An investor with a small stake in ExxonMobil won a historic climate victory when he won two seats on the oil giant’s board.
An activist investor for the first time with a small stake in Exxon Mobil Corp. gained a historic victory in its power struggle with the oil giant, which signaled the growing importance of climate change for investors.
Engine no. 1, the little-known company that jumped to the spotlight in December when it began pressuring Exxon to come up with a better plan to fight global warming, won two seats on the company’s board at the annual meeting of ‘shareholders on Wednesday, according to a preliminary account.
The result is a disgrace to Exxon, unprecedented in the rarefied world of Big Oil, and a sign that institutional investors are increasingly willing to force the United States to cope with climate change. This No. 1 engine, with only a 0.02% stake and no track record of oil and gas activism, could win even a partial victory against a titan like Exxon, the world’s largest oil producer. demonstrates how seriously environmental concerns are now taken in the boardrooms of the country’s largest companies.
The vote is also surprising because of the strength with which Exxon fought the activist, who also criticized the company for its poor financial performance. Exxon declined to meet with the nominees and CEO Darren Woods told shareholders earlier this month that voting for them would “derail our progress and jeopardize your dividend.” The company even went so far as to commit, just 48 hours before the meeting, that it will add two new directors, including one with “climate experience”.
In other corners of the commodities sector, this year shareholders have already shown frustration at the reluctance of executives to adopt harsh environmental goals. DuPont de Nemours Inc. suffered 81% of votes against managing plastic pollution disclosures, while ConocoPhillips lost a contest to adopt stricter emissions targets.
The result of Exxon’s vote shows clear dissatisfaction with Woods ’strategy, despite this year’s all-powerful rebound, which rose more than 40% due to rising oil prices.
Woods should be able to continue to improve Exxon’s financial performance as cash flows recover, securing the S&P 500’s third-largest dividend and leaving behind the record loss of 2020, the first in four decades. But the biggest question concerns Exxon’s energy transition strategy, which many shareholders believe is far behind its European counterparts.
Exxon’s environmental record and its unwillingness to adopt the transition to cleaner energy quickly enough was a key critique in the six-month representation campaign. Engine no. 1, based in San Francisco, was scathing in its assessment of Exxon’s long-term financial performance, calling it “a decade of value destruction.”
Instead of pivoting toward low-carbon fuels and sales power like some of its rivals, Exxon is strongly committed to carbon capture and sequestration, a technology it says needs substantial government support to be viable.
Engine number 1 said Exxon’s CCS center in Houston “has no real substance” and generated nothing more than an “advertising bombardment.” The fund also said Exxon’s climate targets “distorted its long-term emissions trajectory” and that its claim to be aligned with the Paris Agreement “fails the basic test of logic”.
It remains to be seen how Exxon pivots, if at all, but the message from shareholders is clear: the status quo cannot continue.