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City comment: Shell’s best breakup defense is to take going green seriously

·1-min read
Shell CEO Ben van Beurden  (Shell)
Shell CEO Ben van Beurden (Shell)

Breaking up is hard to do — but Dan Loeb is giving it a go at Shell.

The New York hedge fund billionaire has come out swinging against the oil company, arguing for a break-up.

It makes no sense to pump oil while at the same time building a renewable energy business, he says. It’s like filling up a bucket while drilling a hole in it — the two things just fundamentally contradict.

What’s more, Shell’s renewable assets are undervalued. Split the businesses to get them re-rated and let shareholders enjoy the value.

Shell boss Ben van Beurden argues that a green future is only possible if businesses like his back it. Creating renewable infrastructure at scale requires a level of investment that only a Shell or a BP can muster with their huge cashflow and profits.

This is a popular argument among the super-majors. Van Beurden today vowed to cut the company’s emissions by 50% by 2030, extending a Net Zero pledge made last year.

At the same time, the company is fighting part of a ruling by a Dutch Court around cutting so-called Scope 3 emissions: the carbon output of customers that use its fuel. These account for the vast majority of emissions.

Shell is not the only business to face calls like that of Third Point’s. Elliott, another activist fund, is currently agitating for power company SSE to spin off its renewables business. There will no doubt be others.

Van Beurden made clear today that he will fight the break-up calls. The best defense will be to take transition serious and focus more time and effort on going green.

Correction: An earlier version of this piece suggested Shell’s emissions pledge today was its first and had been prompted by a recent Dutch court ruling. Shell in fact first announced Net Zero targets last year.

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