Exxon Lawsuit Forces Pro-Climate Investors to Drop Shareholder Resolution

In what one journalist called "big news for shareholder activism" at powerful companies, a climate-focused investor group said Friday it was withdrawing its proposed resolution for more ambitious emissions reductions at ExxonMobil, which had been submitted under federal guidelines for a vote at the oil giant's upcoming annual meeting, following the company's lawsuit filed in right-wing court.

Dutch group Follow This and investment firm Arjuna Capital had planned a shareholder vote on an expansion of Exxon's emissions targets, which would have included "scope 3," requiring the company to reduce emissions produced by those who use its products.

Other fossil fuel companies have adopted targets including scope 3 as well as scopes 1 and 2—emissions from their infrastructure and operations.

Exxon has said it plans to reach net-zero emissions from scopes 1 and 2 by 2050, but made clear last month it had no intention of allowing its investors to decide whether it should broaden that plan.

The company sued in the U.S. District Court for the Northern District of Texas, asking a judge to exclude the climate proposal from its proxy statement and arguing that Follow This and Arjuna have failed to garner enough support in previous votes to resubmit the resolution.

Just over 27% of Exxon shareholders supported the proposal in 2022, while the number dropped to 10.5% last year.

Exxon also said in its court filing that Follow This and Arjuna were "driven by an extreme agenda," despite the fact that nearly half of large companies surveyed by Morning Consult last year said they were prepared to publicly report their scope 3 emissions, which climate advocates have said are key to reducing a company's overall impact on planetary heating.

Follow This did not say specifically why it decided to pull the resolution, but suggested it was not prepared to get involved in a legal battle with Exxon, which reported one of its largest profits of the last decade—$36 billion—in 2023.

"Given Exxon's preference to fight a battle in court rather than allow shareholders the freedom of a vote at its annual meeting, we decided to withdraw the climate proposal. Now that we have withdrawn, the company has no reason to continue the lawsuit," said Mark van Baal, founder of Follow This.

Exxon surprised observers by filing its lawsuit in Texas' Northern District; the company is based in Houston, within the jurisdiction of the state's Southern District.

Some critics posited the choice was made so the case could be heard by right-wing U.S. District Judge Reed O'Connor, who declared the Affordable Care Act unconstitutional in 2018 and blocked married same-sex couples from exercising their rights under the Family Medical Leave Act.

Without even proceeding to trial, Exxon's lawsuit "worked," said Financial Times journalist Tom Wilson.

Pranav Putcha, a sustainable finance researcher at the European University Institute advised shareholders in other powerful companies to "beware."

Arjuna accused Exxon of "silencing investors that voice climate-risk concerns" as climate scientists and energy experts alike warn that fossil fuel extraction must be rapidly phased out to mitigate planetary heating as much as possible.

"Not only is the company sidestepping a critical corporate accountability mechanism that has upheld shareholder freedoms for decades," said Natasha Lamb, chief investment officer at the firm, "this amounts to tactics of intimidation and bullying."