Exxon proxy push: LGIM has had enough after years of fruitless engagement
Michael Marks, head of stewardship at LGIM, said a resolution has been filed after years of engagement with the ExxonMobil board has led to no results
The board of energy giant ExxonMobil is facing somewhat of a net zero revolt after a climate motion was filed by one its most important shareholders, investment giant Legal & General Investment Management.
The reason? LGIM demands answers and clarity on a range of net zero-related issues, as the London-based investor is not satisfied with earlier explanations and policies from Exxon's board and feels engagement efforts have led to no results.
LGIM confirmed to Net Zero Investor it has filed a shareholder resolution at ExxonMobil’s upcoming AGM on 25 April, demanding the board to fully disclose the quantitative impact of the International Energy Agency (IEA) Net Zero Emissions scenario on all of their asset retirement obligations (AROs).
Michael Marks, head of investment stewardship and responsible investment integration at LGIM, told this publication that "by filing this proposal, we are seeking greater clarity into the costs associated with the retirement of Exxon’s assets, in the event of an accelerated energy transition."
He said LGIM "believes such level of disclosure is imperative for investors to better evaluate long-term risks and economic viability of the business in a carbon constrained future.”
LGIM is not alone: So far its motion is publicly backed up by fellow shareholder Christian Brothers Investment Services.
Downstream assets
Asset retirement obligations are an essential part of the energy transition and particularly significant for the oil and gas sector, with many in Exxon’s peer group already disclosing a considerable amount of ARO detail, the investor stressed.
Nevertheless, the company currently does not provide such disclosure on its downstream assets, claiming such obligations can’t be reasonably estimated as they will run well into the future, Marks noted.
The resolution has been filed by a coalition of "like-minded investors after years of individual engagement with the ExxonMobil board and relevant decision makers," he disclosed.
We are seeking greater clarity into the costs associated with the retirement of Exxon’s assets, in the event of an accelerated energy transition.
The resolution calls for further transparency and disclosure from the company, amid investor concerns around costs associated with the decommissioning of Exxon’s assets in the event of an accelerated energy transition.
"We believe this information is vital for the company’s shareholders, helping us to better evaluate financially material risks and provide insight that is decision useful as investors assess long term value and economic viability of the business in a carbon constrained economy," Marks said.
No alignment
Given ExxonMobil’s business model is not aligned with the Paris Goals of 1.5 degrees, for LGIM, this is "an organic escalation step" for the investment stewardship team, Marks added.
"It is a key part of our approach to investee company engagement and expectations around appropriate disclosure," he continued.
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Marks stressed this "also follows the decision taken in 2019 to divest applicable shares in ExxonMobil from the L&G’s Future World Fund Range, around concerns it failed to address risks posed by climate change."
He recalled that LGIM sees climate change "as one of the defining issues of our time and a financially material risk, in our view."
For LGIM, engagement and voting are two key levers that support our commitment to aligning our assets with a net-zero trajectory by 2050.
"Specific engagements like this resolution, build on our well established climate impact pledge engagement programme and voting policy, while holding companies to account, protecting our clients’ assets and safeguarding the planet," Marks concluded.
Responding to the upcoming motion, a spokesperson for Exxon told Net Zero Investor: “We respect that our shareholders may have viewpoints and perspectives that differ from management and the board, and we always consider their feedback.”
ExxonMobil's AGM will take place next week, on 25 April.
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