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Exxon Lawsuit Forces Pro-Climate Investors to Drop Shareholder Resolution
"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," said the head of an activist investor group.
Feb 02, 2024
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."
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'Remarkable Step': Exxon Sues to Block Investor Climate Resolution
"Apparently," said the founder of an activist shareholder group, "the board fears shareholders will vote in favor of emissions reductions targets."
Jan 22, 2024
As the only major U.S. oil company that still hasn't set emissions-reduction targets for all of their operations and products, an activist shareholder group said Monday that ExxonMobil has likely seen "the writing on the wall" and is making a last-ditch effort to avoid new pollution requirements, leading it to file a lawsuit to stop investors from voting on a climate resolution at its next annual meeting.
Exxon filed a complaint on Sunday in the U.S. District Court for the Northern District of Texas—outside the district where the firm usually files cases—asking a judge to exclude a climate proposal from its proxy statement, which investors will vote on at the company's annual general meeting (AGM) in May.
The proposal was put forward by Dutch activist shareholder group Follow This, which has introduced motions at other fossil fuel companies' investor meetings, and investment firm Arjuna Capital. The groups are calling on Exxon to set "Scope 3" emissions targets, which would require the company to reduce emissions produced by those who use its products.
Exxon said last year it plans to reach net zero emissions by 2050, but included only direct emissions from its own infrastructure (Scope 1) and indirect emissions from its operations (Scope 2) in its pledge.
Going to court to stop a similar vote from going forward, said Follow This founder Mark van Baal, is a "remarkable step" by the firm.
"ExxonMobil clearly wants to prevent shareholders using their rights," said van Baal.
An Exxon spokesperson told The Guardian the company is trying to stop "the breakdown of the shareholder proposal process, one that allows proponents to advance their agendas through a flood of proposals," and said the proposal requiring Scope 3 emissions targets "does not serve the interests of investors."
"We are simply asking the court to apply the [Securities and Exchange Commission's] proxy rules as written to stop this abuse and eliminate the significant resources required to address them," the spokesperson said.
But as Reutersreported, Follow This—which says it filed its proposal in accordance with SEC rules—has said that investing in a transition to renewable energy sources is in fossil fuel company investors' best interests, as it would "prevent risks of losing access to capital markets, of facing policy interventions, and incurring in losses associated with stranded assets."
"ExxonMobil appears to interpret reducing emissions as decreasing business even though fossil fuels can be replaced by renewable energy," said van Baal. "The resolution leaves the strategy of how to achieve emissions reductions entirely up to the board. ExxonMobil's interpretation shows a lack of imagination beyond oil and gas."
Follow This urged Exxon to listen to the growing number of shareholders who "want to tackle the climate crisis."
"They realize Big Oil has a key role to play, like the 27 institutional investors who recently co-filed a similar climate resolution at Shell alongside Follow This," said van Baal.
A coalition of investors controlling about 5% of Shell's shares plan to back a resolution requiring the company to align its Scope 3 targets with the 2015 Paris climate agreement.
Some observers noted that Exxon filed its complaint in the Northern District of Texas, despite the fact that the company is based in the Houston area and the Southern District usually hears its cases.
Exxon's case will be heard by U.S. District Judge Reed O'Connor, an appointee of Republican former President George W. Bush who has a record of ruling in favor of right-wing causes. He declared the Affordable Care Act unconstitutional in 2018, ruled last year that "ghost guns" are exempt from background checks, and blocked married same-sex couples from exercising their rights under the Family Medical Leave Act.
Van Baal said Exxon likely took the step because it "is afraid of its shareholders."
"Apparently," he said, "the board fears shareholders will vote in favor of emissions-reductions targets."
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French Protest 'Climate-Wrecking Projects and Massive Profits' of TotalEnergies
"Total's record-breaking profits come at a steep cost: environmental devastation, human rights abuses, and climate chaos," said one advocacy group. "It's time to hold them accountable for their insatiable pursuit of wealth!"
May 26, 2023
Climate campaigners marched through central Paris Friday in the latest attempt to disrupt a shareholder meeting held by a major fossil fuel company, demanding that oil giant TotalEnergies adopt a resolution to sharply increase the pace of its greenhouse gas emissions reductions.
Advocacy groups including 350.org, Greenpeace, Scientist Rebellion, and Friends of the Earth France joined a reported 700 demonstrators outside the Salle Pleyel, the venue of Total's annual general meeting, with campaigners chanting, "All we want is to knock down Total" and "One, two, three degrees, we have Total to thank"—a reference to planetary heating and scientists' warnings that fossil fuel extraction must be drastically reduced in order to keep warming to less than 2°C above pre-industrial levels.
Banners carried by the protesters read, "The science is clear but Total is ignoring it" and "Floods, heatwaves, drought, pandemics: The world according to Total."
\u201cBlocage Total! @350France joins over 700 climate activists block @TotalEnergies 's AGM today to protest against its climate wrecking projects and massive profits.\n\n\ud83d\udcf7Claire Jaillard / @350\n\n#BlocageTotal #PeoplesHealthTribunal\u201d— 350 dot org (@350 dot org) 1685090522
Police targeted the demonstrators with tear gas and pepper spray, with some people being dragged away from the Salle Pleyel—moves that were condemned as "outrageous" by the campaign group Stop East African Crude Oil Pipeline (EACOP), of which Total is the lead shareholder.
"Police resorted to extreme measures, dropping a tear gas grenade amidst a group of peaceful, seated, handcuffed activists at Total's AGM blockade," said the group. "This excessive force against non-violent individuals is utterly unacceptable!"
\u201c\ud83d\udea8 Outrageous! \ud83d\ude21 Police resorted to extreme measures, dropping a tear gas grenade amidst a group of peaceful, seated, handcuffed activists at Total's AGM blockade. This excessive force against non-violent individuals is utterly unacceptable! \ud83d\ude20 #BlocageTotal #StopEACOP\u201d— StopEACOP (@StopEACOP) 1685085784
Inside the meeting, the Dutch activist shareholder group Follow This pushed investors in Total to adopt a resolution committing the company to include Scope 3 emissions—those caused by the burning of Total's products by customers, such as airlines, or drivers—in its 2030 emissions targets and steeper absolute emissions cuts.
The resolution garnered the support of about 30% of shareholders, nearly doubling its support in 2020, the last time such a proposal was put forward. Seventeen investors who control a total of $1.2 million in the company voted in support of the resolution.
Follow This CEO Mark van Baal, whose group's motto is "Change from the inside," called the vote "a great outcome" and evidence of a growing "shareholder rebellion."
"One-third of investors say Total needs to decrease emissions by 2030 and that they can't hide behind their customers by saying Scope 3 emissions are not the company's responsibility," he toldFrance24.
The final vote on Total's climate pledge, however, approved emissions cuts only at the company's directly-owned facilities and garnered more than 88% of shareholder votes.
Greenpeace France on Friday acknowledged that Energy Minister Agnes Pannier-Runacher toldFrance Info radio as the meeting convened that fossil fuel companies will have no future unless they shift to renewable energy and urged companies including Total to "re-invent themselves."
"But you know that these companies won't do anything without legal constraint," said the group. "We therefore expect strong political acts."
In the United Nations' Intergovernmental Panel on Climate Change's 2022 report, scientists said the world needs to reduce fossil fuel emissions by 43% from 2019 levels by 2030 in order to meet the Paris climate agreement's target of limiting planetary heating to less than 2°C.
As scientists and advocates have demanded companies including Total reduce their emissions, the company reported a net profit of $36.2 billion in 2022, doubling its earnings in the previous year.
"Total's record-breaking profits come at a steep cost: environmental devastation, human rights abuses, and climate chaos," said Stop EACOP. "It's time to hold them accountable for their insatiable pursuit of wealth!"
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