Shell’s Balancing Act: Resource Allocation and the Green Transition (Abridged)

In mid-2023, amid pressure from climate change activists, shareholder activists, and confronting enormous uncertainty about the future demand for and price of fossil fuels, new Shell CEO Wael Sawan (Harvard MBA 2003) announced a change in strategy for the U.K. oil major. Maintaining that, “We’re not an oil-and-gas-only investment case, and we’re not a renewables-only investment case,” he stated that Shell would remain “balanced” and “disciplined while delivering compelling shareholder returns.” Yet, in a shift in how resources were to be allocated across “Three Pillars” during the transition to net zero operations, he placed more emphasis on “return of capital” and “return on capital” and demanded a “fundamental cultural change” in the company. The change in strategy would not just affect the internal allocation of resources across Shell’s different businesses, but would also have important impacts on global climate change and the future mix of fossil fuels and renewables in the economy.