US oil giants ExxonMobil and Chevron are braced for a shareholder showdown later on Wednesday with climate activists and disgruntled institutional investors over their failure to set a strategy for a low-carbon future.
The oil companies will face investors at separate shareholder meetings on Wednesday. Chevron will defend its climate plans against a rebel climate resolution from activists at Follow This, and Exxon will hope to avert a toppling of its board directors by dissident hedge fund Engine No. 1.
The battle has been billed as a key test of institutional shareholder resolve to push for greater climate action from major polluters. Eli Kasargod-Staub, the executive director of US investor group Majority Action, said top asset managers BlackRock, Vanguard, and State Street “have a choice – one that could be decisive”.
“Exxon’s board has undermined climate action for years,” he said. “For the first time, Exxon shareholders face a choice between competing board slates for who will lead the company.”
Exxon’s second largest shareholder, BlackRock, is understood to have thrown its support behind a campaign by rebel investor Engine No. 1, which hopes to oust four directors on the Exxon board in favour of its own candidates, who all have a background in fossil fuels but leadership experience in green energy innovation.
The candidates include Gregory Goff, the former chief executive of Andeavor, a petroleum refining company; Kaisa Hietala, a former renewables boss at Finnish bioplastics maker Neste; Alexander Karsner, a senior strategist at X, the innovation lab owned by Google parent company Alphabet and Anders Runevad, former chief executive of Danish wind turbine maker Vestas Wind Systems.
Exxon has attempted to see off the threat of a boardroom coup with a pre-emptive strike against activists who claim that the company is unwilling to embrace change. The company announced in March that it had hired activist investor and ESG proponent Jeff Ubben to join the board, putting the chief executive, Darren Woods, squarely between those agitating for change from within the company and from its wider shareholder base.
Ceres, a coalition of green investors, said the power struggled represents a major blow to Woods’ leadership, regardless of the outcome.
“I don’t see how Darren Woods remains as CEO if one of the dissidents, let alone all four, are elected,” said Andrew Logan, director of oil and gas at Ceres. “It would be such a sign of fundamental dissatisfaction with the status quo that something would have to change. And that starts with the CEO.”
Engine No. 1 was founded as an impact investment firm late last year by veteran hedge fund tech investor Chris James. The hedge fund includes Charlie Penner, a former partner of JANA Partners, another activist hedge fund.
BlackRock, the world’s biggest asset manager, owns a 6.7% stake in Exxon, and has reportedly sided with the rival upstart in the boardroom battle, according to Reuters, due to frustration with the company’s refusal to take climate concerns seriously. Legal & General, one of Exxon’s top 20 investors, is also backing Engine No. 1 and has pledged to vote against Woods.
Exxon’s tenure as the longest serving company on the US Dow Jones index came to an end last year following a precipitous decline in its market value in recent years. Exxon was once the biggest listed company in the world but has fallen from favour due to stumbling oil market prices and the rise of future-focused technology companies including Apple and Amazon. It was valued at over $520bn before the financial crash in 2008 but today is worth less than half this market valuation, at around $234bn.
At the Chevron shareholder meeting the Follow This resolution will call on the company to set tough targets to reduce carbon emissions, following a string of similar campaigns against European oil companies including Shell and BP.
Climate resolutions have attracted rising shareholder support in recent years as investors become increasingly concerned about the future of major fossil fuel producers in a low-carbon world.
The Follow This campaign, led by former journalist Mark van Baal, expects a “large turnout” in favour of their resolution at the Chevron vote after shareholders backed their call for tougher targets by 58% at ConocoPhillips’ shareholder meeting and 80% at the Phillips 66 meeting earlier this month.
Chevron and Exxon are expected to reveal the preliminary results of the shareholder votes after 16.30 BST on Wednesday, with final tallies to follow by early next week.
Almost a third of Shell’s investors backed the Follow This climate resolution over the company’s own energy transition plan in the head-to-head climate vote last week. Legal & General Investment Management (LGIM), one of the oldest fund managers in the City of London, was among the investors in favour of Follow This because it does not believe that Shell’s climate targets offer a credible route towards a net zero carbon future.