Shell Looks for a Hedge Against Climate Change by Geoffrey Smith @FortuneMagazine May 16, 2016, 12:51 PM EDT E-mail Tweet Facebook Linkedin Share icons Royal Dutch Shell is creating a new unit specially for renewables and alternative energy, but it continues to insist that its current business of burning hydrocarbons is under no threat from global policies to mitigate climate change. The company told investors last week that it will combine its modest operations in green energy—biofuels, wind and solar technologies—into a business unit called “new energies” under its natural gas business. It will go public with the idea in June, according to The Guardian. It’s unlikely to attach much fanfare to the event, conscious of the risks of making exaggerated claims about saving the planet. The operations will account for only $1.7 billion in invested capital and have an annual investment budget of only $200 million out of a capital expenditure budget of $33 billion this year. But climate campaigners say it’s the thinking behind the move that’s more important; thinking that’s outlined in a new supplement to the company’s long-term energy outlook, entitled A Better Life with a Healthy Planet. In most of its previous long-term research, Shell had refused to consider the possibility that there would be effective policy action to keep global temperatures from rising by more than 2 degrees Celsius. It has leaned on MIT research suggesting that average temperatures will rise between 2.4 and 2.7 degrees by the end of the century. But the new report suggests that keeping the rise in temperatures to the 2 degrees pledged in the Paris climate agreement in December may be possible—albeit only in a scenario that “will require the combination of all the most optimistic outcomes described in (the MIT’s research) and more.” “Our work has led us to conclude that providing the necessary energy in the context of net-zero CO2 emissions”—i.e. a world in which the energy sector adds no further carbon dioxide to the atmosphere—”is technically feasible. But it will be very challenging,” Shell’s VP for global business environment, Jeremy Bentham wrote. The main thrust of Shell’s environmental shtick in the past has been to urge governments to substitute more natural gas for coal in the electricity fuel mix. Its merger with BG Group fortified an already strong position in the world market for liquefied natural gas in particular. By contrast, it has shunned developing offshore wind in Europe or backing solar power (except in cases where the power generated goes to improve the efficiency of its oil lifting). Why is this change of emphasis important? Because action to limit global warming is almost invariably action to stop Shell from monetizing its reserves of oil and gas, and therefore action to force it to write down the value of its asset base. That’s a challenge facing all oil and gas companies, and Shell is arguably further along that road than, say, ExxonMobil xom , in as much as it has accepted shareholder resolutions asking it to detail the risks of climate change to its future value. By contrast Exxon is under investigation in New York and California for what amounts to the opposite: misleading investors about the risk of climate change. It denies the allegations.