How green activist investors plan to take on Shell and BP

Dutch group Follow This on Wednesday launched a newly revised strategy to take on Big Oil at the upcoming proxy season, seeking to increase shareholder pressure on the financial sustainability of fossil fuel business models.

The prominent climate activist group, which paused filing shareholder resolutions last year due to a lack of investor appetite, said it will change tack to focus on the financial risks associated with declining oil and gas demand — rather than requesting emission reduction targets.

The pivot comes as oil and gas majors double down on hydrocarbons and scale back green energy investments as part of a push to boost profit.

Alongside 23 institutional investors with 1.5 trillion euros ($1.75 trillion) in assets under management, Follow This said it has co-filed new shareholder resolutions for the Annual General Meetings (AGMs) of Britain’s Shell and BP.

The resolutions request that both London-listed companies disclose strategies for creating shareholder value under scenarios of falling oil and gas demand, including under the International Energy Agency’s Stated Policies Scenario (STEPS) and Announced Pledges Scenario (APS).

“Every investor in his right mind knows — even BlackRock knows — that climate change is threatening their entire portfolio. They all know it, but they don’t dare to take action,” Mark van Baal, founder of Follow This, told CNBC by video call.

“We concluded that OK, if we want to increase the pressure on the oil companies to change, we need to raise the votes, and we need to raise an extra talking point into the discussion,” Van Baal said.

“They are only going to change if their business model is not profitable anymore, if their license to operate is gone, or if their shareholders steer them in a different direction. We have always been working on the shareholder lever.”

In response, a spokesperson for Shell said: “As with any resolution that meets the procedural requirements, the Board will consider it and respond with a recommendation to shareholders in our Notice of Meeting for the AGM.”

BP did not immediately respond to a CNBC request for comment.

Follow This, which has previously achieved majority investor backing, has seen support plateau at around 20% in recent years, partly due to concerns about legal risks, particularly in the U.S.

It says a change of approach is necessary, given that many investors remain wary about supporting climate-labelled resolutions. Financial risk, by contrast, is an issue boards cannot dismiss as non-financial, Follow This said.

“Everybody is hesitant. Politicians are hesitating because we have a climate denying president in the U.S., while in Europe, right-wing politicians are just repeating that message, and the politicians in…