The power of partnership-based engagement: A case study with Shell

Within L&G's Asset Management business, we firmly believe that active, constructive engagement with our portfolio companies is one of the most effective tools we possess as institutional investors. A recent experience with Shell Plc illustrates how a partnership-focused approach can yield constructive outcomes for both shareholders and the business itself. 

The catalyst for this engagement was a shareholder resolution filed last year by the Australasian Centre for Corporate Responsibility (ACCR). The resolution asked Shell to provide greater transparency regarding their Liquefied Natural Gas (LNG) business, specifically highlighting how its strategy was consistent with its climate commitments, including its target to reach net-zero emissions by 2050.[1] When Shell proactively approached us to discuss our voting intentions, we used the opportunity to initiate a deeper dialogue. 

During our engagements, we made our priority clear. While we recognise that the future holds a wide range of potential demand scenarios for LNG, as shareholders, it is vital for us to understand the financial consequences if demand does not follow the company's expected path.

Shell’s response to this feedback was constructive. They acknowledged our concerns and engaged with us in a series of discussions to determine what form this new disclosure should take. They went as far as creating ‘mock-ups’ of potential reporting frameworks, allowing us to work closely with their team to frame a disclosure model that we believed would be substantially helpful to the investor community.  

As a result of these positive engagements, in the light of the assurances we received that Shell would look to improve disclosure to investors in the way we had outlined, we did not vote in favour of this resolution at the 2025 AGM.[2] 

This year, we were delighted to see Shell release disclosures[3] that utilise almost the exact format we had originally discussed with the company.   

What makes this result so encouraging in our view, is twofold. Firstly, it highlights the positive result that constructive engagement with a company can produce, with Shell responding to investor feedback with an open mind. Second, the new information provides remarkable insights. In the new disclosures, Shell has clearly articulated how potentially advantaged their assets are from both a cost and carbon perspective, and they have clearly quantified the financial resilience of their LNG business against a declining demand scenario. 

These robust disclosures have reassured us that the company takes these transitional scenarios seriously. In fact, it suggested that the company's financial resilience in this area may be greater than we had initially suspected, giving us additional confidence in the company. 

This case study is a testament to the fact that when companies and investors work together and listen carefully, they can potentially produce market-leading disclosures. We commend Shell for their exemplary reaction to our engagement and are delighted with the progress made.  

For illustrative purposes only. Reference to a particular security is on a historic basis and does not mean that the security is currently held or will be held within an L&G portfolio. The above information does not constitute a recommendation to buy or sell any security.

 
[1] Shareholder Resolution to Shell plc on LNG Outlook Disclosures
[2] Our voting intentions for 2025
[3] LNG Portfolio - Response to Resolution 2026