking experience in Brazil. Are there any questions on those two nominations for the board? Seeing none, could we see the vote, please? Thank you very much. Resolutions six through 15 are the reappointment of the other directors to the board.
Are there any questions about resolutions six through 15? Microphone number 1?
Yes.
Thank you.
Hello, I'm a student of sustainable business and innovation at Utrecht University, and I'm a shareholder in Shell. My question is to Gerard Kleisterlee. As a former CEO of Philips, a very impressive technology company who has made a giant move towards sustainability and circularity, what do you think are the most promising technological innovations for Shell in a net zero energy system as aimed for in the Paris Agreement?
I think we all like to know the answer.
What do you think, Gerard?
I think we will not be here at the moment to discuss what I think. What I think I discuss with my fellow directors in the boardroom, that will be part of the input with the proposals we get from management to drive the direction forward for Shell in renewable energies. At this point in time, we are at the agenda points that deal with the reappointment of directors, I think we should stick to that.
Thank you.
Are there other questions on the appointment of directors? Seeing none, could we see the vote, please? If we could turn to resolutions number 16 and 17. This is the appointment of Ernst & Young as our auditor and associated appointments. Are there any questions on those, 16 and 17? Seeing none, could we see the vote? 18 concerns the allotment of shares under Companies Act 2006. The directors are subject to certain expectations they're unable to allot without shareholder approval. This resolution, I think, is very clearly spelled out. Are there any questions on that? I see no questions. Could we see the vote on number 18, please? Number 19 is a special resolution on this application of pre-existing rights. It requires a 75% majority to pass and something that's necessary under the Companies Act. I think it's clearly described in a normal resolution.
Are there any questions? See the vote on number 19, please. Number 20 is the authority to purchase our own shares under resolution number 20. That's required, and we will guarantee you we'll be very prudent in exercising that right, but it's a part of our overall strategy. Are there any questions on number 20? Seeing none, could you see the vote on number 20, please? Number 21 is a shareholder resolution that Mr. Mark van Baal has put forward. We would like him to have the opportunity to address the meeting with his comments. Mr. Van Baal.
Dear Mr. Chairman, Mr. Van Beurden, and board, thank you for your very extensive answer to our resolution. This points out how important you think this issue is. We also like to thank the team of the secretary for helping us with the paperwork of filing this resolution. I'd like to address the shareholders. Fellow shareholders, good to see you again. This is the first time we're here. The question today is, are we the last generation of shareholders in Shell? Or will we, shareholders, give Shell enough support to change course to make sure that there will be a next generation of shareholders in Shell? That Shell stays a world-class investment case. The Paris Climate Agreement will have a huge influence on the future of all companies, in particular energy companies.
Therefore, the resolution states, in short, shareholders support Shell to take leadership in the energy transition to a net zero energy system. Therefore, we request one simple thing from Shell, to set targets that are aligned with the Paris Climate Agreement. In short, the resolution simply asks Shell to commit to the Paris Climate Agreement. It's up to the management of Shell to set greenhouse gas emission reduction targets and to develop activities to attain these targets. The resolution is fully agnostic, as we call it, with respect to business models and technology. Support of the VEB, the Dutch Association of Private and Institutional Investors, shows that participating in the energy transition is much more than a legal or moral obligation. It's simply the best strategy for long-term shareholder value.
Therefore, we hoped that the board of Shell would welcome a shareholder resolution that expresses shareholder support for a long-term strategy. By advising its shareholders to vote against Resolution 21, Shell is choosing not to commit to the Paris Agreement yet. As of May 2017, 195 countries have signed the Paris Agreement. Shell, bigger than half of the countries that have signed the Paris Agreement, does not want to set targets that are in line with this agreement. The goal, again, is limit global warming well below two degrees. We have not lost faith in Shell. In its response, Shell writes, "We believe we are unique in having a broader set of business opportunities than any other company in this sector." We fully agree.
This is why we've started our mission two years ago at Shell's AGM, when we said on behalf of a few hundred shareholders, imagine Shell putting its brains and billions behind renewables. Two years later, we say this on behalf of more than 3,000 shareholders. Shell has taken promising steps. Shell stopped drilling in the Arctic, stopped exploiting oil sands, planned to build a wind farm in the North Sea, expressed support for the Paris Agreement, and established a New Energies division. I know this is the most popular division in the company, especially among young employees of some who have joined Follow This. Unfortunately, when we look at the investments, it's just a few hundred million dollars, and that's less than 1% of the total investment of Shell of $25 billion.
Today, we as shareholders can show Shell whether we mean business with climate change. Of course, acting on climate change is a moral and legal obligation. As shareholders, we are convinced that changing course is first and foremost a business opportunity and a way to avoid financial risks. According to Carbon Tracker, much quoted, Shell runs the risk of losing billions of dollars in stranded assets. Today, shareholders will decide whether they will support Shell in the energy transition. The % of votes that the resolution will ultimately receive depends on how well-informed institutional investors are and how consistent they are with their own policies. We like to thank MN, Actiam, BlueSky Group, and all others in advance.
For example, the policy of Dutch Institutional Investments says, "We urge companies to provide an overview of their efforts to help deliver the goals of the Paris Agreement." This writes the representative of Dutch Institutional Investments, Eumedion. Today, shareholders that voted for Resolution 21 will give Shell and the other oil majors a strong signal. We need you to change. If Shell and the oil majors do not change, they will go bankrupt and make large parts of this planet unlivable for future generations. In Shell's words, we hear a lot that you are truly concerned about climate change, you are truly motivated to be seen as a force for good. In Shell's deeds, however, we miss three things: this is commitment to Paris, imagination of what the energy system could be like, also a sense of urgency.
We hope today shareholders will give Shell a strong signal to commit to the Paris Climate Agreement, so Shell can be a force for good. This is a resolution of optimism, a resolution of faith. To quote the resolution, we encourage Shell to set targets that are inspirational for society, employees, and shareholders, thus allowing Shell to meet the increasing demand for energy while reducing greenhouse gas emissions. Dear shareholders, in the coming decades, the next generation will ask us, "You knew there was a global problem, and you also knew there was a solution. What did you do about it?" Your answer could be I was in a fortunate position to be a shareholder in Shell, and I supported the company to change the world by putting its brains and billions behind renewables and move to a net zero emission energy system.
Shell is a strong supporter of the Paris Climate Agreement. The time is right for Shell to stop acting as a supporter and start acting as a responsible major global player. As we cast our votes, we had the opportunity to support Shell to commit to the targets of the Paris Climate Agreement. We are convinced that this is the right and only way for Shell to go forward in the future, and we are keen to know how many shareholders support Shell take leadership in the energy transition. Thank you.
Thank you very much for your presentation. It's appreciated by the room. Ben, would you respond, please?
Thanks, Chairman. Thank you very much, Mr. Van Baal, for setting it out in the way that you did. As you indeed note, the board unanimously recommends to vote against the resolution. Let me explain the reason for that, and it's not for the reason that perhaps you have displayed here. First of all, let's say that portfolio activities, so selling assets as we are also doing, they can make a significant difference, but they only make a significant difference perhaps to our own portfolio. They don't necessarily improve the overall landscape. For instance, divesting energy-intense operations may reduce our emissions, but actually doesn't impact the overall emissions in the case that these assets continue to be operated by someone else. You have to bear that in mind, of course. We should continue to discuss how best we can reduce the emission intensity within our company.
The targets that your organization Follow This asks for, and not least the inclusion of Scope 3 emissions. These are the emissions of our customers, people who fill up at our retail stations. That actually, that Scope 3 emission limits our ability to participate in the energy system and actually also limits our competitive positioning. I also think that by targeting a single actor, and even though we are a large company, we are a tiny company in relation to the overall energy system. We are not going to have a quicker transition. The only thing that will happen if we would indeed implement the resolution as you have recommended, is that we will have our competitors benefit, and it may actually have an adverse effect on greenhouse gas emissions. There's a slide coming up here.
Let me say, first of all, contrary to your assertion, the fact that we do not want to have an absolute emission target in the way that you have proposed does not at all mean that we're not supporting Paris. I hope if one thing, our shareholders here have come away with a clear impression that we are committed to Paris, that we are doing many things in support of Paris, and that we will continue to do that, including having a dialogue with our institutional investors on what else we can do. You say we lack imagination. I urge you again to read this document. Actually read it, Mr. Van Baal, and you will see there is plenty of imagination on how we envisage the world to look like in a net zero emission scenario.
If you look at commonly published scenarios by institutions such as the Potsdam Institute for Climate Impact Research and MIT, they indicate that, roughly speaking, and I said this earlier on, in order to limit the temperature rise to 2 degrees C, we need to have net zero emissions by around 2070. If we talked about the 1.5 degrees C, the sort of strong ambition that Paris put out there, that would require us to get there already by 2050. Then after 2050, we need to have negative emissions. From 2050 onwards, we need to take CO2 out of the atmosphere and actually store it underground. We have, for a long time said that one of Shell's ways to help address this challenge of climate change is by providing natural gas as a substitute for coal or for heavier fuels.
With our BG acquisition, we have given ourselves the additional scale to do that. There's a number of examples on the slide, and I will leave the slide on, so take some time to take them in. All these examples on this slide are actually activities where we reduce greenhouse gas emissions against the alternative. These are things that we do that reduce greenhouse gas emissions, and therefore, they would be good things to do. That's why we are doing them as well. The only problem with these four things is that they actually increase our emissions. While it is good for the world, it would go against the spirit and the letter of your resolution.
If we had a resolution like this, we would be disinclined, as a matter of fact, we would be legally compelled not to do these types of things anymore, because we would be compelled to reduce the emissions of our customers. That's why we think that the resolution is an unreasonable ask. The only way we can reduce the emissions of our customers, the Scope 3 emissions that you refer to, is to reduce the sales of our products. That's the only way we can do it. At best, this will mean that our customers will just fill up at another petrol station of a competitor.
It will also mean in some other cases, like for instance, the example of selling gas into the power markets of Pakistan, that we will perhaps prolong the use of coal and push customers away from the alternatives that we propose, which are cleaner alternatives. In this case, we would encourage the world to burn more coal. That can't be for the benefit, and that's why we are against the specifics that you are proposing. We believe that we have a strategy that will allow us to navigate the energy transition successfully.
If indeed you are worried that we will become a dinosaur or a company of the past, I think we have everything within our means to navigate this transition successfully and indeed come out as a winner as we adapt our portfolio to this evolving energy system that we will see evolve over the rest of the century. We cannot shape, as a 0.25% player, we cannot shape the energy system on our own. We can influence government initiatives. We can influence policies. We can help accelerate the transition, and we can indeed make investing in the transition a commercial proposition because of the policy changes. That's exactly what we are doing, and these are the sensible things that we can do in order to show our commitments to Paris.
We will undertake, and I will be very clear on this, and I have been very clear all the way during my tenure, and I will continue to be so in the rest of my tenure, we will undertake the actions that we believe are best equipped for us to drive this transition. We will undertake to report out how we are doing on this. We will do this together with the work that we are doing on our assets, the portfolio choices that we make, and we will do this together with you, our shareholders, to assess whether we are on track and whether we are living up to the spirit of Paris.
We've received a lot of input from many of our institutional shareholders in the run-up to this AGM, we agree that our strategy and our approach needs to be transparent, as transparent as possible. We welcome the dialogue that we've had on this, and many of you, and probably a few more of you in a moment, will comment and ask questions along that line. We are also in discussions with, as I said, governments, the Task Force on Climate-related Financial Disclosures. Many of you, of course, also have your own initiatives as institutional investors and stewardship interests in this area. Together, I hope we can work out what would be a sensible framework that will show enhanced transparency, that will demonstrate without a doubt that we are living up to the spirit of the Paris Agreement.
A framework that encompasses risks and opportunities and issues on portfolio resilience through that energy transition. Don't expect that the complexity of this system can be boiled down into a simple numerical target that you are asking for. My commitment is that following this AGM, we will discuss the best way to take this dialogue forward with our institutional investors to deliver this world-class investment case to the energy transition. I strongly believe, I say this again, that our ultimate objectives are exactly the same, finding ways we can contribute to the energy transition while also ensuring the success of your company. With that, Chad, back to you.
Thank you, Ben. We're ready to take questions on this resolution. Microphone number 1.
Would you like me to respond to this or later on?
Why don't we take the other questions, you can have a chance at the end. Number one.
Good afternoon, Mr. Chairman. My name is Sylvia van Waveren, I'm representing today the asset manager Robeco and the insurance company Aegon. Well, Shell has just received a resolution by Follow This, a group of Shell shareholders that support Shell to take leadership in the energy transition to a net zero emissions energy system. This shareholder proposal requests Shell to publish company-wide greenhouse gas emission reduction targets that are aligned with Paris, and more specifically, to Scope 1, 2, and 3 emissions. The shareholder proposal contains a number of elements and has raised a lot of discussions among the institutions I represent, and we consider our voting statement here before you. We have had several meetings in the past with both Follow This, but also with Shell board and management, and we've discussed the shareholder resolution in full. Our analysis has come up with the following.
For many years, the Eumedion participants have encouraged Shell to not only report on greenhouse gas emissions, but also to establish group-wide operational greenhouse gas reduction targets. Despite these years of engagement, we find that Shell does not show enough progress in formulating these group-wide operational targets. We have evaluated this analysis. We've discussed it amongst the Eumedion members, this has led to a range of voting outcomes. Some institutions have voted for, some have abstained, some have voted against or are doing that at this very moment. The main reason for voting for or abstaining on the shareholder resolution is that investors are discouraged by Shell's reaction to Follow This statement. For this reason, Aegon is abstaining on this shareholder resolution. At the same time, Robeco has decided to vote against the shareholder resolution.
Main reason for this is that we consider that the emission reduction target on Scope 3 is a bridge too far. The carbon emissions from the use of Shell products by consumers and clients are outside the managerial scope of Shell. Reducing those emissions could seriously impair the business and reduce the necessary room for you to maneuver for playing an active role in the energy transition. Shell's ability to produce solutions for Shell's clients to implement the Paris Agreement are seriously being hampered by a reduction target on Scope 3. However, having said this, we have a strong and urgent message for Shell's board. We think still that Shell has not shown enough progress in formulating a long-term vision on the transition towards a carbon neutral economy, on adopting group-wide targets on operational emission reductions.
Investors simply need a clearer statement on this specific subject from Shell, and we expect the company to show us this clear description of quantifiable, time-bound sustainability goals and ambitions. In this regard, and you already mentioned it, we particularly would like to recommend you to take into regard the recommendations of the Financial Stability Board's Task Force on Climate-related Financial Disclosures, the TCFD. They will soon be finalized, we expect. We particularly ask Shell to take their recommendations at heart and embrace them wholeheartedly. With that, I would like to end this voting statement. I hope it is clear to you that we expect the company to be more proactive in the future on setting targets on Scope 1 and Scope 2. Thank you very much, Chairman.
Thank you very much for your clear logic and reasoning behind the voting. We appreciate you sharing that with the whole room. Number two.
Good afternoon. My name is Jags Malia. For the record, I work for APG Asset Management. We also represent ABP, the large Dutch state pension fund. Before I read my prepared statement, which has a lot of overlap with what Sylvia just mentioned, I just want to go off-piece and say, Chad, thank you very much for proactively reaching out to the investor community at an early stage to let us chip into the debate. Thank you. On our vote in terms of Resolution 21, before I get into that, I want to say, my job as a portfolio manager is to provide decent investment returns so I can get a decent pension for our clients, also doing that in a responsible manner. One aspect of responsible manner would be our commitment to reduce our portfolio's Scope 1 and Scope 2 carbon emissions by 25% by 2020.
We encourage all of our companies, including Shell, to work with us on that goal. What I want to say is we, A, really respect and appreciate the changes that Shell has demonstrated since our last AGM and the one before that. I won't list everything here, but it is moving in the right direction for what we've asked for. In terms of Resolution 21, I need to, in my job, look at the details as much as the direction of a resolution. In terms of agreeing with our goal to move towards COP21 Paris climate change agreements, in the details, as you've mentioned in your response to the resolution, as Sylvia's touched, to put limits on Shell's Scope 3 emissions would limit your ability to use gas to push coal out of the energy mix. We really see that as one of your core strengths.
To cut a long story short, that's the main reason we're going to vote against Resolution 21 today. Thank you.
Thank you very much for sharing your point of view. It's much appreciated. Number 1.
Thank you, Mr. Chairman. My name is Pieter van Stijn. I work with PGGM. I speak and vote on behalf also of one of our largest clients, which is the pension fund for the healthcare sector in the Netherlands. I'm going to make some statements which are repetitive of what's already been said. Highly appreciative of the constructive dialogue that we had in the last couple of months, years, about this important subject. We do acknowledge the efforts of Shell to contribute to the shift to cleaner energy. We appreciate the steps taken to improve reporting. We think Shell is actually leading in this sector. However, we also notice a lack of corporate greenhouse gas reduction goals, despite multiple demands made by several investors, including ourselves.
For Scope 1 and 2, this is for us an issue, especially since, like ABP, our large client also has clear reduction targets for reducing the emissions of their investment portfolio. It is therefore that we regret the rather negative response of Shell to the Resolution, focusing very much on the inability to achieve and to commit to these formal Scope 3 emissions. I think this response doesn't do justice to the spirit of the proposal, and we support the spirit of the proposal. However, like other investors, we also understand the difficulty to commit and to achieve to these formal Scope 3. We do understand why you are this negative, so we cannot support this proposal.
However, we want you to really acknowledge the urgency and the necessity to provide us with concrete targets to give insight into the direction and the pace of your contribution to the energy transition. We also do not follow your advice to vote against it. We chose the middle way. We withhold. We vote withhold. We do welcome your invitation to continue the dialogue on this important matter. We would like to stress four points. One is, we would like you to develop corporate emission targets for Scope 1 and 2 before the coming AGM. Second is, develop targets to provide us guidance with the pace and direction of your role in the energy transition. For instance, by setting long-term directional targets for your energy mix. Efforts targets for prevented emissions throughout your value chain.
Third is, develop a program to work preferably together with your peers on how to reduce the emissions of your customers. The final one is, disclose the assumptions in the scenarios that are underlying your decision-making. It's a wide range of scenarios. We would like you to be more specific on what it is that you take into consideration in your decision-making. Thank you.
Thank you very much for your very studied comments and suggestions. We'll take them under advisement. Other comments from number 1?
Yes. Sorry, my name is Faryda Lindeman. I work for third-party asset manager, NN Investment Partners. We support already some of the statements that have been made earlier by the other institutional investors and the statements made by IIGCC. We would like to make a statement on our own voting decision. We acknowledge the difficulty of the climate transition for the company. Also the targets on Scope 3 are challenging to set for you. We do believe, however, that Shell can disclose the targets on Scope 1 and 2 emissions. We also see it as a missed opportunity that you have not committed to do so in your response to this resolution.
We will abstain on this resolution, thereby sending a signal that we do not fully support the resolution due to Scope 3, but we would like to see more commitment from the company going forward. Thank you.
Thank you very much for your comments. We fully understand. Are there any more comments or questions on this resolution?
Mr. Chairman, I am Fred Heineman . I am private shareholder living in The Hague. In my opinion, it goes miles too far to demand from Shell at this point already an elaborate plan in order to diminish the emissions of fossil energy. One very important thing has been forgotten, and that is the situation of the science in the future. Nobody knows what will be invented the coming 30 years, during which there still will be quite a huge demand for fossil energy, coal as well as oil as well as natural gas. There is a proverb that says, "The demand was come first, the inventions will follow." It always has happened during the history. The Paris Agreement is indeed useful, but to elaborate it in detail, that goes miles too far as nobody knows what will be invented during the coming 30 years.
During the past 30 years, there has been more invented than all the years before. In my opinion, I support the opinion of Shell, and I will stay to it. Thank you.
Thank you very much for your comments. Are there any other comments, suggestions? Mr. van Baal, did you want one last statement?
A few last remarks. First of all, thank you to all the institutional investors who voted for our resolution and also the ones who abstained. That's also a very strong signal. Also thank you to others for giving Shell the support to really change course. Three remarks. First of all, on the flexibility on setting targets. In the resolution, we've given you full flexibility of how to set these targets. So if one of your targets would be we're going to replace an X amount of coal by an X amount of natural gas, it could be easily fitted in the targets as long as they fit with Paris. Second, the whole world has to go to zero on Scope 1, 2, and 3, so why not Shell? Last remark, you are truly the most innovative company in your sector.
Again, I hope shareholders will give you the sign that they trust you in doing that, because apparently we have more trust in you than you have in yourself. Good luck.
Thank you for your comments. Ben, would you like to respond to any of the comments from the floor?
Yes, I would like to. Maybe to reiterate a few points. I think what comes out of this discussion today is that this is a complex matter. I have no doubt that indeed the resolution and all the sentiment behind it is extremely well-intended. As a matter of fact, it's exactly the same sentiment that also drives a lot of the attitudes and decision-making within our company. I don't think we have any disagreement on where we need to go. We don't have any disagreement on the transparency of disclosing it all. I sense there is not a lot of disagreement also on the appropriateness of the actions that we are taking. What we seem to have a disagreement on is how we set targets and measure progress against it. Let me explain just one more time.
The issue that we have with targets, ones adopted here, is that they are for real. This is not a birthday party where we just make some sort of promise. This is actually a serious investor resolution that we are legally obliged to comply with. The whole idea that it's okay if we reduce somebody else's goal, Scope 3 emissions, because we can still credit that to our Scope 3, is not the reality. The reality is that Scope 3 emissions are the emissions from our products, not from somebody else's products. Having said all that, I also hear a lot of the debate about, what about Scope 1? What about Scope 2? Can you demonstrate a little bit more what you are doing? We hear a lot of good words, but we need to understand a little bit better what it is.
I will reiterate the commitment that I've made, that we have the whole management team and the board behind. We will continue to engage to find the right way to show not only that we are doing the right things, but that we are making progress with it, and that there is a framework and a philosophy for measuring and holding the company to account. You can make up your mind whether you like what you see. What I cannot commit at this point in time is that we can boil that all down into a single target. It will be a little bit more involved, but let's have the discussion on what it exactly is that you need.
I understand for institutional shareholders, that also you are, of course, under a lot of scrutiny and pressure from your clients to demonstrate that you are holding a portfolio that is fit for the future and a portfolio that is compatible with what society desires. Therefore, I think it is also our obligation to demonstrate that you need to hold our share because we are doing just that. Let's find a way together then to demonstrate that this is the case, and let's have an open mind on how that works. If it can only be done with single numerical quantitative targets, I'm afraid it will be a difficult discussion. If it can be done in a way that nevertheless drives the right outcomes, then be my guest.
We will get there. We will commit a very significant part of our investor relations program on socially responsible matters just to this issue, because I think it is the issue that defines our time and that will define our company. Thank you very much.
Ben, thank you very much. I think that summarized in an excellent way the full thinking of the board. I think it's a very forward-looking step at this subject. I look forward to seeing it move forward. Linda, we're getting close to the end of the meeting. Well, the resolution 21. I'm sorry. Let's vote for 21. Moving too fast. Good. Linda, we're getting closer to the end of the meeting. If you could tell us the procedures for voting.
Thank you, Chairman. Happy to. Ladies and gentlemen, please cast your vote by completing your white paper poll card. If you agree with the resolution, please mark your X in the box marked for. Likewise, if you disagree, please mark an X in the box marked against. If you would like to abstain, please place an X in the box marked vote withheld. Please note that a vote withheld is not a vote in gross. Of course, it will not count in the proportion of the votes for or against any resolution. The scrutineer will establish from the register how many shares you hold and will assume that you would like to vote all your shares in the way that you have indicated. If you wish to split your vote, please contact a member of staff up at the registration desk.
If you have lodged a proxy form, you do not need to complete a poll card, unless your proxy is not present or you would like to change the way your shares are voted. Please remember to sign your card and date it May 23rd, 2017. If you do not sign your card, your votes will not be counted. Please deposit your card in one of the ballot boxes, which you see clearly marked as you leave the auditorium. These boxes will be removed in 20 minutes or earlier, if I am satisfied that the voting process has been completed. The final results of the poll votes will be sent to the Amsterdam, London, and New York Stock Exchange and shown on the Shell website tomorrow or later today if time permits. Thank you very much for your time and your votes, and back to you, Chairman.
Linda, thank you very much. I'd like to thank every shareholder and proxy that's here today for the highly respectful way that we have dealt with the topics at hand. This has been a very constructive dialogue. I assure your entire Board of Directors we'll take into account what we've heard here today. We're now coming to the close of the meeting. I do want to point out to all shareholders that Thursday in London, the CEO, the CFO, and myself will be there to have a dialogue with U.K.-based shareholders and those that could not be here in person. I hope that you will find that very useful. I now want to formally close the meeting. Thank you very much.