Activist Investor Targets Exxon in Climate Push

An activist investing group that garnered strong shareholder support earlier this year for a resolution that would have forced Royal Dutch Shell to set stronger emissions goals has now set its sights on the largest US supermajor.

In a briefing distributed over the weekend, investor group Follow This said it had filed a climate resolution for the first time with Texas-based Exxon Mobil, with the aim to vote on it at the company’s annual general meeting next year.

The resolution calls on the company to meet Paris accord requirements by setting and publishing targets that cover Scope 1, Scope 2 and Scope 3 (direct, indirect and end-use) greenhouse gas (GHG) emissions over the short, medium, and long term.

'A United Front for Climate'

The announcement comes amid increased investor pressure on the oil and natural gas industry, and Exxon in particular, to lower carbon emissions and transition to cleaner energy sources.

Earlier this year, investment fund Engine No. 1 successfully placed three new members on Exxon’s board of directors, each selected with the hope that their energy industry expertise could help the firm think bigger and more proactively apply its engineering and project management prowess to help solve the world’s decarbonization goals.

“We expect that Engine No. 1's new board members and our climate resolution will reinforce each other at Exxon Mobil in a united front for the climate,” Follow This said in its briefing.

The investor group noted the “unprecedented number” of shareholders that voted in favor of its climate resolutions at annual general meetings in May, but stressed that more needs to be done. For example, Follow This noted that the strategies currently being pursued by both Shell and BP would in fact increase the absolute level of emissions by 2030.

“In 2022, voting must compel oil majors to set Paris-consistent Scope 3 targets; targets that lead to deep cuts in absolute emissions reductions by 2030,” said Follow This.

A number of global operators have announced plans to drastically reduce emissions, but many of those strategies revolve around Scope 1 and 2. Scope 3, which accounts for the largest source of emissions, is proving a bigger problem for the industry to get its arms around.

Exxon last week announced a plan to achieve net-zero GHG emissions at its Permian Basin operations, but the scheme only covers Scope 1 and 2.

Losing Patience

Exxon isn’t the only US company that will field a climate resolution from Follow This next year. The group said in the briefing that it had also filed a similar motion with refiner Marathon Petroleum, its first with the company.

In addition, it said it has filed new motions with Chevron, ConocoPhillips, Phillips 66 and Occidental Petroleum, as well as European majors Shell and BP. The group may still file with Norwegian oil major Equinor if it finds the company’s own resolutions to be lacking. It has withdrawn a resolution with US refiner Valero Energy after collaborating with an institutional investor that filed a similar motion.

Follow This founder Mark van Baal, speaking at a Shell shareholder meeting last week, noted the group’s climate resolution won support from about one-third of the company’s shareholders in May. He pressed Shell to lower its net absolute emissions by 45% by 2030.

“Shareholders are losing their patience. You need to decrease your emissions,” he said during the meeting.

Shell Chairman Andrew Mackenzie told van Baal that the company expects to halve its Scope 1 and 2 emissions relative to 2016 by 2030, and that the company continues “to work extremely hard on our Scope 3 emissions."

"I think Shell has pioneered the approach of working sector by sector to show how we can change our offer to our customers so that they can continue to do their business, but do it with emitting less and less carbon," said van Baal. "And we have a wide range, and I've been incredibly impressed by the amount of conversations that are happening sector by sector by sector on our Scope 3 emissions to bring that about.”