Shell: Green Finance and Sustainability Challenges

Name: Shell: Green Finance and Sustainability Challenges (English version)
SKU: F-991-E

Vergara, Carles; Mateu, Adrià

Product #:F-991-E

Supplier:IESE Publishing

Discipline:Finance

Setting:Países Bajos; Reino Unido, 2021

Details:Case (PDF) • 15 pages • 2022-09-09

Subjects:

Corporate governance Business management Finance and investing

Industries:

Food and beverage sector

Your Price:

$10.54

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On October 27, 2021, Daniel S. Loeb, founder and chief executive of the hedge fund Third Point, sent a letter to Royal Dutch Shell's Board of Directors outlining a significant value-creation opportunity. The letter suggested splitting the company in two -- a spinoff company that will include the Liquefied Natural Gas, Renewables, and Marketing businesses and the remaining company that will include the Upstream, Refining, and Chemicals operations. How might the CEO and Board respond to this suggestion? How can Shell manage the increasing pressure from the activists? Should Shell frontally reject the proposal or try to arrive to an agreement? To successfully answer these questions, the participants will need to consider several key factors such as the financial implications of such a spinoff in Shell's valuation and cost of capital, its governance issues, the impact on the various different stakeholders, and how this case fits in the current sustainability trends.

Learning Objectives

This case was written for courses on finance, particularly those dealing with sustainability, corporate governance, and valuation. Shell?s challenges are well suited for analyzing the following key topics: how value is created through green finance; how shareholder activists are reshaping firms? strategies; how green finance affects cost of capital and firm valuation methods of ?green? and ?brown? firms; what are the effects of climate challenges to firms within the framework of a strategic industry that has seen significant changes in the recent years.