[Editor's note: This article was updated at 6:55 a.m. CST on May 30, 2019.]
Exxon Mobil Corp. and Chevron Corp. both held annual shareholder meetings on May 29, with climate change issues high on both agendas. Despite pressure from some of their own investors, both companies’ shareholders ultimately voted to reject proposals focused on greater accountability and transparency in the area of climate change.
The fact that climate change is increasingly dominating the discussion is a sign of the changing times, despite Exxon Mobil and Chevron showing resistance to shifting their focus away from fossil fuels. The two U.S.-based companies have come under fire from activist investors, among others, for not being as proactive on environmental issues as their European counterparts, Royal Dutch Shell plc and BP plc.
While executives from both Exxon Mobil and Chevron continue to emphasize the importance of meeting future oil demand, they have to take at least some steps to appease their shareholders on climate change concerns. This trend seems set to become more pronounced over time.
Exxon Mobil’s chairman and CEO, Darren Woods, kicked off the company’s annual meeting in Dallas, Texas, with a presentation looking at what the company is doing to address climate change.
“Exxon Mobil joined the oil and gas climate initiative and continued our work in support of a carbon tax. In an important step for industry we also supported strong regulations for methane emissions,” Woods said. However, earlier this year, the U.S. Securities and Exchange Commission (SEC) allowed Exxon Mobil to block a shareholder resolution calling on the company to set greenhouse gas (GHG) emissions reduction targets in line with Paris Agreement goals on climate change.
The supermajor described the resolution as being misleading over its stance. But the SEC’s move resulted in a backlash from certain shareholders. These included the Church Commissioners for England—the Church of England’s endowment fund—and New York State Comptroller Thomas DiNapoli, who manages the state’s pension fund.
The two shareholders said in early May they would withhold support for the re-election of all of Exxon Mobil’s directors at the supermajor’s annual meeting, citing its “inadequate” response to climate change concerns. They attributed this to Exxon Mobil’s board not functioning effectively owing to the absence of an independent chairman, and urged other shareholders to back a measure that would have split the roles of CEO and board chairman. But the proposal was defeated, winning only 41% of the vote at the supermajor’s annual meeting.
Measures that called on the board to set up a special committee on climate change, publicize climate change risks at Exxon Mobil’s U.S. Gulf Coast chemical plants and report its lobbying and political contributions were also rejected. And Woods, while acknowledging the importance of tackling climate change, maintained that oil would have an increasingly significant role to play in meeting future demand.
“Engagement on climate is important, but working on solutions through fundamental research and development for new technologies is also important,” said Woods. He added that ExxonMobil would continue to engage with shareholders as part of a “years-long process.”
Chevron shareholders, at its annual meeting in San Ramon, Calif., rejected a similar proposal to create an independent chairman role. The resolution garnered just 26% of votes, while only 8% voted in favor of setting up a board committee on climate change.
A Chevron stockholder proposal that would see the company reporting efforts to reduce its carbon footprint was also defeated, winning only 33% of votes.
“Chevron believes in taking prudent, practical and cost-effective actions to address climate change risks. This proposal is based upon the flawed premise that a global agreement to limit warming to 2 degrees Celsius requires each individual fossil fuel producer to reallocate investment to different energy resources,” Chevron said in a statement reporting its voting results. “A decrease in overall GHG emissions, however, is not inconsistent with continued or increased fossil fuel production by the most efficient producers,” it added.
But the fight is far from over, and in fact the shareholder push on climate change issues appears to be gathering momentum. The 41% share of the vote for the independent board chair proposal at Exxon Mobil was the largest out of the last seven times such a move has been considered. “Exxon would ignore this level of support for an independent board chair at its own risk”, DiNapoli warned in a statement.
Steps taken by European super-majors are also expected to ramp up the pressure on their U.S. counterparts. Investors in BP recently passed a resolution requiring it to set out a business strategy consistent with the goals of the Paris Agreement, with support from the company. Meanwhile, Shell has linked executive pay to emission reduction goals.
Indeed, Woods also noted his company’s progress in lowering emissions, which includes its work on algae-based biofuels and its efforts to develop more carbon-capture technologies.
“Last year, we set goals to reduce methane emissions by 15% and flaring by 25%. We’re on track to meet both,” he said. Woods added, however, that his company would continue to meet the growing demand for fossil fuels, echoing Chevron’s comments. But this pursuit of increased oil production looks like it will increasingly have to be balanced with efforts to mitigate climate change risks. Pressure from activist investors does not appear likely to ease, and indeed should be expected to intensify.
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