Published on 02 June 2021

SUSTAINABLE FINANCE

Shareholder climate engagement sees first major victory at ExxonMobil annual meeting

The small activist investment fund Engine No. 1 recently led a campaign that resulted in the election of at least two of its candidates to ExxonMobil’s board of directors. This was a big blow for CEO Darren Woods, who bowed to pressure from investors after concern for future consequences stemming from the company’s lackluster climate strategy.

Manifestation Exxon climat Angela Weiss AFP

@Angela Weiss AFP

It was quite a symbol for Texas oil giant ExxonMobil to experience its first shareholder rebellion due to climate issues. In a show of disapproval, at least two directors were replaced at the end of a surrealist annual shareholders meeting. This astonishing success marks a turning point in shareholder engagement and could permanently change the oil sector.

It was a bleak day for ExxonMobil ahead of its May 26th virtual shareholders meeting: big investors like BlackRock and CalPERS, as well as proxy advisory firms ISS and Glass Lewis, declared their support for the Engine No. 1 campaign. The main target of investor wrath was CEO Darren Woods’ climate strategy. Contrary to its international rivals, ExxonMobil intended to increase oil production in the coming years, despite its struggling financial performance. A few emissions reduction efforts and carbon capture projects served as a front for real climate ambition.

A chaotic annual shareholders meeting

The shareholder meeting quickly became what shaped up to be the shareholder battle of the year, after six months of fighting between leaders and rebellious investors. After customary introductions, the meeting was suddenly suspended under the pretext of giving latecomers time to vote. Engine No. 1 was quick to denounce obstructionist tactics and desperate efforts by ExxonMobil to convince shareholders to change their position.

At the end of this hour-long interlude (i.e., the total duration of the general shareholders meeting in 2020), Woods engaged in an unusually lengthy question-and-answer session for a group that is not used to excessive transparency. Feverish and riddled with flowery language, Woods’ digressions while discussing his strategic vision only delayed the looming disavowal: the shareholder vote gave two seats on the board of directors to the Engine No. 1 candidates, while a third seat could be gained after the final vote is published.

A turning point for the climate and "shareholder democracy"

Acknowledging the "desire of shareholders to drive change," according to statements reported by AFP, Woods attempted to show that ExxonMobil was "well positioned to respond." Although Woods retained his position as CEO, this bombshell suggests lasting effects for the future of the company. Without recourse, investors finally chose to take power in order to defend a responsible climate strategy and ensure the sustainability of the company.

While all this drama was playing out at ExxonMobil, Chevron shareholders also orchestrated a serious setback against company leaders: 61% of them voted in favor of a resolution calling for more ambitious targets for reducing Scope 3 emissions. The last strongholds of resistance to shareholder climate engagement are crumbling, and oil sector leaders have been warned: if they do not take action on climate issues, their shareholders are ready to do it for them.

Paul Kielweisser


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