Two separate events on Wednesday – one in a courtroom in the Netherlands, the other at the Exxon Mobil annual meeting in Texas – have stunned global business, especially the oil industry.
In both cases, the catalyst was the same – unease at the slow speed at which energy giants are moving towards zero emissions.
In the Netherlands, a court ordered Royal Dutch Shell to cut its emissions by 45% by 2030, not the 20% envisaged in the company’s transformation plan- overwhelmingly approved at its annual meeting last month.
And in the US, a tiny hedge fund called Engine No 1 has succeeded in getting two of its nominees elected to the board of Exxon Mobil at the oil and gas giant’s annual meeting in Houston, with the position of a third nominee uncertain, but close to being elected when a vote recount is completed overnight.
A majority of Exxon shareholders – including some of the largest investors in the country – voted least two of the four directors nominated by Engine No 1 on to the energy giant’s board of 12. Engine No 12 has waged a proxy campaign against the energy giant since last December, saying the oil and gas group’s focus on fossil fuels had put it at “existential risk”.
Engine No. 1 used a tiny 0.02% stake in Exxon to base its campaign which saw it nominate four independent director candidates to the 12-member board. Before the meeting it had won support from large pension funds, including CalPERS, calSTRS and New York State Common Retirement Fund – all public sector or industry type funds.
Exxon’s top five shareholders include Vanguard, BlackRock and Fidelity, all large mutual fund operators and global investors. BlackRock is the world’s largest asset manager, and Exxon’s second largest shareholder with a 6.7% stake.
BlackRock has not said yet how it voted at the Exxon’s meeting but Reuters and The Wall Street Journal on Tuesday reported that BlackRock backed three of the four dissident board candidates.
Exxon has been slowly buckling under the sustained pressure from Engine No 1 and its supporters – in March it added two new directors to its board, including ESG investor Jeff Ubben, who founded Inclusive Capital Partners. Ubben previously headed activist firm ValueAct, which he launched in 2000 (and which for a while was the largest non-Murdoch investor in News Corp).
On Monday Exxon said it will nominate two environment expert directors in the near future, but that was too little too late.
Exxon and Chevron (America’s second biggest oil group which also held its annual meeting on Wednesday) faced similar resolutions urging them to change their accounting methods to take greater account of environmental costs. Early figures from the Chevron meeting say 48% of shareholders voted for the adoption of climate related accounting, while the final vote from the Exxon meeting has still to be tallied.
Chevron shareholders also voted for a proposal to reduce emissions from the use of the fuel the company makes and sells to drivers and other customers.
Meanwhile, a Dutch court on Wednesday ruled oil giant Royal Dutch Shell must reduce its carbon emissions by 45% by 2030 from 2019 levels. That’s a much deeper cut than the company’s current aim of lowering its emissions by 20% by 2030.
The lawsuit was filed in April 2019 by seven activist groups — including Friends of the Earth and Greenpeace — on behalf of 17,200 Dutch citizens. Court summons claimed Shell’s business model “is endangering human rights and lives” by posing a threat to the goals laid out in the Paris Agreement.
Under the Paris Agreement — a deal adopted in 2015 and signed by 195 countries — nations agreed to a framework to prevent global temperatures from rising by any more than 2 degrees Celsius, although the accord aims to prevent global temperature rises exceeding 1.5 degrees Celsius.
The Dutch ruling only applies in the Netherlands but activists say similar actions are on foot in other European countries.
