2024 proxy season: key energy AGMs to watch out for

We are soon entering the 2024 proxy season - and when it comes to climate change, the stakes have never been higher, with the world breaching the critical 1.5C threshold for the first time over a 12 month period earlier this year.

Meanwhile, the anti-ESG ideology rippling throughout the United States has continued to destabilisze collective action on climate change: in March, five US-based asset managers - BlackRock, Invesco, JPMorgan, Pimco, and State Street Global Advisors - each either quit or amended participation in responsible investor coalition Climate Action 100+ (CA100+), due to concerns around collusion.

All the while, shareholder support for ESG resolutions has plummeted in recent years, with research from financial non-profit and shareholder advocacy group ShareAction revealing that the world’s four largest asset managers in the world: BlackRock, Fidelity Investments, State Street Global Advisors, and Vanguard – showed a “significant” fall in support for ESG last year, including on those filed at oil majors.

Separately, activist investors attempting to pile pressure on energy companies to improve their climate credentials have come up against legal challenges. For example, in January 2024, US oil major ExxonMobil filed a lawsuit to block a vote on a climate resolution led by Dutch activist investor Follow This, which called on the company to set targets for their Sscope 3 emissions.

The lawsuit forced Follow This and co-filer investor group Arjuna Capital to withdraw their motion, and promise to not re-submit it. In response to this move by ExxonMobil, Follow This founder Mark van Baal claimed that “shareholders’ rights are under attack”.

According to an annual assessment of 2024 ESG resolutions from shareholder advocacy groups As You Sow and Si2, climate change remains the biggest single group of ESG proposals in the US, with shareholders filing a total 106 proposals focused directly on corporate strategy and disclosure this year. However, this represents a significant drop from the all-time high of 122 climate proposals filed at the same point the year prior.

Speaking to Net Zero Investor about which climate related AGMs at energy firms investors should be focusing on this season, Lindsey Stewart, director of investment stewardship research at financial services provider Morningstar, said that it is “safe to say the oil supermajors (Exxon Mobil, Chevron, BP, Shell, Total) will be in the spotlight again this AGM season”.

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He added that it is also “fairly safe to say that the prospects for Scope 3 focused resolutions at US companies have further reduced following the withdrawal of the Follow This resolution at Exxon Mobil, and the omission of previously proposed reporting requirements from the final SEC Climate Rule (itself now on ice due to legal challenges).”

In terms of key AGMs, all eyes will be on that of British oil major Shell, which is due to take place on 21st May. During Shell’s AGM, investors will vote on a resolution filed by shareholder advocacy group Follow This (and backed by backed 27 other institutions including workplace pension scheme Nest, UK asset manager Rathbones, and French asset manager Amundi), which asks the company to to align its climate targets with goals of the Paris Agreement. More specifically, the resolution asks that Shell set its medium-term targets for Scope 3 greenhouse gas emissions to be consistent with efforts to limit global warming to 1.5C above pre-industrial levels. Unlike in previous years, this year’s Follow This Resolution no longer includes a hard 2030 deadline for interim targets.

Follow This has filed similar resolutions each year since 2016; last year, its resolution received 20% support. In response to this year’s resolution, Shell said that the company’s board has “previously advised shareholders that the Follow This resolution was unrealistic and simplistic, that it would have no impact on mitigating climate change, have negative consequences for our customers, and was against the interests of the company and our shareholders.

At other oil majors, investor groups are recommending that shareholders hold directors accountable for climate inaction by voting against them and their boards. For example, non-profit Majority Action US has recommended that investors vote against all board members, as well as specific directors, at ExxonMobil (AGM in May 2024) ConocoPhillips (scheduled 14th May 2024) and Occidental Petroleum (scheduled 2nd May 2024).

In Europe, non-profit Reclaim Finance has called on investors to “integrate climate into strategic routine votes” by voting against the re-election of directors, directors’ and executives’ remuneration, dividends and financial accounts, “in order to sanction and try to block their climate-wrecking strategies.”

Reclaim Finance has specifically singled out the AGMs of TotalEnergies (24th May), where shareholders will vote on resolutions relating to the re-election of directors, including chairman Patrick Pouyanné, as well as resolutions relating to executive pay, the re-election of auditors, and the payment of dividends as well as the repurchase of shares.

The non-profit has also advised voting against similar resolutions at Italian energy firm Eni (May 15th); British oil major bp (25th April); Norway’s Equinor (14th May) and Spain’s Repsol (10th May) as well as voting in favour of Follow This’ resolution at Shell.

Thinking ahead to which kinds of climate resolutions might perform well, Moningstar’s Lindsey Stewart tells Net Zero Investor that proposals that have gained the most support in the past “are mostly focused on delivering transparency on emissions with an eye on any potential regulatory risks a company might face in the future. This includes Scope 1 and 2 greenhouse gas emissions, with an increasing focus on methane emissions as part of that.”

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