Exxon’s case against activist shareholders highlights new stewardship challenges
Oil giant Exxon Mobil is taking its shareholders to court over their climate activist resolution for this year’s AGM. What are the implications for climate stewardship?
The new year got off to a turbulent start for Dutch climate campaign group Follow This. Just last week, it proudly announced that its Shell AGM Resolution has received a record backing with 27 investors co-filing.
But this week kicked off with headlines that the oil giant Exxon Mobil has filed a case in a Texas district court in a bid to prevent an activist resolution at this year’s AGM due to take place on 23 May.
It is the first time that Exxon Mobil is taking an activist shareholder to court.
Exxon claims that the Follow This resolution is repetitive and overly prescriptive – under SEC rules, shareholders are not allowed to resubmit a proposal if they fail to gather increased investor support.
Last year, Follow This filed a resolution requesting that Exxon Mobil establish Scope 3 targets in line with the Paris Agreement. However, the proposal received the backing of only 10.5% of investors.
“BP’s leadership turmoil seems to push its investors to show more patience. The co-filing investors give a market signal: pressure on Shell will be heard in the other board rooms"
Speaking with Net Zero Investor, Follow This founder Mark van Baal confirms that the group had indeed put forward another proposal for this year’s AGM.
The exact demands of the 2024 resolution have not yet been disclosed but last year’s Exxon resolution did not specify how Exxon Mobil was to achieve Paris alignment for its Scope 3 emissions. “The strategy for how to achieve this target is entirely up to the board”, the 2023 resolution states.
This applies to most climate resolutions filed last year, argues Georgia Stewart, CEO and co-founder of Tumelo. “We have done an analysis of shareholder proposals last year and did not find that they were significantly more prescriptive than previous years,” she stresses.
Similar conclusions were also drawn in Share Action’s latest Voting Matters report.
Legal challenges
It is not the first time that a major corporate has interfered to prevent shareholders putting their resolutions forward. Last year, more than 100 “no action” requests had been brought to the SEC, according to a Net Zero Investor investigation.
For example, Exxon used a no action request in 2023 to prevent a resolution demanding an impact assessment for the Guyana oil spill.
Moreover, campaign group As You Sow was also targeted with multiple “no action requests” to prevent it from filing climate resolutions.
But what stands out this year is the fact that Exxon took matters to court, rather than addressing this through the SEC.
This comes as As You Sow, the US equivalent of Follow This, has been hit with a Subpoena at the end of last year, amid accusations that its climate resolutions were allegedly violating US antitrust rules.
Repositioning
Amid these pressures, activist shareholders are now adopting their strategies. For example, Follow This is set to focus its efforts on the Shell AGM this year and has opted not to file a resolution at the BP AGM, Mark van Baal tells Net Zero Investor.
“Most investors consider a climate resolution at Shell more urgent because Shell’s new CEO seems to backtrack on climate commitments. The perception of some investors is that BP has better climate targets then Shell; we don’t agree, both are far from being Paris-aligned.
“BP’s leadership turmoil seems to push its investors to show more patience. The co-filing investors give a market signal: pressure on Shell will be heard in the other board rooms. One clear-cut climate resolution is enough to make clear which investors vote for tackling the climate crisis and which investors vote against,” he adds.
This targeted approach, which was decided before the announcement of the Exxon court case, has led to results for Follow This. Its 2024 resolution for the Shell AGM has received the record backing of 27 institutional investors.
Voting against directors would be the natural course of action but then it is much harder for asset owners to group around that, it’s not like it is a call for action on climate change
But Exxon Mobil’s court case also indicates that oil and gas firms are prepared to act increasingly aggressive.
With campaign groups such as Follow This and As You Sow facing new legal pressures, what are asset owners who wish to challenge the transition strategies of firms like Exxon Mobil supposed to do?
The options have become more limited argues Tumelo’s Georgia Stewart, who predicts that institutional investors might hold back in putting forward their own resolutions out of fear of being taken to court.
“Voting against directors would be the natural course of action but then it is much harder for asset owners to group around that, it’s not like it is a call for action on climate change. This is why these votes don’t get as much attention, even though they are arguably more important,” she adds.
Another side-effect of this is that the debate instantly becomes personal, rather than being centred on climate change. “That could be completely counterproductive to the things we are trying to achieve.
“The reason why all of this is broken is because the director’s fiduciary duty is to maximise short-term profits for the company whereas the fiduciary duty of the pension fund is to members and extends over a much longer time horizon; those two things are not aligned,” Stewart believes.
Also read:
Follow This ditches 2030 deadline ahead of Shell AGM
SEC no action requests: The issues companies don't want to discuss
