Directors’ Remuneration Report

“2023 was again a year of strong leadership, with a renewed focus on performance, discipline, and simplification.”

Neil Carson

Chair of the Remuneration Committee

This Report

The Directors' Remuneration Report for 2023 has been prepared in accordance with relevant UK corporate governance and legal requirements, in particular Schedule 8 of The Large and Medium-sized Companies and Groups (Accounts and Reports) Regulations 2008 (as amended). The Board has approved this report.

As in previous years, this report is split into three sections: this Chair's letter, the Annual Report on Remuneration, and the Directors' Remuneration Policy (Policy). The Policy was last approved by shareholders at the 2023 AGM with 94.6% support. No changes are being proposed to the Policy this year, though it is reproduced in full in the Directors' Remuneration Policy section for ease of reference and in order to provide context to the decisions taken by the Remuneration Committee (REMCO) during the year.

Dear Shareholders,

As always, the remuneration decisions by the Remuneration Committee (REMCO) for 2023 have been framed by the Group's broader performance context.

Wael Sawan became Chief Executive Officer (CEO) on January 1, 2023. Very soon after, he streamlined the EC to further simplify the organisation as we seek to create more value with less emissions, and deliver increased shareholder returns through a balanced energy transition.

Shell delivered another set of strong financial results in 2023, despite lower commodity prices, with income of $19.6 billion, cash flow from operations (CFFO) of $54.2 billion, and free cash flow* of $36.5 billion. We delivered our second-highest Adjusted Earnings in a decade, after a record last year. This shows strong management performance, improved operational delivery and the resilience of our portfolio, despite external uncertainty and volatility. We were guided by our principles of performance, discipline and simplification as we reduced our net debt* to $43.5 billion, around half of what it was in 2019, and as we continued to demonstrate prudence in our capital expenditure and reduction in structural costs.

Our financial results in 2023 were underpinned by strong operational performance across our portfolio. In the Gulf of Mexico, turnaround operations at Appomattox, Perdido and Olympus were safely completed ahead of schedule and below budget. In the second quarter, Prelude delivered its highest quarterly production since its start-up in 2018. In December 2023, Shell and Eneco's CrossWind joint venture completed construction of the Hollandse Kust (Noord) wind farm. Capacity is anticipated to increase in the coming months to eventually reach 3.3 TWh a year, which is around 3% of the Netherlands' total demand for electricity. In Shenzhen, China, together with BYD, we have opened Shell's largest global charging site for electric vehicles, serving more than 3,300 customers a day. We are also making good progress across the targets outlined at Capital Markets Day (CMD) in June. Our strong performance in 2023 has allowed us to deliver shareholder distributions* of $23 billion for the year, exceeding the 30-40% of CFFO range set out at CMD 2023.

During the year, we reviewed our approach to considering fatalities, in order to support consistent and fair judgment of safety performance over time. I am saddened that we experienced three tragic incidents in 2023 at Shell-operated ventures, which resulted in four recordable fatalities that year. We reflected on these and Shell's broader safety performance, as we always do, when we determined the final pay outcomes for 2023, and we applied downward discretion to the annual bonus outcome. A fourth incident in late 2023 resulted in a further fatality in 2024. This will be assessed as part of the REMCO's considerations of safety performance outcomes for 2024. Further information is in the "Annual Report on Remuneration".

* Non-GAAP measure (see "Non-GAAP measures reconciliations" section).

2023 remuneration outcomes

2023 annual bonus

The overall mathematical outcome of the annual bonus scorecard was above target at 1.58. The REMCO carefully considered the tragic incidents which resulted in fatalities in 2023. One contractor colleague in Malaysia died during scaffolding work and one in the Philippines died after a fall from height. In Nigeria, an armed ambush resulted in the death of two contractor colleagues, as well as four government agents. After careful consideration of the factors leading to the events and reflection on Shell's overall performance in 2023, including overall safety performance and the record performance in process safety, the REMCO used downward discretion to determine a final bonus outcome for Executive Directors of 1.55.

Vesting of the 2021 LTIP awards

Overall, the mathematical outcome of the Long-term Incentive Plan (LTIP) was 94% of target. The REMCO was satisfied that no windfall gain had arisen. The REMCO also believes the vesting outcome to be representative of Shell's performance over the period.

Finalising the 2023 pay outcomes

In finalising pay outcomes, the REMCO considered Shell's wider performance and context during 2023 and over the LTIP performance period, paying particular attention to:

• The strong financial performance in 2023, with CFFO of $54.2 billion and free cash flow* (FCF) of $36.5 billion, which has enabled Shell to invest in our businesses, reduce debt and enhance shareholder distributions;
• The shareholder experience, including total shareholder distributions* of $23 billion in 2023 and $58 billion over the LTIP performance period, and absolute and relative total shareholder return (TSR) performance over the same periods;
• Shell's performance beyond the formulaic outcomes of the variable pay structures, including safety (and fatalities), reputation, ethics and compliance, and feedback from the Audit and Risk Committee (ARC) and the Sustainability Committee (SUSCO);
• Shareholders' views on remuneration matters, as shared with the REMCO during engagements in March 2023;
• The employee experience, where the REMCO noted the above-target vesting outcome for 2023 under the Performance Share Plan (PSP), used to make discretionary share awards below Senior Executive level, and the average employee salary increases;
• Comparisons between the 2023 outcomes and historical remuneration levels; and
• The alignment of the 10-year average outcomes of the annual bonus scorecard (1.11) and LTIP (91% of target) to the target level, demonstrating the effective design of the structures and the integrity of the target-setting process.

This resulted in a single figure outcome of £7.9 million for the CEO and £3.9 million for the CFO, noting that both individuals' 2021 LTIP awards were made prior to their appointment to the Board. The REMCO was satisfied that the shareholder-approved Remuneration Policy had operated as intended, and these outcomes were appropriate in the context of Company performance and the target pay opportunity.

* Non-GAAP measure (see "Non-GAAP measures reconciliations" section).

2024 remuneration

The 2023 Remuneration Policy was submitted to shareholders at the 2023 AGM, and received strong support. I would like to thank shareholders for their valued input and engagement prior to the AGM. The REMCO has appreciated the diverse range of views from our shareholders and they were invaluable in shaping our Remuneration Policy and design.

2024 salaries

Effective January 1, 2024, Wael Sawan and Sinead Gorman received a salary increase of 3.9% and their salaries for 2024 are £1,455,000 and £961,000, respectively. In reviewing their salaries, the REMCO considered carefully the external environment, including the increases provided to the Shell workforce in the key markets of the UK (4.5%), the USA (3.1%), and the Netherlands (4.3%). The Executive Directors' increases for 2024 were positioned below the average UK increase and in line with the average increases across the key markets. The REMCO also recognised the multiplier effect on total remuneration.

2024 annual bonus

The REMCO is satisfied that the current mix of financial and non-financial measures remains well-aligned with our strategic and operational priorities. The "Shell's journey in the energy transition" measure has been updated for Energy Transition Strategy 2024 (ETS24). See section below for further details.

In the interest of simplification and alignment of the two Executive Directors in delivering the operating plan (which is the primary focus of the annual bonus), the CFO's target bonus will be aligned to that of the CEO from 2024, at 125% of salary. This is within the confines of the existing shareholder-approved Remuneration Policy.

2024 LTIP performance conditions

The performance conditions and weightings will be unchanged for the 2024 LTIP awards. The measures will be cash generation, TSR, organic free cash flow*(OFCF) and "Shell's journey in the energy transition", and they will be weighted equally. Cash generation and TSR performance will be measured against the energy majors as before, and OFCF will be measured on an absolute basis against annual operating plans. The "Shell's journey in the energy transition" performance condition has been updated for ETS24. See section below for further details.

* Non-GAAP measure (see "Non-GAAP measures reconciliations" section).

"Shell's journey in the energy transition" in variable remuneration

The achievement of Shell's plans for the energy transition has been linked to the annual bonus and LTIP for a number of years with "Shell's journey in the energy transition" currently forming 15% of the annual bonus scorecard and 25% of the LTIP. These weightings will continue in 2024 and the REMCO has adjusted the performance metrics in light of ETS24, continuing to align to Shell's strategic objective of becoming a net-zero emissions business by 2050, supporting a balanced energy transition by responsibly delivering the oil and gas people need today, while helping to build the clean energy system of the future.

Shell's strategy sets out its objectives for reducing operational emissions while supporting our customers to reduce their emissions. Shell's plans cover all its businesses: growing its world-leading LNG business; reducing emissions from oil and gas production; and growing sales of low-carbon products. These objectives are reflected in the scorecard, where a measure of LNG volumes, focussing on the operational performance of the LNG business, will be introduced for 2024. LNG is a critical fuel for the energy transition. It provides energy security and flexibility, and is the lowest-carbon fossil fuel, producing around 50% less carbon emissions than coal when used to generate electricity. Shell's intent is to grow LNG and the REMCO will reflect this by measuring LNG liquefaction volumes. The existing GHG abatement metric, targeting the operational actions Shell can take to reduce emissions in support of our target to halve Scope 1 and 2 emissions under our operational control by 2030 on a net basis (compared with 2016 baseline), is retained. Our ambitions to develop new lower-carbon offerings for our customers is represented by the existing electric vehicle charge point rollout measure, aligning to Shell's plan to become a global leader in public charging for electric vehicles.

In the LTIP, the REMCO's determination of the extent to which awards will vest will be based on the REMCO's holistic assessment of progress towards reducing Shell's operational emissions and supporting our customers to reduce their emissions. This will be based on our journey to net-zero climate targets for our own operations, progress in developments that support the energy transition to 2030 and beyond, such as the development of our Power business (including renewables), lower-carbon LNG, biofuels, advanced biofuels, electric vehicle charging, hydrogen, and carbon, capture and storage (CCS). We will also take into account progress towards achieving a 15-20% reduction in net carbon intensity (NCI) by 2030 (compared with 2016 baseline) and a 15-20% reduction in customer emissions from the use of our oil products by 2030 (compared with 2021 baseline), as well as any other factors the REMCO may consider relevant.

Looking ahead

I hope that you find this report presents a clear account of the REMCO's decisions for the year. I look forward to continuing to engage with our shareholders in the coming months.

Neil Carson
Chair of the Remuneration Committee
March 13, 2024