Engine No. 1 versus ExxonMobil: Climate shareholder activism pays off

Ahead of the Exxon AGM, in a detailed presentation (https://reenergizexom.com/), Engine No. 1 has consciously honed its arguments. The activist fund provides a critical analysis of the company’s climate strategy, specifically associating it with significant financial risks in the near future. While most European oil companies, like Total, are investing heavily in renewable energy to reduce their products’ carbon footprint (which is where the oil industry’s real challenge lies), Engine No. 1 reports that Exxon is focusing primarily on reducing the carbon emissions from its operations through carbon capture technology¹. With only 0.1% of its capital expenditure invested in low-carbon solutions between 2015 and 2020, Exxon has one of the lowest rankings in the industry, according to Bloomberg’s assessment in a climate transition study.

Furthermore, according to Engine No. 1, the strategy of massive investments in oil projects with low financial returns puts the company at risk by destroying value for its shareholders. These arguments hit the nail on the head and, thanks to the support of large institutional investors, led to the election of Engine’s No. 1 candidates, who were tasked with making Exxon more sustainable and financially successful.

¹Carbon capture and sequestration avoids the release of greenhouse gases into the atmosphere by recovering the carbon dioxide from the emitting facilities and then storing or making better use of it.

This shareholder success, far from being anecdotal and symbolic, highlights a fundamental trend. In a context where harmful climate change is being felt acutely, responsible investors are seizing their rights as shareholders and are opposing the management of the largest polluting companies with their views on their climate strategy via “Say on Climate” resolutions. What is most interesting is that this shareholder movement now extends beyond the (no longer closed) circle of responsible investors and, as we have seen, is now attracting the backing of more “traditional” investors. The latter realise that, as a result of existing and future regulations, the most carbon-intensive companies will have to pay more for negative externalities, which are not yet sufficiently internalised. This in turn will have an adverse effect on the value of their investments. The way in which shareholder activism makes this climate awareness possible is remarkable: rather than excluding Exxon from their portfolios, the investors who supported Engine No. 1’s campaign have opted to push the company to implement change by accompanying it in a strategic transformation.