* Investors urge Shell to disclose emission targets
* Include upstream operations in emissions bonus scheme
* Shareholders to vote on new pay policy at May 23 AGM
* GRAPHIC Shell annual bonuses: tmsnrtX.rs/2fHRTZH
By Ron Bousso
LONDON, May 17 (Reuters) - Investors are pushing oil giant Royal Dutch Shell to explain the finer details of its plan to link executives' bonus pay to lowering carbon emissions, urging more transparency as the world shifts away from fossil fuels.
Shell was hailed by investors as a pioneer among the world's biggest fossil fuel producers when it announced the policy to tie 10 percent of executives bonuses to cutting greenhouse gas emissions, which will be voted on at a May 23 annual general meeting in the Hague.
But scrutinising the small print, some investors want Shell to show how it will calculate the targets for lowering emissions in the new bonus scheme rather than provide the information retrospectively in its annual report.
"This is a good move by the company but we would like to see more," said Bruce Duguid, director in the stewardship team at Hermes Investment Management, which holds shares in Shell. He declined to say how he would vote next week.
Shell has been criticised for developing projects such as Canadian oil sands, one of the most energy intensive and polluting forms of exploration, although it has reduced its exposure to those developments this year.
"We would prefer to see public, pre-set greenhouse gas reduction targets using a methodology appropriate to the type of an emission," Duguid said.
"It could be an intensity target rather than an absolute emissions number but ideally set over a long period of time that is part of a long-term efficiency and carbon reduction plan," Duguid said.
Investors also urged Shell to include 100 percent of emissions from its operations in its remuneration policy. They note that the calculation does not encompass emissions from oil and gas production and only factors in polluting gases from refineries, chemical plants and gas flaring, accounting for roughly 60 percent of the total emissions.
"We would love to see that metric be expanded to cover the trickier issue of upstream emissions, from exploration and production. The more difficult issue of the carbon intensity of its reserves hasn't been addressed," said Matt Crossman of Rathbone Greenbank Investments, also a shareholder in Shell.
A Shell spokeswoman said the company was "working hard on reducing carbon intensity", adding it planned to disclose emission reduction targets retrospectively at the end of each year, the same as with annual bonuses. She declined to comment on why oil and gas production was not included in targets.
Shell, along with several of its peers including BP have called for a global pricing of carbon which it believes will help the transition to cleaner energy.
Shell is also facing longer-term pressure to increase transparency of its emissions reporting which will allow shareholders to compare it with peers.
The Institutional Investors Group on Climate Change, which includes 137 investors managing $13 trillion in assets, has urged Shell to stress test its business model against a sharper growth in electric cars and renewable power which could be spurred by an international deal to cap global warming.
Shell last year reported a 3 percent reduction in greenhouse gas (GHG) emissions from direct and indirect operations, known as scope 1 and 2, to around 81 million tonnes of CO2.
The figure however dwarfs overall emissions from the burning of oil and gas products that Shell sold to end consumers, known as scope 3, which totalled 600 million tonnes.
A group of climate-activist shareholders - called Follow This - will ask the AGM to vote on a resolution forcing Shell to widen its targets to include scope 3 emissions.
The company's board has opposed the move and a number of shareholders, including Hermes' Duguid, and proxy advisors have also rejected it as going too far.
But Adam Matthews, Head of Engagement for the Church Commissioners and Church of England Pensions Board, said he would support the resolution.
"This is the kind of resolution we'd imagine would grow in support in the coming years if there isn't a response from the company that reassures long-term shareholders," Matthews said.
Reporting by Ron Bousso; Editing by Dmitry Zhdannikov and Susan Thomas