ExxonMobil, one of the largest US oil companies, has taken legal action to prevent a vote on a climate resolution proposed by Dutch green activist investor group, Follow This. The move, which raises significant implications for the fossil fuel industry globally, comes as Follow This urges the company to intensify its efforts in reducing greenhouse gas emissions.
The lawsuit, filed in a US district court in Texas on January 21, 2024, argues that the resolution put forward by Follow This violates SEC investor petition rules. ExxonMobil is seeking a court decision by March 19, 2024, just ahead of its annual meeting scheduled for May 29, 2024.
Follow This, collaborating with investment adviser Arjuna Capital, has consistently registered motions at the annual general meetings of several oil companies, advocating for more stringent commitments to emission reduction. In a similar vein, Shell is currently facing investor rebellion over a Follow This resolution, with approximately 5% of its shares at stake.
The lawsuit by ExxonMobil prompts close scrutiny from both oil and gas companies and environmental groups. It remains to be seen whether it has also submitted a "no action letter" to the Securities and Exchange Commission (SEC), the customary route taken by listed companies attempting to halt a vote on a resolution.
The company contends that the Follow This and Arjuna proposal violates SEC rules designed to prevent shareholders from excessively influencing businesses' decisions through proposals, asserting that such micromanagement goes against the regulator's guidelines.
This legal action comes amid increasing pressure on the SEC to reassess the registration of numerous motions by environmental groups at annual shareholder meetings, following policy changes made during the Trump administration.
ExxonMobil, in 2021, announced its intention to achieve net-zero greenhouse gas emissions from its own operations by 2050. The company faced activist pressure the same year when Engine No 1, an activist hedge fund, secured three seats on Exxon's board, pushing for faster emission reductions.
An Exxon spokesperson stated, “The breakdown of the shareholder proposal process, one that allows proponents to advance their agendas through a flood of proposals, does not serve the interests of investors. We are simply asking the court to apply the SEC’s proxy rules as written to stop this abuse and eliminate the significant resources required to address them.”
Mark van Baal, of Follow This, expressed surprise at the company's legal action, noting that it appears the company aims to hinder shareholders from exercising their rights in voting for emissions reduction targets. The outcome of this legal battle will undoubtedly influence the ongoing discourse surrounding climate activism and corporate responsibility.
In the UK, ExxonMobil's subsidiary, Esso Petroleum Company (EPC), recently reported a surge in pre-tax profits and turnover, highlighting the economic recovery post-COVID-19. EPC's gross emissions also increased in 2022, contributing to the broader context of the company's environmental impact.