Shell and BP’s pay plans encourage their bosses to dig for oil instead of investing in low-carbon energy and should be overhauled by shareholders, according to the campaign group ShareAction. Investors in the oil companies should use binding votes on pay policies next year to scrap short-term targets and reward chief executives for working towards the target set in Paris last December to limit global temperature increases to 2C or less, the responsible investment group says in a report. ShareAction said international pressure to reduce the impact of climate change was an existential threat to companies whose business depends on extracting fossil fuels. Persisting with pay plans that reward old measures of success risk Shell and BP becoming obsolete and ultimately going bust, the report says. Large companies face binding shareholder votes on three-year pay policies at next year’s annual general meetings under rules introduced in 2013. Shell and BP’s policies will take them up to 2020 when pledges under the Paris treaty could be strengthened, making the votes important, ShareAction said. Shareholders voted against the £14m pay package for Bob Dudley, BP’s chief executive, and ShareAction said the pay policy votes would be a test of investors’ resolve. Shell’s chief executive, Ben van Beurden, was paid €5.85m (£5m) last year. Catherine Howarth has called for BP and Shell investors to ‘walk the talk’ next year. Photograph: Linda Nylind for the Guardian Catherine Howarth, ShareAction’s chief executive, said: “Responsible investors who are serious about climate risk have a crucial opportunity to ‘walk the talk’ at BP and Shell next year by pushing for remuneration policies designed make these companies commercially resilient in a low carbon world – and voting down policies which fail that test.” ShareAction said bonuses were largely tied to shareholder returns, project delivery, replacement of reserves and measures that encourage oil extraction. Long-term bonuses were paid after a few years yet the effects of Van Beurden and Dudley’s decisions lasted for decades, ShareAction said. ShareAction called on investors to push BP and Shell to develop low-carbon energy, remove outdated performance measures and reward bosses for working towards the Paris targets. Van Beurden and Dudley have said they support a shift to renewable energy but have resisted pressure to make a radical switch to their companies’ activities, which have attracted increasing opposition. BP’s attempt to drill in a marine reserve in the Great Australian Bight was delayed for the third time on Wednesday and Shell has started production at the world’s deepest underwater oil and gas field in the Gulf of Mexico. Van Beurden has argued new oil supplies are needed to meet demand from a growing, more urban and prosperous global population. Dudley has said governments should do more to prevent energy being wasted and that oil companies should not be required to go lead the search for renewable sources. BP said it had been in talks with shareholders over pay and would consult them on its proposed pay policy later this year. Shell said it would read the report with interest.