Activist investor Dan Loeb of Third Point is pushing for a break up of Royal Dutch Shell (RDSA.L), having built a position in the oil major.
The challenge represents the most serious threat to Shell's strategy at a time when it is both attempting to embrace a transition to net zero and pump more oil and gas.
Loeb criticised the company for having conflicting strategies, and too many competing stakeholder voices.
A person familiar with the matter told Bloomberg that Third Point took a $750m (£545m) stake in the company, with Loeb telling investors on Wednesday that Shell would stand to benefit from breaking off its liquified natural gas (LNG), renewables and marketing businesses into a standalone company.
The move would separate it from Shell's legacy energy offering. Upstream, refining and chemicals operations would be left.
Shell has come under fire for action to address changing its business model in a world increasingly focused on the climate crisis.
“Shell’s board and management have responded to this with incrementalism and attempts to ‘do it all.’ As the saying goes, you can’t be all things to all people,” said Loeb in a letter.
“In trying to do so, Shell has ended up with unhappy shareholders who have been starved of returns and an unhappy society that wants to see Shell do more to decarbonise.”
In its latest set of quarterly results published on Thursday, Shell set targets to halve the absolute emissions from its operations compared with 2016.
"This quarter we've generated record cash flow, maintained capital discipline and announced our intention to distribute $7pbn to our shareholders from the sale of our Permian assets," said Royal Dutch Shell CEO, Ben van Beurden.
Combined with the carbon reduction target, "this is clear evidence of how we are accelerating our Powering Progress strategy, purposefully and profitably," he added.
“At first sight, this is short-term activism that will not help Shell or the fight against climate change,” responds Mark van Baal, head of Follow This, a long-term activist shareholder group. “We think it’s better to generate cash flow with declining fossil fuel sales and invest this in renewables.”
The moves also come within a year of another activist investor challenge to Exxon Mobil (XOM), in which Engine No. 1 ran a successful proxy contest to elect new directors to its board. The challenge was, in part, attempting to address the company's lack of action on climate change.