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: Activist wins Exxon board seats in major shareholder pushback on oil giant’s climate strategy

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Powerful shareholders have forced ExxonMobil to make room for climate-minded board members and a new vision for the oil giant’s strategy in one of the biggest boardroom fights over climate change to date.

Hedge fund Engine No. 1 pushed to replace four of Exxon’s
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board members with people they argue will strengthen the company’s finances and lead it through the transition to cleaner energy. Reports of vote tallies so far Wednesday indicated at least two people on the Engine No. 1 slate were voted in.

Engine No. 1 does not have a significant stake in Exxon’s shares. But BlackRock, the largest asset manager in the world and Exxon’s second largest shareholder, reportedly backed at least some of the upstart Engine No. 1’s candidates, Reuters first reported. Influential pension funds were also supportive.

“Major asset managers stepped up. Credit goes to BlackRock
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Legal and General, CalSTRS and others for aligning their proxy voting with their climate pledges,” said Fred Krupp, president of the Environmental Defense Fund.

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Shareholders have gotten louder in their demands for publicly traded companies to address global warming and other environmental issues.

This year, 25 climate-related shareholder proposals have made it onto ballots, and those that have been voted on so far have received support from 59% of shareholders on average, according to the Institute for Shareholder Services.

Engine No. 1 wanted Exxon to add directors who have a track record of managing change in the energy sector. Many major fossil fuel companies have diversified, although not fast enough for some shareholders.

More broadly, the hedge fund argued that Exxon has underperformed rivals, giving up market share even when demand for oil
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and natural gas
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was growing. It also claimed the company lacks a credible strategy to create value in a de-carbonizing world.

The Biden administration has set an ambitious goal of slashing America’s greenhouse gas emissions in half by the end of the decade and to net zero by 2050. And the International Energy Agency earlier this month recommended ending investments in new oil and gas wells and coal mines, a surprising shift from the “watchdog” historically seen as backing the industry.

“The test of the enhanced board will be its ability to get ExxonMobil aligned with a net zero transition in the months to come, with a credible business strategy backed by climate targets, dollars and policy advocacy,” said EDF’s Krupp.

Exxon, for its part, says it has refreshed its board with directors who have expertise in energy, capital allocation and transitions.

“We’ve been actively engaging with shareholders and received positive feedback and support, particularly for our announcements relating to low-carbon solutions and progress in efforts to reduce costs and improve earnings,” said Exxon’s Chairman and CEO Darren Woods. “We heard from shareholders today about their desire to further these efforts, and we are well positioned to respond.”

Exxon had already announced a proposal for a hub for carbon capture and sequestration. To accomplish that, Exxon called on government and industry to together invest $100 billion.

Read: Exxon floats idea for $100 billion private-public carbon capture hub, largest of its kind

Exxon has said it would spend $3 billion through 2025 on carbon capture and other low-carbon initiatives.

Other major oil companies, including BP
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,
Shell
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Conoco Phillips
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and Chevron
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though still facing pressure from environmental groups and some shareholders, have stepped up corporate disclosures of climate-damaging emissions.

A Dutch court on Wednesday ordered Royal Dutch Shell to cut its carbon emissions by net 45% by 2030 compared to 2019 levels in a landmark case brought by climate activism groups.

Meanwhile, Chevron shareholders at its general meeting on Wednesday voted by 61% approval for a proposal to reduce emissions from customers. Another proposal demanding the company report more information on its lobbying activities received about 48% of votes.

“What we’re finding with other oil companies, is we’re making progress, and Exxon needs to catch up,” Anne Simpson, managing investment director for board governance and sustainability at the California Public Employees’ Retirement System — known as CalPERS — America’s largest pension fund, told the Associated Press. “Exxon is still saying one thing and doing another.”

The New York State Common Retirement Fund has also backed the latest proposed changes for Exxon’s board.

Read: Influential New York pension fund will drop fossil-fuel stocks, put pressure on utilities and auto makers to cut emissions

“The new board should act on this mandate for change and adopt Paris compliant transition plans immediately and begin the hard, but necessary work of creating the roadmap to transform the company’s core business,” said Andrew Behar, CEO of As You Sow, an environmental shareholder advocacy group.

Exxon shares are up 41% in the year to date, rebounding as the economy emerged from COVID-19 lockdowns. The Dow Jones Industrial Average
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is up 12% over the same timespan.

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