Activist investor dials up pressure against Exxon Mobil to act on climate

Activist investor Mark van Baal has pushed nearly every European oil major to rethink its climate action plan, since filing his first shareholder resolution in 2016.

Now, he’s setting his sights on America’s largest oil company.

In an interview with Yahoo Finance, van Baal said his investor group FollowThis has filed a shareholder resolution requesting that Exxon Mobil (XOM), for the first time, set and publish medium- and long-term targets to reduce greenhouse gas emissions and energy products, consistent with the goal of the Paris Climate Agreement.

“Big Oil can make or break the Paris Climate Accord and we need shareholders to support them and if needed to push them to commit to the Paris Climate Agreement and start investing differently,” van Baal said. “That's the only way we have any chance to fight the climate crisis.”

Specifically, the resolution from FollowThis calls on Exxon to go beyond addressing operational emissions, but all of their emissions, including Scope 3 or indirect emissions stemming from activities or assets that are not directly controlled by the oil giant. Van Baal said that accounts for 90% of the firm’s carbon footprint, making it a critical piece of addressing climate action.

The resolution, filed ahead of the 2022 annual general meeting (AGM) frames Exxon Mobil’s failure to act as a financial risk, making limiting global warming “essential to risk management and responsible stewardship of the economy.”

“On the demand side, we have to make different choices. But on the supply side, the energy industry, which is now the fossil fuel industry, should completely overhaul the supply of energy,” van Baal said. “The only way to achieve that is to stop investing in exploration of more oil and gas and start the exploration of new business models in renewables."

Big oil has come under increasing pressure from shareholders in recent months, to reduce its reliance on fossil fuels and transition to clean energy investments, with climate scientists warning that a failure to act would accelerate global warming beyond 2 degrees Celsius, bringing with it catastrophic consequences. Earlier this year, little known hedge fund Engine No. 1 successfully waged a campaign to install three new independent directors on Exxon’s board, with the goal of pushing the company towards a greener future.

Since first waging a battle against Royal Dutch Shell in 2016, FollowThis has filed dozens of shareholder resolutions, largely against European oil majors, gaining shareholder support. In May, 61% of Chevron shareholders voted for a proposal filed by the activist group, to encourage the company to reduce all of its emissions.

Exxon has maintained it “advocates for responsible climate-related policies.” Earlier this month, it unveiled an investment strategy that increases the amount the company spends on greenhouse gas emissions reduction projects to $15 billion, by 2027. CDP, a nonprofit group that runs the world’s largest environmental disclosure reporting mechanism said Exxon hasn’t disclosed its climate risks since 2017. The company has also failed to provide science-based targets that allow for measurable progress, beyond the larger net-zero declaration, unlike its European competitors BP and Royal Dutch Shell.

While multinational companies like PepsiCo and Microsoft have invested well over a billion dollars into reducing their upstream emissions, Simon Fischweicher, the head of corporations and supply chains for CDP, said slashing Scope 3 emissions for oil and gas companies remain particularly challenging, in part because suppliers aren’t the only part of the equation.

“The supplier of Exxon, in terms of impact that might be providing equipment or services, is not the same impact in terms of the downstream Scope 3, as the customer side is for them. It's actually the use of sold products that's most critical,” he said. Fischweicher said oil and gas companies have been reluctant to push back against setting targets on indirect emissions, in part, because the options to dramatically reduce their scope are limited.

He added that oil and gas companies can take action, by producing less oil and gas to diversify their business, advocating for more stringent fuel efficiency standards and additional regulation, and by seeking alternative uses of oil and gas that don’t involve burning petroleum.

In addition to Exxon, FollowThis is targeting Marathon Petroleum Corporation (MPC) ahead of its annual meeting. The Ohio-based firm disclosed its climate risks through CDP for the first time last year. Fischweicher said that is proof that shareholder activism is forcing companies in the fossil fuels industry to think more critically about their carbon footprint.

“If you look at 2018, there were a number of shareholder resolutions that passed or came close to passing around climate related scenario analysis, the two degrees stress testing of business models with Exxon and Occidental,” he said. “More companies since then have proactively taken the step to take those actions. So, there's the pressure that seeing another company, having their hands forced, in a sense, activates others to take that step. Even if the resolution doesn't pass, it gets the company aware of how serious this is an issue for their shareholders.”

Akiko Fujita is an anchor and reporter for Yahoo Finance. Follow her on Twitter @AkikoFujita

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