The Struggle for Climate Change Resolutions at US Oil Majors’ Shareholder Meetings
Despite increased pressure from activists and shareholders in recent years, ExxonMobil and Chevron shareholders have once again rejected climate change proposals at their annual meetings. This year, only 11% of Exxon shareholders backed a petition calling for the setting of emissions reduction targets consistent with the goals of the 2015 Paris climate accord, while a similar Chevon proposal received less than 10% support. These figures defy those of many of their European counterparts, and demonstrate a widening gap between the support for climate change action by American and European oil companies.
The Vote Tallies: Differences Between US and European Oil Companies
At BP in April, 17% of shareholders voted in favour of a resolution seeking to force the company to lower oil and gas production more quickly. Similarly, last week, 20% of Shell’s shareholders voted against the company’s energy transition plan, arguing that reducing emissions was insufficient. In contrast, the US oil majors, ExxonMobil and Chevron, have steered clear of price-setting targets for emissions from consumer use of their products. Such targets would make it practically impossible for these institutions to continue to increase oil and natural gas production, as is their current plan. Chevron has invested $6.3 billion to acquire U.S. shale producer PDC Energy, thereby adding new oil and gas reserves.
Shareholder Momentum for Climate Action Lost in the US
Whilst public sentiment has gradually shifted over the past year in favour of climate action in some quarters, Republicans in the US have been particularly dismissive, actively attacking the voting behaviours of asset managers. In this context, investor momentum has waned for climate action in America. Last year, Paris’ alignment shareholder proposals secured 28% and 33% support from Exxon and Chevron shareholders respectively. Dutch shareholder activist Follow This, which refilled those petitions again this year, confirm that “it is incomprehensible that most investors still accept the refusal of US super majors to cut emissions this decade”.
The Votes that were Preceded by Public Perception Shifts
Public perception has shifted in the past year as Russia’s war in Ukraine drove up fuel prices and elicited widespread interest in and emphasis on energy security. Furthermore, this has come alongside a growing appreciation of the need to improve climate protection across the globe. The majority of Exxon’s shareholders last year supported a proposal that compelled the company to report how a rapid global shift away from fossil fuels awareness might affect its finances. BlackRock, a major Republican target, even voted in favour of this proposal last year.
Shareholder Proposals at Exxon and Chevron Annual Meetings
Exxon and Chevron faced 13 shareholder proposals related to carbon emissions or climate change at their 2019 annual meetings. Only one of these proposals managed to secure over 20% support. This percentage is considered as the threshold for significant investor opposition. On the other hand, about 36% of shareholders supported a proposal asking Exxon to report more systematically on its methane emissions. In a separate vote, a quarter of Exxon’s shareholders approved a petition seeking information on how slowing demands for plastics could affect the company’s bottom line.
Norwegian Sovereign Wealth Fund to Support Follow This Proposal
Prior to the vote at US oil majors, the Norwegian sovereign wealth fund, the largest in the world, expressed support for Follow This’ proposals. In a statement, they said they would come back to the proposals.
Exxon’s Trojan Horse Counterargument
Exxon has publicly stated that it intended its shareholder proposal to function as a “Trojan horse” to force companies to drop investments in oil and natural gas. Follow This founder Mark van Baal rejected this outright, however, calling it “incomprehensible that most investors still accept the refusal of US super majors to cut emissions this decade”.
Summary
ExxonMobil and Chevron shareholders have overwhelmingly rejected climate change proposals at their annual meetings, with the majority of Exxon shareholders backing a petition to set emissions reduction targets consistent with the 2015 Paris climate accord in 2018. The discrepancy between US and European oil companies regarding support for climate change action remains stark, with European companies warming to the idea of reducing their carbon footprint, while US companies balk at the prospect of reducing oil and natural gas production. The shift in public sentiment towards greater support for climate action has been driven, in part, by rising fuel costs and increased awareness of energy security, with many shareholders throughout the globe urging companies to do more to protect the environment. Whilst climate change remains a contentious issue between stakeholders and investors, it is important that US oil majors take seriously investors’ concerns about supporting decarbonisation and renewable energy.
Additional piece
The decision of US oil majors ExxonMobil and Chevron to resist setting emissions reduction targets consistent with the goals of the 2015 Paris climate accord will doubtless be viewed with frustration by environmental groups and other stakeholders alike, who have consistently sought greater commitment to reducing emissions. While European oil companies have a growing focus on reducing carbon emissions, American companies have yet to get to grips with the problem in any meaningful way. This is unfortunate given that the business case for reducing carbon emissions across all global sectors has been well established for high-level stakeholders. Reducing emissions can enhance a company’s reputation, build brand value, boost employee morale, and attract new investment. It should be obvious to these oil companies that failing to capitalize on the momentum currently behind environmentalism can only steepen the ditches they will be forced to climb in the future.
Although environmental concerns have grown more pronounced over the past few decades, doubts remain amongst many investors as to whether global super majors can adapt fast enough to the changing priorities surrounding decarbonisation. Climate action is further complicated by the current political climate – the Trump administration has been largely dismissive of efforts to reduce emissions, for example. In addition, the ongoing trade war between the US and China has also put additional pressure on companies to maintain market share, which in turn increases the competition for natural resources.
Governments and policy makers, as well as investors, continue to call for more meaningful action on climate change, with more stringent regulations on emissions and increased support for green technologies having the potential to create enormous incentives for companies to green their operations. While the decision of ExxonMobil and Chevron may have been disappointing for many, there remains hope that other companies will take a proactive approach to protecting the environment and invest in a cleaner future. As we look to the future, it is critical that investors continue to hold these US oil majors accountable for their environmental impact, while taking a more active role in driving change within the companies they invest in.
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ExxonMobil and Chevron shareholders steadfastly rejected climate change proposals at the annual meetings of US oil majors on Wednesday, reducing support from last year and splitting with the results of peers in Europe, where resolutions related to global warming have gained stronger support.
Only 11 percent of Exxon shareholders backed a petition calling for the company to set emissions reduction targets consistent with the goals of the 2015 Paris climate accord. A proposal similar to Chevrons received less than 10% support.
The vote tallies highlight the differences between shareholder support for climate change action by US and European oil companies. Last week, 20 percent of Shell’s shareholders voted against the company’s energy transition plan, arguing that reducing emissions was not enough. At BP in April, 17% of shareholders supported a resolution forcing the company to reduce its oil and gas production more quickly.
Unlike BP and Shell, the US oil majors have resisted setting targets for emissions from consumer use of their products because it would effectively force companies to start reducing oil and natural gas production. Both companies plan to ramp up production, and last week Chevron spent $6.3 billion to acquire U.S. shale producer PDC Energy, adding new oil and gas reserves.
In the US, where Republicans have attacked the voting behaviors of asset managers, investor support for climate action has lost momentum. Last year, Paris’ alignment shareholder proposals received 28% and 33% support from Exxon and Chevron, respectively, according to Dutch shareholder activist Follow This, which filed those petitions again this year.
“It is incomprehensible that most investors still accept the refusal of US super majors to cut emissions this decade,” said Follow This founder Mark van Baal after the Exxon and Chevron votes.
The votes came after a shift in public perception over the past year as Russia’s war in Ukraine drove up fuel prices and gave renewed emphasis to energy security together with climate protection.
Last year the majority of Exxon’s shareholders supported a proposal asking the company to report how a rapid global shift away from fossil fuels would affect its finances. BlackRock, a major target of Republicans, voted in favor of this proposal last year.
On Wednesday, Exxon and Chevron faced 13 shareholder proposals related to carbon emissions or climate change. Only one petition received more than 20% support, a threshold considered a strong signal of investor dissent. About 36% of shareholders supported a proposal asking Exxon to report more on its methane emissions.
Separately, a quarter of Exxon’s shareholders approved a petition seeking information on how slowing demand for plastics could affect the company’s bottom line.
Before the votes in the US oil majors, said the Norwegian sovereign wealth fund, the largest in the world he would come back the proposal Follow this.
Exxon has fired back at van Baal, claiming it has publicly stated that its shareholder proposal is intended as a “Trojan horse” to force companies to drop investments in oil and natural gas.
Additional reporting by Derek Brower in New York
https://www.ft.com/content/7faccadc-beef-4b10-be53-ae7aceaeafce
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