Shareholder Mark van Baal: ‘Imagine Shell really used their brains and billions for the energy transition’

In 2013, Mark van Baal was writing a novel. The main character was a man who had had a successful thirty-year career in the oil and gas industry and was at the top of the pyramid. Now he had to decide to make the shift to sustainable energy. Slowly he was coming to the realization that he had to say goodbye to the way it had been, that things could no longer go on this way, and that the company’s course would have to change radically.

Van Baal was writing his book alongside his work as a journalist specialized in energy transitions. Many of his columns and articles asked why companies like Shell weren’t investing in sustainable energy any longer. Van Baal’s reasoning was simple: it was getting more and more expensive to get oil out of the ground, while at the same time technologies for wind and solar energy were getting cheaper and cheaper. So why weren’t they shifting their focus? If Shell wasn’t careful, they’d make themselves redundant.

‘Mark, this isn’t my kind of book,’ his wife said, ‘but it is the manifesto of a movement.’

His calls, warnings, and analyses failed to make much of an impression. Shell employees at every level gave him the same answer: the world’s population was going to grow from seven billion to nine billion, that we’d need twice as much energy in 2050, and that it simply could not be done without fossil fuels. And thus Mark van Baal the journalist was spending his evenings writing about his fantasy CEO who did dare to change.

Once the manuscript was finished, he asked his wife, Marijke Voerman, to read it. ‘Mark, this isn’t my kind of book,’ she said, ‘but it is the manifesto of a movement.’ It was the birth of Follow This, a group of shareholders who since 2015 have been trying to get Shell to take the lead in the energy transition. It now has 4,000 ‘green shareholders’.

In the head of a CEO like that

Van Baal, who has just turned 50, receives visitors in an office in Amsterdam-West, a building of metal and glass full of millennials. They don’t work for him (‘We’re not that big yet’) but for Dept, a company that helps enterprises worldwide position themselves online. ‘The owner is a friend of mine from my student days in Delft, one of the people who joined Follow This early on,’ says Van Baal.

He has to chuckle when I ask about his never-published novel. ‘For me, it was an exercise that led to Follow This. I’m fascinated by people who are stuck in their ideas, who do see that something has to change but who say “I can’t take such a decision with my responsibilities, because of job losses, dividends, shareholders…” What has to happen in the head of a CEO like that before he or she can take a brave decision? Of course, I dreamed that my devastating novel would change the world. All the people at Shell would read it and then they’d think: damn, that Van Baal guy is right, let’s do it.’

‘They could get the combustion engine banned tomorrow. Instead, they’re using all their lobbying power to get the dividend tax abolished.’

Then he gets serious: ‘Suppose Shell really used all those billions and all that brainpower for the energy transition. If Shell wanted it, a CO2 tax would be the work of a moment. They could get the combustion engine banned tomorrow. Instead, they’re using all their lobbying power to get the dividend tax abolished.’

In May 2016, a week before the annual Shell shareholders’ meeting, this magazine published its first story about Van Baal. The article opened with a scene in which Van Baal was in an Amsterdam café when a well-known TV host, Umberto Tan, passed by and Van Baal tried to interest Tan in his cause. As Vrij Nederland-journalists Map Oberndorff and Jaco Alberts noted drily, ‘A short conversation ensued, after which the host of RTL Late Night seemed not terribly impressed.’

Now, three years on, Follow This is a fixture on the scene when it comes to greening Shell. At the last shareholders’ meeting, the Follow This resolution had the support of six of the Netherlands’ ten largest pension investors; the four others, for the first time including the Netherlands’ largest pension fund, ABP, abstained from voting despite being urged by the Shell board to vote No. Van Baal has appeared on the late-night talk show Pauw along with Jort Kelder (also a green shareholder), dance-event company ID&T founder Duncan Stutterheim has joined the movement, and papers like the New York Times, The Guardian, and the Financial Times have written about him.

Disorderly scene

Let’s go back to the beginning, in 2013. Van Baal had often said to his wife that in twenty years he would surely be invited to a late-night chat show to talk about Shell and how they had taken the wrong decisions.  Then he would compare them to Kodak, the photo-film company that had gone belly up as a result of its failure to see the digital revolution coming. ‘My wife said, “I don’t like men who always say in retrospect that they were right. You have to do something about this now.”’

The only way to spur Shell to change, Van Baal, concluded, was to acquire real power during the shareholders’ meeting. He would have to set up a group that would act as an activist investor.

What had always buzzed around in Van Baal’s head was the events at Dutch bank ABN AMRO in 2007. The Children’s Investment Fund, an activist group owning 1% of the shares of the bank, succeeded in getting it split into three parts. Van Baal reasoned that if it could happen with ABN AMRO, it could happen with Shell. The shareholders meet once a year in the Circustheater in Scheveningen near The Hague.

Traditionally it’s a festive event where shareholders sip coffee together and the board gets to announce how much dividend the company is distributing. Of course there is always disruption by representatives from the Niger Delta or the Inuit in Alaska, invited by (Dutch) Friends of the Earth or Greenpeace, who have come to inform those present about the dramatic consequences of oil contamination.  ‘These meetings get kind of disorderly,’ says Van Baal, ‘and then the board members dust themselves off and continue merrily on with what they were talking about.’

The only way to spur Shell to change, Van Baal, concluded, was to acquire real power during the shareholders’ meeting. He would have to set up a group that would act as an activist investor.

Striking a chord

In 2013 and 2014 Van Baal held confidential meetings with a handful of people. Was his analysis right? Was this a feasible strategy?  One of these people was Robert Kleiburg who had worked for Shell for twenty-two years, including as vice-president for strategy and planning at Shell Renewables & Hydrogen worldwide. He was one of the people responsible for investing in solar, wind, biofuels, and geothermal and hydrogen power.

‘I was the sustainable face of Shell,’ says Kleiburg (51). When sustainable energy became less and less important at Shell (to such an extent that his department was abolished), he left for the Netherlands Energy Research Centre in Petten, according to Kleiburg ‘the Walhalla of renewable energy in the Netherlands’. They knew each other from an interview Van Baal had done with Kleiburg. ‘I was very enthusiastic from the beginning,’ Kleiburg remembers. ‘He had the right analysis. If Shell doesn’t invest in renewable energy, it’s putting its survival at stake. It has to be helped to change direction. I think indeed that Shell listens more to shareholders than to journalists.’

Initially Van Baal thought that someone else, perhaps a Dutch celebrity or a pension fund, should execute his ideas. ‘I talked with various people. They all thought it was a wonderful idea but they didn’t have enough time to do it. So I decided I’d better do it myself.’ Van Baal and his wife had a little savings and agreed to live off her income for a while.

In April 2015 Van Baal launched the Follow This website. Using slogans like ‘Change the world, buy Shell’ and ‘Get a share in a clean future’, he called on everyone to become a green shareholder. A few hundred people each bought a green share for €30 and sent an email to Shell CEO Ben van Beurden with the message ‘Hi Ben, I’m your newest shareholder. You can change the world. You have my support.’

The website featured catchy text like ‘A company that wants to survive in the long term will have to focus on the future instead of just next quarter’s figures.  It will have to adapt to the changing world.’ Although the initiative only made the back pages of the newspapers, Van Baal had struck a chord. In the weeks and months that followed, volunteers and new and existing Shell shareholders came on board in droves.

Aloof

On 19 May of that year, Van Baal went to the annual shareholders’ meeting in Scheveningen for the first time, representing the first few hundred new shareholders. There were many more shareholders there besides him who were concerned about climate change. At the entrance, environmental groups were protesting drilling in Alaska, the pollution in Nigeria, and gas extraction in Groningen [which had caused earthquakes, ed.].  Large shareholders were pressing for transparency about the effects of climate change on Shell’s business model. This resolution had massive support, since the Shell board had co-written it and advised shareholders to vote for it.

‘We want you to look towards the future; as shareholders, we don’t want you to be the next Kodak or Nokia. Invest the billions you have, and the brains you have, in sustainable energy.’

But Follow This wanted to go much further. At the time, Shell was still planning to drill at the North Pole. ‘We would like to ask you not to put your profits into drilling for oil in Alaska but in wind farms in the North Sea,’ said Van Baal. ‘We want you to look towards the future; as shareholders, we don’t want you to be the next Kodak or Nokia. Invest the billions you have, and the brains you have, in sustainable energy.’

Shell CEO Ben van Beurden’s response to Van Baal’s plea was not unsympathetic (‘I read them all,’ he said about the hundreds of emails) but still a little aloof. Yes, Shell intended to make a contribution to the energy transition, but ‘that won’t go as fast as you want if you want to have your dividend safe.’  Investments in sustainable energy were, according to CFO Simon Henry, only profitable because of subsidies. ‘And we don’t think that it is sustainable to let our company’s entire future depend on subsidies.’

‘We have more confidence in you than you have in yourself,’ was Van Baal’s retort. ‘We think you have the billions and brains not only to follow this change but to lead it. How can we help you?’

The message was: we’ll fix it ourselves, we don’t need you.

And his performance got noticed. His name was in The Guardian and the Netherlands’ het Financieele Dagblad. But, at least for the time being, it stopped there. ‘The wealth managers weren’t exactly breaking down the door. For them, I was nothing more than a journalist with a little idea.’ When Van Baal contacted pension funds, they were reserved.  They didn’t do ‘engagement’ with Shell. When Van Baal pressed, the answer was, ‘We discuss things with Shell; slowly we’ll turn them round.’ And so it went, turning in a circle. The message was: we’ll fix it ourselves, we don’t need you.

Early birds

If Follow This was to have more influence, it would have to grow, and Van Baal had to get more people behind him. To encourage him, his wife, Marijke, showed him a YouTube video, which now has 15 million views, of a solitary dancer at a festival. ‘The guy is dancing a little oddly, at first all alone, then two or three more join him and he welcomes them enthusiastically, which is important, and then the others follow. I’ve always remembered that. You have to look after those early birds.’

The first large shareholders to join Follow This were a few friends, businesspeople who prefer to remain anonymous. The next one, who came out of the blue, was Bob Crébas, founder of a group of second-hand stores Het Goed and the website Marktplaats.nl.  The former welfare recipient and anti-nuclear activist sold Marktplaats for €225 million to eBay, making him suddenly one of the richest people in the Netherlands. In October of 2015 Crébas heard about Follow This for the first time and the idea appealed to him right away. ‘I’ve been concerned about the climate and energy for forty years now. It seemed like a great campaign, and Mark looked like the right man for the job,’ says Crébas.

Silent heroes

Around that time, Van Baal received the first signals of interest in his initiative from the world of financial institutions. During a radio show, he met a manager of Actiam, an asset management company with invested capital of €56.3 billion. Within a couple of weeks, Van Baal had been invited to a closed round-table discussion about oil drilling at the North Pole. There were representatives from pension funds there as well as someone from Greenpeace. ‘The world that had shut me out was starting to let me in more and more often,’ says Van Baal.

‘Everyone has to have an opinion; journalists are going to be asking you about it which helps enormously.’

‘And I discovered that in that conservative world, there are also people who want to make the world a better place in their lifetimes, who want things to change. They operate under the radar. They have a political mindset and make sure that decisions get taken and that their bosses can keep some backbone when Shell rings them up. They avoid publicity, but I hope that in ten years or so we can all have a drink together and I can tell them that what they did was really important. To me, they’re the silent heroes of this story.’

Van Baal’s 2015 performance in the Circustheater entailed nothing more than an appeal to Shell on behalf of a few hundred Follow This green shareholders. For the 2016 meeting, he wanted to submit a resolution that the meeting would have to vote on. Van Baal says, ‘Then you’re on the agenda. Everyone has to have an opinion; journalists are going to be asking you about it which helps enormously.’

To be eligible to submit a resolution, however, Follow This had to have €5 million in shares. Van Baal managed to find ten shareholders who were each willing to register half a million euros’ worth of their stock with Follow This (including Bob Crébas, dance-event mogul Duncan Stutterheim, and Bart Manuel) and another hundred people who each owned one symbolic share. But it wasn’t that simple, as it turned out two weeks before the submission deadline. Each of those shareholders, Shell informed them one Friday afternoon, had to maintain a separate portfolio with a bank, with its own account number. At that point, only the ten large shareholders had portfolios; the ninety others who had one share apiece were in one big bloc at Follow This.

Panic broke out in the Van Baal household. How could they manage to get a separate account number for all those shareholders within two weeks? Salvation came from a friend who played rugby on the same team as a board member of Binck Bank, who immediately went for the idea and wanted to help.

The managers of the crèche were interested right away and wanted to join in. Suddenly I had eight new Follow This members. And they were all going to talk to their parents as well.’

According to Marijke Voerman, ‘Over the next few days, our house was transformed into the headquarters of a well-oiled operation. We were at the dining-room table with five faithful friends, phoning all the shareholders until late into the evening.’ They couldn’t talk about anything else any more. Van Baal told his story with passion at a party at his son Barend’s crèche. ‘The parents of the other children were interested right away and wanted to join in. Suddenly I had eight new Follow This members. And they were all going to talk to their parents as well.’

And it worked. At the end of those two weeks, Maarten Bax, a young volunteer with Follow This, boarded a plane (there was no time for a boat or train) in order to deliver a folder containing signed documents and copies of share portfolios to Shell’s statutory headquarters in London. ‘The company secretary was amazed that we had done this in two weeks,’ says Van Baal, still visibly proud.

Gooseflesh

The Follow This resolution didn’t pull any punches. From now on, Shell would invest its profits from oil and gas in sustainable energy. Far-reaching resolutions like these are a rarity in the investment world, since they put the shareholders in the driver’s seat as it were. Nevertheless, before the meeting Van Baal got a phone call from his contact at Actiam. They would be voting in favour of the resolution, making them the first large pension fund to support Follow This. ‘I got gooseflesh,’ says Van Baal. ‘I thought, “Yes! It’s going to work!”.’

Who wouldn’t want to fill their tank with petrol from a company that was investing in sustainable alternatives?

On 24 May 2016, Van Baal once again was the spokesperson at the shareholders’ meeting, where he soon found himself in a lively exchange of words with Ben van Beurden. Van Baal started by complimenting the company for going in the right direction with measures such as giving up its ambitions to drill in the North Pole, and aiming to build wind farms in the North Sea and invest in solar and wind energy.

These are all steps in the right direction, said Van Baal, but wouldn’t the company like to take it one step further? Not by stopping oil and gas production today, but by deciding not to make any new investments in exploring for fossil fuels. Imagine if you threw all of your efforts into sustainables, he said. Wouldn’t that be inspirational? Who wouldn’t want to fill their tank with petrol from a company that was investing in sustainable alternatives?

Van Beurden was his affable self that day. Although he understood the feeling very well, he said, going along with the proposal would lead to ‘value destruction’ or even the end of the company. And that couldn’t have been what Van Baal wanted. Yes, the company was making a transition, but all the parties in society would have to work together to bring it about. It wasn’t Shell’s job to solve everything; consumers also had a part to play. And so Shell’s board recommended a No vote on the Follow This resolution. Despite this, 3% of the shareholders voted in favour of the text, including asset manager Actiam.

Much too activist

Van Baal was sitting in the hall with five volunteers from Follow This and a hundred or so green shareholders. One of them was Rob Hulsman (50), by day the controller at a multinational company. Hulsman and Van Baal had written the text of the resolution together. ‘I was flabbergasted that we got 3%,’ says Hulsman. ‘That’s really very rare. The fact that Van Beurden took several minutes to respond to Mark proved that we were being taken seriously by the top management of Shell. We were clearly on to something; we were on the right track.’

Van Baal: ‘Afterwards we were accused of being much too activist. That it wasn’t appropriate to tell the board of Shell what to do. How could we know? We were in a learning process. But we did get three billion in invested capital behind us.’

After the 2016 shareholder meeting, Follow This was taken more seriously. Van Baal was no longer dancing alone, and now it wasn’t three other guys but an enormous group dancing with him. Not only were enthusiastic volunteers streaming through the doors, but the doors of the pension funds were opening as well. ‘In the course of 2016 we had confidential meetings with representatives of those funds and asked how we could word the resolution so that they could get behind it the next time,’ says Van Baal.

Goldilocks and the three bears

One of Van Baal’s inspirations was Adam Grant’s book Originals: How Non-Conformists Move the World. Among other things, Grant describes the trials and tribulations of Lucy Stone, a nineteenth-century American women’s suffrage activist. Although Stone herself was a liberal, she sought collaboration with the conservative Woman’s Christian Temperance Union in order to get what she wanted.

‘Her radical idea was that women should get to vote. Ours is that the oil industry should go sustainable. Like them, we’re not stomping on the established order but are trying to change it from within. To get things moving, you have to convince the established order, and if one of them shows that it’s with you – which in our case was Actiam – the others will follow.’

‘After that first resolution, it was clear to us that if we wanted to get more shareholders behind us, we’d have to tone it down a bit.’

Van Baal was also inspired by what is known as the ‘Goldilocks principle’, from the tale of Goldilocks and the three bears. She took the porridge not from the biggest bowl, which was too hot, nor the smallest, which was too cold, but from the one in the middle that was ‘just right’. ‘After that first resolution, it was clear to us that if we wanted to get more shareholders behind us, we’d have to tone it down a bit. We came up with “shareholders support Shell in committing to the Paris climate agreement”. It was also kind of a Trojan horse. The essence of committing to Paris comes down to the same thing: we still think that Shell has to use its brains and its billions for the energy transition.’

While Van Baal was trying to change things from the inside, the Dutch Friends of the Earth, a group called Milieudefensie, filed a lawsuit against Shell. ‘I think they have a strong case,’ says Van Baal. ‘They’re using Shell’s rejection of our resolutions as evidence. All pressure to accelerate the energy transition is welcome. Shell can only avert the suit by committing to meeting “Paris”.’

People at the right level

The Follow This resolution at the shareholders’ meeting in May of 2017 would have required Shell not only to set emissions-reduction targets in line with the Paris Climate Agreement, but also to take responsibility for reducing CO2 emissions by its consumers of petrol, natural gas, and LPG. Shell felt the last goal was unreasonable, since it might hamper their ability to grow in the short term. The Goldilocks approach worked: 6.3% of the shareholders voted for the resolution and another 5% abstained from voting despite the fact that the Shell board had strongly urged a No vote.

‘At this point we’re the most influential shareholders, and it’s tough for Shell that such a small group has so much clout.’

That Follow This would be a full-fledged player from now on became clear in the months that followed. Van Baal grew to become a worthy partner in talks with Shell which were held in The Hague [Shell’s Dutch headquarters, ed.], along with former Shell vice-president for renewables Robert Kleiburg. Van Baal will not name the people with whom he spoke. ‘I always say “with people at the right level”. It doesn’t help the mood to name names.’

They were real talks, Van Baal emphasises. ‘At this point we’re the most influential shareholders, and it’s tough for Shell that such a small group has so much clout. The company reasons from a position of power – they like to talk about how they see the world, and we all have to listen. They say that in the twenty-first century, fossil fuels are still going to be important and that Shell will play an important part. That other companies are much worse and why don’t we take aim at them instead. Shell had indicated it wanted to work with us, but on its terms. We didn’t come to an agreement then, but we’re in talks again.’

A huge step

Partly due to the influence of Follow This, on 28 November 2017, the company made a remarkable move. At its annual meeting of large investors and analysts in London, Van Beurden announced that the company intended to drastically lower its CO2 emissions.

‘Shell is the first oil company in the world to do this. They’re leading the industry.’

And the reduction would not be limited to the company and its suppliers: for the first time, Shell acknowledged it would also be responsible for the CO2 emitted by the products consumers purchased at its petrol stations – precisely what Follow This had asked for in its resolution. By 2035 the company aimed to have the relative emissions reduced by 20%, and by half in 2050. However, given the increasing demand for energy, in absolute terms this meant a reduction of only 30%.

The phone never stopped ringing that day. ‘I was pleasantly surprised,’ says Van Baal. ‘Shell is the first oil company in the world to do this. They’re leading the industry.’

But is that enough? No, says Van Baal, it’s not enough. ‘Shell has taken a huge step, but the reduction it mentions of about 30% does not meet the Paris Agreement, which requires a 70–100% reduction. Shell keeps saying that it wants to be flexible in a “whatever world” and therefore not commit to anything. They keep talking about ambitions, while we’re asking for targets. They don’t want to be leading here but to follow the rest of society.’

Open letter

By now, Follow This had the full and open support of large pension funds. In the run-up to the shareholders’ meeting in May of this year, the Church of England, a majority shareholder, wrote an open letter to Shell stating that they were supporting Follow This because ‘targets are more meaningful than ambitions’.

There was another open letter in the Financial Times signed by asset managers who had invested a total of €10 billion. They called on all oil companies to make ‘concrete commitments’ and also asked them to make it clear how their investments were in line with the targets set in Paris. Van Baal: ‘The large asset managers see very clearly that their investments worldwide are in danger from climate change.’

‘At Aegon (an insurer, ed.] they said literally that halving emissions is not enough, that the net CO2 emissions must be headed toward zero by 2050, and that we can’t get any yields in a world that is over 2°C warmer. Big financial institutions aren’t only concerned about socially responsible entrepreneurship and doing good for the world. Their attitude to oil companies is informed by a strong financial incentive.’

Shell did not go along with the demands. The company stated that if they were forced to take measures, it would ‘not be in the best interest of Shell or its shareholders’.

We’re moving with society when it comes to sustainable energy.’

This year, Shell will invest €25 billion in exploration of new oil and gas reserves, and from 2020, only €1–2 billion in new sustainable energy sources. In October of this year, Van Beurden announced unambiguously during a meeting with investors that the future of Shell in the next few years is firmly linked with oil and gas. ‘We’re moving with society when it comes to sustainable energy.’

Van Baal: ‘We still have a battle to fight. Apparently we need more support from shareholders.’

Proposal for philanthropists

Now that Follow This has come so far in a short time, Van Baal is also setting his sights further abroad. ‘We’re planning to get going with four more large oil companies in May 2019.  It’s logical to start in the English-speaking world and Norway, where the threshold for submitting resolutions is low. That gives you companies like BP in Great Britain and Equinor, formerly Statoil, in Norway. But you need money and people who know the local markets. Right now we’re writing a proposal for philanthropists.’

As long as there’s no change in course by Shell and the rest of the oil industry, we’ll be well over 2°C. And we don’t want to be there.’

In early October, the Intergovernmental Panel on Climate Change (IPCC) published a report in which they pleaded for new, unprecedented changes in energy policy and transportation to avert the worst effects of climate change. According to the scientists, it’s still possible if there is the political will to change things.

For Mark van Baal, the report underlines more than ever the necessity of continuing with Follow This. ‘We can stay within the 1.5°C temperature rise, but companies like Shell will have to show leadership. As long as there’s no change in course by Shell and the rest of the oil industry, we’ll be well over 2°C. And we don’t want to be there.’