By Dana Drugmand
ExxonMobil has dismissed a shareholder proposal calling for the company to disclose how it plans to align its business with Paris Agreement climate targets, calling it “materially false and misleading.” Other companies with significant stakes in fossil fuels are also resisting similar requests from shareholders to take responsibility for their contributions to climate change.
The shareholder proposals are a way for investors to push companies to address climate change risks. But oil and gas majors like Exxon and Chevron have been largely unreceptive to them, refusing to include them in the materials that shareholders will consider and vote on at the companies’ annual meetings. The proposals ask the companies to issue a report on reducing their contribution to climate change and how they might align their investments and business activities with the Paris Agreement goal of limiting warming to well below 2 degrees Celsius.
The Securities and Exchange Commission has previously allowed Exxon and Chevron to block these proposals on alignment with the Paris Agreement. The companies recently filed responses with the SEC saying they plan to once again dismiss the proposals.
Exxon: Climate Proposal is False and Misleading
Both Exxon and Chevron claim they are already responding to shareholder requests, pointing to climate-related reports on their websites. But Exxon went a step further in calling the shareholder proposal materially false and misleading.
“The actual intent and effect of the Proposal that shareholders are being asked to vote on is not for the Company simply to issue a report on how it is addressing the risk of climate change (as the Company is already doing, as discussed in more detail below), but for the Company to exit its current oil, gas, and petroleum product businesses in the near term. For the Proponent to represent otherwise under the guise of merely requesting a ‘report’ is false and misleading,” Exxon wrote in a response filed January 17.
“We were surprised by the ‘false and misleading’ claim,” said Danielle Fugere, president of shareholder advocacy organization As You Sow, which submitted the climate-related proposals to Exxon and Chevron. “With regard to [Exxon] saying we want them to end oil and gas tomorrow, that is not the case. We’re asking the company to provide a plan to demonstrate that they’re moving toward that zero [emissions] by 2050 target.”
“We don’t believe that anything we’ve said is false and misleading, to the extent we believe every oil and gas company has to start reducing its oil and gas products, and in fact that’s where the market is going,” Fugere added.
Exxon, however, defended its continued production of oil and gas, arguing that “substantial new investment in oil and gas projects will be required for many years,” and that other companies will fill the production void if Exxon pivots away from petroleum.
“Singular actions by the Company to shrink its oil and gas business would ultimately not reduce global GHG emissions or advance the goals of the Paris Agreement,” Exxon claims.
This assertion is contrary to expert reports finding that current trajectories of fossil fuel production are incompatible with the temperature targets set in the Paris Agreement. One recent analysis by Carbon Tracker says that oil and gas majors must curb production by more than one-third by 2040 if the world is to meet the targets. Even the International Energy Agency, whose global energy forecasts are often cited by the oil majors, recently said that the oil and gas industry “can do much more to respond to the threat of climate change,” and warned that “solutions cannot be found within today’s oil and gas paradigm.”
“Each year, Exxon becomes more hostile toward its investors and buries its head further in the sand to ignore the world changing around it,” Fugere said. “Doubling down on investments in oil and gas while claiming Paris alignment is unacceptable. The company’s efforts to stifle shareholder concern about the climate crisis is wholly inexcusable.”
Chevron and JP Morgan Chase Also Dismiss Climate Proposals
Chevron also said it would exclude the proposal submitted by As You Sow, which calls for a plan to slash emissions. Like Exxon, Chevron claimed that increasing fossil fuel production is compatible with the goals of the Paris Agreement.
“It is Chevron’s view that a decrease in overall fossil fuel emissions is not inconsistent with continued or increased fossil fuel production by the most efficient producers,” Chevron wrote in a 2019 report on climate resilience. “We believe that compelling select oil and gas producers to unilaterally reduce their production or change their portfolios to align with a possible future energy mix does not advance the goals of the Paris Agreement.”
Chevron argued in a recent response to the shareholder proposal that these disclosures essentially fulfill the proposal’s request for a report.
But Fugere said Chevron, along with Exxon, needs to do a lot more to prove to investors that they are taking climate risks seriously.
“They point to their efforts to reduce methane emissions and create efficiency in their operations, but that is less than 20 percent of their entire greenhouse gas footprint,” Fugere said. “They’re doing not enough, and it’s not quickly enough. They are in fact not Paris-aligned, and neither company will take responsibility for their product emissions.”
Banking giant JP Morgan Chase also dismissed a proposal that would require a report on how its lending activities are aligned with the Paris Agreement. Chase told the SEC it would exclude the proposal because it relates to the company’s ordinary business activities and seeks to “micromanage” the company.
According to the proposal, also submitted by As You Sow, “JPMorgan Chase’s funding contributes substantially to global climate change. The company is the largest source of financing to fossil fuel companies globally, averaging $65 billion annually since the Paris Agreement was signed.” The proposal asks Chase to issue a report “outlining if and how it intends to reduce the GHG emissions associated with its lending activities.”
In a response filed with the SEC on January 13, the company argued that the proposal seeks to compel investment decisions based on greenhouse gas emissions, decisions it says are solely in the hands of management. “The requested lending criteria, however, would effectively displace management’s judgment regarding the appropriate factors for making lending and investment decisions,” the response said. Chase claims the proposal “seeks to micromanage the Company by probing too deeply into matters of a complex nature.”
But Fugere said banks need to be held accountable for lending decisions that continue to prop up the fossil fuel industry.
“So long as banks continue to put money into oil and gas companies, it sends the wrong signal that these companies are investable,” she said. “[Banks] have to reduce their own carbon footprint, and that means reducing the amount of money going to fossil fuels.”