Home Commodities US companies watch as Exxon sues climate shareholder groups

US companies watch as Exxon sues climate shareholder groups

by SuperiorInvest

ExxonMobil’s market capitalization exceeds $400 billion. Follow This, a Dutch group of climate activists, controls shares of the oil major that, at last count, were worth less than $4,000.

Follow This has repeatedly attempted to use its small stake as leverage to force Exxon to expand its commitments to reduce greenhouse gas emissions. This year the oil company has had enough.

Minutes after midnight on January 22 in Amsterdam, Exxon hit Follow This and another investor, Arjuna Capital, with a lawsuit alleging their climate petition violated US securities rules.

Small investors backed down and abandoned their proposal, but Exxon is moving forward. This week his lawyers told a federal judge that the case was moot, claiming that Follow This and Arjuna have manipulated shareholder activism “for the sole purpose of attacking ExxonMobil from within” and adding: “There is no good reason to believe that they will stop doing it.” .”

The standoff between the largest Western oil company and a small activist group follows a proliferation of shareholder resolutions on a range of environmental, social and governance issues in recent years. It’s a new flank in a broader conflict over ESG investing.

“Large companies are watching this case move forward,” said Charles Crain, vice president of the National Association of Manufacturers, a Washington-based industry group that has an Exxon representative on its board of directors. He expressed concern about “the extreme degree to which activists have hijacked proxy voting with politically motivated proposals.”

Exxon is continuing its legal case three years after suffering a historic defeat by small hedge fund Engine No. 1, which managed to oust three of its board members with a demand for more serious plans to address climate change.

But while Engine No. 1 owned more than 944,000 shares, Follow This represents shareholders who own 37, according to the latest figure reported to Exxon.

Follow This is run by Mark van Baal, a Dutchman with a mop of curly silver hair who has long argued that investors should use their voting rights to pressure oil companies to reduce emissions and shift risk. climate.

His group relies on a strategy in which investors, usually small and climate-conscious, buy shares with the explicit goal of presenting proposals at annual meetings. The “Trojan horse” strategy holds that if an oil company followed its resolutions “it would conclude that there is no room for further investment in the exploration of more oil and gas,” says Follow This.

Follow This initially focused on Shell, formerly based in the Netherlands, and introduced its first climate resolutions there in 2016.

In the years since, he began making proposals at BP and Chevron, where in 2021 more than 60 percent of shareholders backed a resolution to force the group to reduce its carbon emissions. Majorities of shareholders in oil producer ConocoPhillips and refiner Phillips 66 also backed similar Follow This resolutions in 2021.

Some previous efforts to scrap his proposals have failed, notably at Occidental Petroleum in 2022. However, investor support for climate proposals has waned more recently.

Van Baal started his group as a one-man operation, and still has only a handful of staff. But his agenda has proven popular in Europe. Katharina Lindmeier, senior manager of responsible investing at Nest, which divested from Exxon in 2021, said Follow This “does a lot of the heavy lifting” when it comes to resolutions, making it easier for other big investors to file jointly with they.

Exxon’s lawsuit wasn’t a big surprise, he said, because there was a big surge in shareholder proposals following the Securities and Exchange Commission’s 2021 decision to allow more petitions to come up for a vote.

The company filed suit in the U.S. District Court in Northern Texas, arguing that Follow This and Arjuna’s proposal was “driven by an extreme agenda” and “calculated to diminish the company’s existing business.” Exxon says the proposal violates SEC rules that prohibit repeating motions that do not meet a certain voting threshold and prevent investors from “micromanaging” deals.

The company recruited a legal team that includes David Woodcock, former head of the SEC’s Texas office, and Noel Francisco, former attorney general in the Trump administration.

The now-withdrawn resolution called on Exxon to set accelerated goals to reduce emissions from its own operations and those from its products. The company has committed to reducing the former to net zero by 2050, but does not have a target for the latter.

Exxon CEO Darren Woods at the COP28 summit in Dubai in 2023
Exxon CEO Darren Woods attended the COP28 climate conference in Dubai last year. ©Bloomberg

“What Exxon is trying to do here is try to really fundamentally change the balance of corporate power between corporations and their investors, making investors think twice before exercising their right to submit a shareholder proposal,” said Andrew Logan, Ceres senior director. a coalition of investors and environmental groups.

“What is particularly pernicious about the way they are approaching this is the way they are trying to make it as costly as possible for filers. . . “Exxon is doing everything it can to maximize those costs.”

Natasha Lamb, managing partner and chief investment officer at Arjuna Capital, last week accused the firm of resorting to “intimidation and harassment tactics.”

Exxon, van Baal and Lamb declined to comment further on the litigation Tuesday.

Filing shareholder proposals has been relatively inexpensive for environmental activists, but the cost of defending them in court could run into hundreds of thousands of dollars, said Josh Zinner, executive director of the Interfaith Center on Corporate Responsibility, which represents religious organizations that present this type of proposals. .

“That is part of the goal here of [Exxon] “It’s making it prohibitively expensive, especially for small investors, to make their voices heard,” he said, comparing the lawsuit to so-called strategic lawsuits against public participation.

The Exxon litigation is not the only live case involving shareholder proposals. The right-leaning National Center for Public Policy Research has sued the SEC, arguing that a shareholder proposal it submitted at supermarket chain Kroger on equal opportunity for employees should not have been blocked by the regulator. . Oral arguments are scheduled for next month.

Video: Have the big oil companies changed? | FT Movie

Climate capital

Where climate change meets business, markets and politics. Explore the FT’s coverage here.

Curious about the Financial Times’ environmental sustainability commitments? Learn more about our science-based goals here

Source Link

Related Posts