Shell counts gas as clean energy. That cons investors, says a new complaint
Shell counts gas as clean energy. That cons investors, says a new complaint
Advocacy group Global Witness has filed an SEC complaint against the oil giant for violating the law.
Emily Sanders is editorial lead for the Center for Climate Integrity. You can catch up with her on Twitter here.
Shell just blasted through its previous records for annual earnings, more than doubling its profits in 2022 to nearly $40 billion. Calls to make the polluter pay for the climate damages it fuels are reaching a fever pitch.
Like its American counterparts, Exxon and Chevron, which also blew the lid off their previous profits records last year, Shell has made a fortune off of fossil fuels while lying to the public about their catastrophic consequences — and communities are paying the price.
And they’re lying about transitioning to clean energy, too. This week, advocacy group Global Witness filed a groundbreaking complaint with the Securities Exchange Commission that documents Shell’s wildly misleading claims to investors about its renewable energy investments.
Global Witness found that the majority of Shell’s self-reported annual 12% renewable investments in 2021 were actually investments in… wait for it… gas. In reality, the company dedicated only 1.5% of its overall expenditures to wind and solar generation.
This is calculated greenwashing, Global Witness argues, and oil and gas companies that falsely claim to be committed to climate solutions shouldn’t be allowed to get away with it. The group is asking the government agency responsible for financial regulations to hold Shell accountable for its blatant deception — and, hopefully, to set an important precedent for other oil giants who might pull from the same bag of tricks. (Just this week, the Wall Street Journal reported that BP’s CEO is also shirking away from the company’s environmental commitments in order to maximize profits from oil and gas.)
I spoke with Zorka Milin and Anna van Niekerk, who are respectively senior adviser and legal fellow at Global Witness, about the complaint against Shell and growing efforts to impose consequences on the industry at large.
Our interview, edited for length and clarity, is below.
EK: How did this complaint come about?
ZM: It actually came out of an unrelated research project where we were looking at Shell’s financial reports. It caught our attention that Shell has a business segment called Renewables and Energy Solutions, which is new as a stand-alone segment as of last year. We spent a lot of time looking at Shell’s financial reports that they filed with the SEC and their other public statements and presentations to investors, trying to understand what exactly is included in that segment. Ultimately, we found that most of those activities are related to fossil gas in one way or another — that includes gas trading, hydrogen derived from gas, or carbon capture, which Shell uses to continue its production of fossil fuels. And there was a vanishingly small portion of actual wind and solar generation. So that mismatch between how Shell is labeling this group of activities that it counts as “renewables and energy solutions” is something we were worried would mislead Shell’s investors and the broader public in terms of Shell’s commitment to tackling the climate crisis — or rather, lack thereof.
EK: Can you explain what the role of the Securities Exchange Commission is and what Global Witness is asking them to do here?
ZM: We decided to bring this to the attention of the U.S. financial regulator, the Securities and Exchange Commission, who are tasked with enforcing investor protection laws. We urged them to open an investigation into whether Shell’s reporting on its investments in renewables is misleading its investors in violation of relevant securities laws. We would like the SEC to put these questions to Shell about what their motivations were for reporting in this way. The SEC has extensive powers to do this in a way that we don’t, so we would like them to use those powers. They have a relatively new task force called Climate and ESG Task Force which is tasked with pursuing exactly these kinds of cases. We think this is a pretty straightforward case for them to take.
EK: How does this square with the public climate pledges Shell has made like their net-zero by 2050 targets?
AV: Those goals, similar to other oil and gas companies, are very heavily reliant on CCS [carbon capture and storage] and on offsets. Doing a little bit of digging, Shell says it will be “net zero” by 2050, but that still includes a large role for fossil fuels even in 2050. Other documents suggested that Shell is not planning to phase out fossil fuels even by 2100, which is ridiculous. The context is that we see this as potentially one more strategy in these greenwashing attempts to indicate that they’re doing more to transition their energy than they actually are.
EK: We’re seeing a larger effort by the oil and gas industry to legally redefine gas as not just a bridge fuel anymore, but as a renewable fuel itself. Most recently in Ohio, dark money groups backed by the gas industry pushed for a new law that rebrands gas as a source of “green energy,” and we’ll likely see these laws appear in other states as well. What could this mean for this complaint and other efforts to hold these companies accountable for greenwashing?
ZM: The Ohio story is wild, and it’s not just Ohio. There’s also a setback in Europe, where the EU has decided to include gas and nuclear as part of its green taxonomy. That said, I think that these are temporary setbacks — they’re last ditch attempts to try to save a dying industry. I’m reminded of what happened with coal: there was the whole “clean coal,” and of course, everyone knows that coal is incredibly dirty and polluting and unhealthy. And I think people are also waking up to the fact that gas is incredibly dirty and unhealthy and polluting. We saw that recently with the prominence in public discussion of gas stoves. Overall, the global trend and U.S. trend is to move away from gas, and we know that that is necessary. It’s not just climate scientists that are saying that — also the International Energy Agency, by no means a radical organization, has made clear that we need to phase out gas over the coming years. That puts Shell and other fossil fuel companies and their political allies at odds with what we know is necessary and what the science demands. The development in Europe is being challenged in court in terms of that taxonomy, and I expect at the state level there may be some similar challenges.
And this is all the more reason for the federal agencies to step in. The Federal Trade Commission (FTC) is currently updating their greenwashing policy, which hasn’t been updated in ten years. A lot has changed since then — at the same time as climate awareness has gone up, we’ve seen an escalation in greenwashing tactics to try to catch up with that. And I think that’s a good moment for [the FTC] to clearly say how companies can publicize around things like gas, and how fossil fuel companies should really be limited in how they are talking about their very small investments in renewables. It’s incredibly misleading, and it’s not just Shell — practically all these companies are advertising renewables very prominently, but if you actually look at their numbers, it’s not prominent at all in their business. So that mismatch is something that is increasingly being targeted by litigation efforts including ours, and it should also be picked up by regulators to make clear, from the perspective of corporate compliance, what is and isn’t acceptable.
EK: In 2021, Global Witness was one of several advocacy groups to file an FTC complaint against Chevron for misleading consumers about their climate commitments. These complaints have some differences, but what’s the larger story being told here?
ZM: On their face they’re different — the complaint filed [this week] is focusing on investors and statements that Shell has made, and the Chevron case is focusing on ads that might be misleading consumers. But ultimately, the bigger story is that these companies — Shell, Chevron, and their peers — are engaging in very similar tactics to basically pull the wool over everyone’s eyes, whether it’s investors, consumers, or the general public, and to trick us all into thinking they are partners in solving the climate crisis. That’s really what a lot of this messaging is aimed at — to lull Shell’s investors into thinking they’re doing a lot more in the energy transition realm than is really the case, or Chevron’s ads, which try to lull consumers and the public into thinking that Chevron actually has their best interest at heart. When really, for these companies, it’s always been about their bottom line.
ICYMI News Roundup
Environmentalists dragged Shell before A District Court in The Hague. The court forced them to reduce emissions from operations 45% by 2030.
Natural gas burns with around half the CO2 emissions of oil. As the article notes, UK and EU taxonomy on "green energy" is changing.
ZM is quoted as saying, "they’re last ditch attempts to try to save a dying industry.". We think this is fundamentally wrong. We think that the reality of the consequences of over reliance on intermittent, expensive clean energy technologies is responsible for what ZM describes, not trying to save them from dying. In other words, it's nothing personal, it's just physics.