Exxon shareholders back resolution requiring the oil major to disclose the impact of climate policies on its business

Edward Mason, Head of Responsible Investment at Church Commissioners for England, addressed the Exxon board yesterday, asking: “Members of the board, do you leave your understanding of climate change at the door when you attend the ExxonMobil board meeting?” Image courtesy of Mike Stone/Greenpeace
As we wait to learn whether (later today) Trump will pull the US out of the Paris Agreement, Remo Bebié of Finance Dialogue shares his briefing report of the what is being seen as growing demands that oil companies incorporate the international deal in their business models
Investors voting against management at Exxon is a powerful rebuke to the climate denialist policies of this White House

Yesterday (31st May, 2017) shareholders at ExxonMobil backed a resolution that requires the oil major to publish an annual assessment of the impact of climate policies on its business.

The resolution gained more than 24 percentage points of shareholder support over last year, bringing the combined votes in favour to 62.3% (from 38.1% in 2016).

This result suggests that all three of Exxon's largest shareholders (Vanguard, BlackRock and State Street) backed the resolution this year.

The Wall Street Journal writes: "Vanguard Group and BlackRock Inc., Exxon's two largest shareholders, supported the measure, people familiar with the votes said." The Washington Post reports the same and also cites voices indicating that State Street supported the resolution.

Last year BlackRock and Vanguard had voted against the resolution. To date, none of the three asset managers have officially confirmed how they voted.

The resolution was co-filed by Church Commissioners for England and New York State Common Retirement Fund and had over 90 investors pre-declaring support.

At yesterday's annual meeting, Edward Mason, Head of Responsible Investment at Church Commissioners for England, addressed the Exxon board: "Members of the board, do you leave your understanding of climate change at the door when you attend the ExxonMobil board meeting?", he asked.

The result came just ahead of an announcement by the US president, indicating a decision on the Paris accord will be communicated today (1st June, 2017) at 3:00 P.M. (presumably ET) at the White House Rose Garden.

Against this backdrop, the Exxon vote is an important signal. Politico write: "The Trump administration may be preparing to withdraw the U.S. from the Paris climate change accords, but shareholders at Exxon Mobil and at least one other U.S. oil company are demanding the companies incorporate the international deal in their business models."

Raj Thamotheram, CEO and Founder of Preventable Surprises said: "Investors voting against management at Exxon is a powerful rebuke to the climate denialist policies of this White House. Markets are moving and Corporate America would be foolish to bet so much on the protection from this regime."

The vote at Exxon may also be a precedent for shareholder activism at other corporations. "Exxon Mobil was one of the last hold-outs among major oil companies on the issue of climate change. Earlier in May, Occidental Petroleum shareholders also passed a similar motion in a vote at its annual meeting", writes BBC news.

CNNMoney wrote ahead of the annual meeting that: "the Exxon vote is seen as ground zero for efforts to get fossil fuel companies to acknowledge the ground is shifting beneath them". 

Sue Reid, Vice-President, Climate & Energy at Investor group Ceres said: "This historic majority vote sends a resounding message that market forces are continuing to drive toward low carbon transition, and investors expect companies - especially carbon-intensive companies like Exxon - to show how they are addressing the corresponding risks and opportunities. Business as usual is no longer an option for carbon-intensive companies like Exxon."

This year, equivalent resolutions were put forward at a number of US Utilities and Oil companies. At all meetings, shareholder support for the 2°C scenario resolutions was substantial and at PPL, Occidental and Exxon a majority was won. In 2015, resolutions asking for climate action passed with resounding support at BP and Shell.

Catherine Howarth, Chief Executive of ShareAction, reminds us that passing resolutions alone is no guarantee for stringent action: "The passing of this resolution is excellent news, marking a step-change in investor sentiment for climate engagement.

"While we celebrate this vote, and others that we hope will follow from it, let's not forget that the success of climate resolutions ultimately isn't measured by voting numbers, but by the substantive changes they catalyse.

"The 2015 resolutions at BP and Shell passed with close to 99% support, yet both firms are still pursuing business strategies that take us towards a frightening 3 degrees of temperature growth. We must recognise this is just a first step towards the transformation required by the world's oil majors to make them safe investments that earn a social licence to operate."

*This briefing report was compiled by Remo Bebié of the Finance Dialogue.  Previous to his role at Finance Dialogue, Remo worked as a financial news editor with awp Finanznachrichten, a leading Swiss business news agency.

 

 

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