Shell has misleadingly overstated how much it is spending on renewable energy and should be investigated and potentially fined by the US financial regulator, according to a non-profit group which has lodged a complaint against the oil giant.
The US Securities and Exchange Commission (SEC) has been urged to act over Shell’s most recent annual report in which it stated 12% of its capital expenditure was funneled into a division called Renewables and Energy Solutions in 2021. The division’s webpage, which is adorned with pictures of wind turbines and solar panels, says it is working to invest in “wind, solar, electric vehicle charging, hydrogen, and more”.
However, Global Witness, the activist group that has lodged the new complaint with the SEC, argues that just 1.5% of Shell’s capital expenditure has been used to develop genuine renewables, such as wind and solar, with much of the rest of the division’s resources devoted to gas, which is a fossil fuel.
“What Shell has said about the energy transition is not reflected in what they are doing,” said Zorka Milin, senior adviser at Global Witness. “This business unit is fundamentally mislabeled, it has very little in the way of renewables and investors could be lulled into thinking Shell is doing far more on renewables than it is.
“This is greenwashing. Gas, whatever it may be, is not renewable, it’s part of the problem. I hope the SEC opens an investigation and imposes appropriate penalties to stop this greenwashing.”
Shell does not have a full breakdown of its renewable energy activity in its annual reports but Global Witness said that by examining the document they could find $288m in wind and solar investment in 2021, which is equivalent to 1.5% of Shell’s capital expenditure. Much of the spending by the Renewables and Energy Solutions division appears to be on the trading and marketing of gas.
Should the SEC act over the issue, it will mark the most aggressive regulatory foray yet by the US federal government against a fossil fuel sector that is facing multiple lawsuits in several states for misleading investors and the public over what they knew about the climate crisis.
Shell, which is headquartered in London but is listed on the New York stock exchange, has denied misleading investors. “We’re confident Shell’s financial disclosures are fully compliant with all SEC and other reporting requirements,” said a company spokeswoman.
The Shell spokeswoman said the company budgeted $20bn for “energy transition activities” in 2022, which is a third of its total operational and capital expenditure spending. This investment went towards renewable energy, hydrogen fuels, capturing carbon at the source of pollution and research and development, she said.
Most of the world’s largest oil companies now accept that burning their product is causing global heating and have committed to the goals of the Paris climate agreement. But their shift away from fossil fuels has been ponderous – only about 5% of oil and gas company capital expenditure went to wind, solar and other renewables in 2022, according to the International Energy Agency. This was up from just 1% in 2019.
Last year was a particularly lucrative one for oil companies’ traditional business model, with soaring fossil fuel costs in the wake of Russia’s invasion of Ukraine prompting record profits for some of the wealthiest businesses in the world. Exxon made a record annual profit of nearly $56bn last year, while Chevron has reported a $36.5bn profit for 2022.
Milin said she hoped the SEC, which is separately mulling new requirements for companies to disclose their greenhouse gases, would act to deter other oil companies. “No more will we allow big polluters to pull the wool over our eyes while the world burns,” she said. The SEC did not respond to a request for comment.
Bruce Huber, an expert in environmental law at Notre Dame University, said the new complaint highlights the external pressure that environmentalists are now placing upon fossil fuel companies.
“What we’re seeing now is climate activists poring over the disclosures of energy firms with a fine-tooth comb, looking for any misstatements that could be the basis for liability or penalty,” he said.
“Whether these tactics will actually induce Shell or its competitors to decarbonize is unclear, but even if not, those firms won’t be able to sneeze without someone looking for a securities violation.”
