Shell to link bosses pay to climate targets. Yes you read that right

Oil major says reducing its climate footprint - including that of its main product - will be incorporated into its executive pay policy that will be voted on by investors in 2020

Shell arctic oil rig, Polar Pioneer - The company is expecting strong expansion of 8 per cent per year despite environmental concerns (Reuters)

Shell linking bosses’ pay to climate change reduction targets is enough to raise eyebrows at the very least.

This, after all, is a company whose principal product is one of the main causes of the global rise in temperatures we are experiencing, the scary consequences of which are beginning to be felt. It also drills in the arctic. Just saying.

As such, it looks a little bit like linking the pay of the bosses of pest control company Rentokil Initial to killing less cockroaches. Stark staring bonkers?

To the contrary, says Shell, which maintains that it is quite serious and, it should be said, has received some notable endorsements for its plan.

There’s one, for example, from Emma Howard Boyd, chair of both the Environment Agency and the Environment Agency Pension Fund Investment Committee, and another from Justin Welby, the Archbishop of Canterbury.

He was an oil executive in another life, but has since called for “bold leadership” from businesses on subject of climate change.

The background to this is that a couple of years ago the company set out an ambition to reduce its net carbon footprint by 50 per cent by 2050.

Critics immediately raised issues with that. I, along with many others, would have sincerely told you being an astronaut was my ambition when I was a kid. But only a very small number people ever get to achieve that aim.

Without being married to targets, Shell's ambition had little meaning. But it’s hard, if not impossible, to set a target with an end date in 30 years time.

To resolve that dilemma, Shell says it is going to set net carbon footprint targets for shorter periods (three to five years) starting from 2020, when a new executive pay plan incorporating them will be part of a revised pay policy that will be put to a shareholder vote.

There is rather a question here of whether this is rewarding executives for what they should already be doing and, if governments force their hand, whether they could end up getting paid for what they are required to do.

I’d also be inclined to ask why not start next year, and I’d want to know that the targets were ambitious and stretching before joining those who have endorsed the plain, which also include a number of very big investors and pension funds, some of which have an explicitly progressive stance. It should be noted that Shell has promised that there will be external monitoring.

Nonetheless, tentatively I’d rate this as a step in the right direction, that would be more valuable still if other polluters are chivvied into following suit. That will have to happen if we’re to stand a chance of turning a potential catastrophe into something that’s merely very unpleasant.

One interesting point to note: This is being hailed as a victory for responsible investment, a sign of how institutional shareholders can exert real influence when it comes to achieving environmental goals.

If the plan checks out to be what it is being sold as, then yes, it would be notable for that.

But if those investors can get an oil company to commit to significantly reduce the polluting effect of its main product, and to link its leaders pay to that, why is it that they can’t achieve similar success when it comes to bringing some sanity to the size of some of the crazy packages that have been handed out to exexecutives?