Copyright © BusinessAMBE 2023

Oil giant ExxonMobil is taking legal action for the first time against a group of activist investors. Climate activists bought a seat at shareholder meetings to apply pressure. Exxon believes proposals from such groups should be more easily removed from the agenda.

Multinationals are being pressured by climate groups to reduce their emissions. In doing so, the activists demand more actions to counter indirect emissions as well. The tension between economics and ecology is getting stronger.

In the news: ExxonMobil sues environmental groups Arjuna Capital and Follow This.

  • Arjuna Capital and Follow This had bought into the company to get their views on the agenda of the annual shareholder meeting. Exxon was supposed to come up with a plan to not only accelerate its own emissions reductions, but also offset customer emissions, known as Scope 3 emissions.
  • Exxon thinks this plan goes too far wants it removed from the agenda. In the United States, stock market regulator the SEC advises on whether to exclude shareholder proposals, but it is too capricious depending on which political party is in power, Exxon said. Hence, the company is taking the legal route.
    • According to the SEC, the number of social and environmental proposals being discussed has doubled in two years.
  • A ruling in ExxonMobil's favor may cause the SEC to tighten its rules, the oil company said.

"Proposals are not in the best interest of investors."

Quoted: Exxon fires sharply, activists fire back.

  • The two groups have "become shareholders solely to campaign for change through shareholder proposals calculated to reduce the company's existing business," ExxonMobil said in the court complaint.
  • And also, "They are aided in their efforts by a flawed shareholder proposal and proxy voting process that is not in the best interests of investors and has become open to abuse."
  • Mark van Baal of the Dutch Follow This predictably responded, "ExxonMobil clearly wants to prevent shareholders from using their rights. Apparently the board fears that shareholders will vote for emission reduction targets."
  • Arjuna Capital, in turn, has a "fundamental right and duty to raise concerns about climate risk," said Director of Investments Natasha Lamb.

No more success

The Bigger Picture: The actions of environmentalists no longer help.

  • Over the past decade, environmental groups caused changes in the ecological policies of oil companies. Some did so in a coercive way by buying in. Others became explicitly involved in creating ESG criteria to help companies deal with environmental and social challenges.
  • Companies like Shell and BP used their ESG policies to ensure stricter emissions standards by 2050, and ExxonMobil also pledged to reduce its own emissions (Scope 1 and 2 emissions) to zero by that year.
  • Proposals from Arjuna Capital and Follow This were generally rejected more often than assumed, writes news agency Bloomberg. Support for such proposals increased between 2015 and 2021, but declined in recent years.

Conclusion: While companies are aware of the need to address their own emissions, holding them accountable for the emissions of others is often a bridge too far for those companies. The question remains whether the objections raised by action groups at shareholder meetings carry enough weight to push decision-making in a different direction. For now, there appears to be little evidence of a major impact on Exxon's operational activities. (evb)

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