It's a decision that leaves a bitter taste of misunderstanding. One month before ExxonMobil’s General Meeting, the world's largest oil and gas company, the SEC granted the group’s request. The decision has allowed the group to reject a resolution filed by several shareholders, led by the New York State Pension Fund and the Church of England.
It called on the company to set specific emission targets corresponding to "the greenhouse gas reduction targets set by the Paris Agreement". For ExxonMobil, such a request was problematic because it "interfered with the management responsibilities" of the board of directors. An argument that hit the mark for the SEC.
The commission concluded that "the Proposal would micromanage the Company by seeking to impose specific methods for implementing complex policies in place of the management board," said special adviser to the SEC, Courtney Haseley. Understood: the imposed climate objectives would interfere in the operational management and the smooth functioning of the company.
An obstacle to overcome
Exxon declined to comment on this decision, but the resolution's supporters expressed their disappointment. "The SEC's decision is an obstacle, but as long-term investors determined to protect the value of our portfolio, we are not giving in. We will continue to put pressure on Exxon and others on climate change risks and consider all options available to us," said New York State Pension Plan Administrator, Thomas P. DiNapoli.
The Church of England, for its part, judged the SEC's decision "disappointing and confusing". For the investor, it allows Exxon to cut off any dialogue with its shareholders on its climate strategy. “Exxon is continuing to misjudge the mood of investors on climate risk and the fact remains that at present the company is providing no assurance that it has a strategy consistent with the Paris Agreement objectives. We are reviewing our options,” the Church wrote in a statement.
Both investors say they will file a new resolution in 2020. Fiona Reynolds, President of the Principles for Responsible Investments (PRI), supports them. The PRI helped coordinate the resolution through the Climate Action 100+ initiative, writing, "It is very disappointing that the SEC supported Exxon against shareholders (...). Investors try to be committed and responsible shareholders (...). It may be a setback, but this commitment (the Climate Action 100+) is only four years old, so we will not give up anytime soon. "
A growing dynamic since 2015
The SEC's decision has hindered strong momentum in recent years. In 2015, shareholders' resolutions on global warming were widely adopted at BP and Shell General Meetings. Their scope was more general than that rejected by the SEC; they simply asked to consider climate risk in business strategy. In 2017, despite opposition from management, ExxonMobil also had a similar resolution on the establishment of a strategy compatible with global warming limited to 2°C.
Shareholder demands for more specific targets for their climate roadmap are, however, still struggling to pass. In 2018, a similar resolution was rejected at the Shell General Meeting. But it had the honour of fuelling debate on the role of investors in the energy transition of oil companies. Half of the questions from the four-hour meeting focused on the group's climate strategy.
Ludovic Dupin, @LudovicDupin