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Vista Projects

Exxon Feels the Heat as More Investors Assail Climate Conduct

These translations are done via Google Translate

Criticism of the oil giant, whose industry is the principal culprit behind global warming, has become an annual rite of spring. But this year may be different.

Exxon Mobil Corp. is again finding itself in the crosshairs of environment-focused investors who say the company is falling far short of its climate-related commitments.

The criticism of the fossil-fuel giant, whose industry is the principal culprit behind global warming, has become a yearly ritual at the company’s annual shareholders’ meeting, which this year is scheduled for May 29. But this gathering is particularly charged since Exxon has sued two climate-focused groups: Arjuna Capital LLC and Amsterdam-based nonprofit Follow This.

In response, the California Public Employees’ Retirement System, the largest US public pension fund and owner of about a 0.2% stake in Exxon, is considering whether to vote against the reelection of Chief Executive Officer Darren Woods to the company’s board, the Financial Times reported last week. And the nonprofit Majority Action, a shareholder-activists group, is calling on investors to oppose the election of Exxon directors—including Woods and lead independent director Joseph Hooley—for “attacking shareholder democracy and failing to address climate risk.”

Exxon said in a statement that efforts by investors to reject its board must be stopped. “By telling people to vote against our board, these groups are making it clear they support continued abuse of the system.”

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The vote comes three years after activist investor Engine No. 1 stunned Exxon with a successful proxy fight to install three directors to its board who would advocate on climate issues. There’s little evidence, however, that Exxon is vulnerable to a similar effort this time around. That’s in part because the company’s stock is up almost 25% during the past year, and environmental, social and governance issues—already diminished by a sustained Republican and oil lobby attack—were pushed back even further because of concerns over energy security in the wake of Russia’s war on Ukraine.

In this instance, Calpers and Majority Action have two main criticisms of Exxon: the company’s environmental record and concerns about the lawsuit it filed.

On the environment, Exxon remains the largest US producer of oil and gas and the biggest emitter of carbon dioxide among investor-owned companies. The Texas-based company also has the weakest emissions-reduction targets among the world’s “oil supermajors,” according to Carbon Tracker.

“Shareholder rights are collateral damage in Exxon’s attempts to avoid accountability for failing to manage its contributions to climate risk,” said Eli Kasargod-Staub, Majority Action’s executive director, in a statement.

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Exxon Mobil CEO Darren WoodsPhotographer: F. Carter Smith/Bloomberg

Exxon has responded to complaints like this by contending that its emissions are declining faster than the global average. The company also says its climate targets are realistic because they’re consistent with the operations it controls. According to Exxon, it doesn’t set goals for its Scope 3 emissions, unlike many of its European rivals, because they’re the result of consumer choice like driving a car, rather than the company’s actions.

The oil company’s critics aren’t mollified by such explanations.

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Exxon has “a decades-long strategy of climate denial, disinformation and delay,” according to Majority Action.

An issue that’s angered activists this year even more than Exxon’s alleged climate intransigence is its decision to sue Arjuna Capital and Follow This. Seeking to block a proposal by the groups, the oil company alleged in court papers that they became Exxon investors “solely to campaign for change through shareholder proposals that are calculated to diminish the company’s existing business.”

In February, Arjuna and Follow This withdrew their proposal, which called for “further accelerating” Exxon’s emissions-reduction plans. Arjuna urged Exxon to drop its lawsuit and accused the company of trying to silence investors concerned about the environment.

Indeed, Exxon has said it hopes to use the case to force a tightening of Securities and Exchange Commission rules around what proposals get on proxy ballots. The company says in a web post that “activists with minimal or even no shares shouldn’t be permitted to re-submit proposals that don’t grow long-term shareholder value.”

Majority Action said the legal push by Exxon is “an unprecedented attack on its own shareholders that appears aimed at stifling investor concerns related to the company’s management of climate-related financial risks.”

Proxy adviser Glass Lewis & Co. added to the antipathy towards Exxon on Monday when it urged shareholders to reject Hooley’s reelection as lead director, citing “unusual and aggressive tactics” against activist investors.

Calpers agreed. The pension fund said in a statement that it “encourages other investors to join us in voicing their opposition to this lawsuit, which attempts to silence investors.”

Sustainable finance in brief

The climate crisis is accelerating so fast that it’s outpacing Wall Street’s ability to profit from it. The risk models that helped drive one of the most lucrative bets of 2023 are increasingly being tested by smaller weather shocks fueled by global warming. Catastrophe bonds and other insurance-linked securities, which powered last year’s highest-returning hedge fund strategy, are built on calculations that can underestimate a new breed of risk stemming from high-frequency events such as wildfires and thunderstorms.

— With assistance from Eliyahu Kamisher

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