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ExxonMobil holds out against shareholder rebellion over 'insufficient' climate action

Around a third of investors, including the world's largest asset manager, voted for changes to the oil giant's governance to help drive bolder climate action

ExxonMobile corporate campus in Houston

The ExxonMobile corporate campus in Houston.

ExxonMobil shareholders have voted against splitting the roles of chairman and chief executive, delivering a blow to campaigning investors who claim the combined job has stymied the oil major's action on climate change.

However, activist investors said that with around of third of shareholders voting in favor of major changes at the company, pressure is mounting on the oil giant for it to emulate a growing number of its rivals and introduce a more ambitious climate strategy.

At its annual general meeting (AGM) last week, ExxonMobil shareholders rejected all four shareholder resolutions, including the proposal to split the chairman and CEO role and another that asked the company to disclose its lobbying activities.

Ahead of the meeting, several major investors had backed the election of an independent board director, including investment giant BlackRock, the New York State Common Retirement Fund and the Church Commissioners for England.

Edward Mason, head of responsible investment at the Church Commissioners for England, offered a damning assessment of the oil major's engagement with investors concerned about its climate strategy. "Today's AGM shows the blatant disregard Exxon has for meeting the expectations of Climate Action 100 Plus, an international coalition of over 450 key investors with more than $40 trillion in assets," he said.

BlackRock, Exxon's second-largest investor, confirmed earlier last week that it intended to vote in favor of the shareholder motion to split the chairman and CEO role, linking the oil major's failure to set robust greenhouse gas emissions reduction targets to the board's lack of independence.  

BlackRock also said it would not endorse the re-election of public issues and contributions committee chair Angela Braly and board lead independent director Kenneth Frazier. The investment giant said both figures were accountable for the oil major's "insufficient progress on TCFD-aligned reporting and related action," referring to the guidelines put forward by the Taskforce for Climate-related Financial Disclosures that aim to ensure investors are provided with sufficient information on the climate risks companies face.

In a bulletin explaining its voting motivations published last week, the asset manager criticized Exxon for "lack of urgency proportionate to the risk identified" around greenhouse gas reduction targets, its failure to disclose Scope 3 emissions and its expectations for global warming impacts, as well as issues relating to its corporate governance structure.

The Church Commissioners of England, which manages the Church of England's pension fund, and New York State Common Retirement Fund, the third-largest pension plan in the United States, had urged fellow investors in April to vote for the resolution for an independent chair and to vote against the re-election of the oil company's board for failing to take action on climate.

In response, Exxon has argued that having a combined chairman and CEO role is more efficient. It also recommended that shareholders vote against a resolution for better disclosure on lobbying on the grounds that current federal and state oversight were sufficient to ensure disclosure and transparency.

However, with more than 32 percent of investors voting in favor of an independent chair and 37.5 percent voting for better lobbying disclosure, the Church Commissioners' Mason said the results were "clear evidence" for shareholders' desire for change.

"Faced with Exxon's repeated failure to address concerns about climate strategy and governance, investors have voted against management in large numbers," he said. "The results are clear evidence of shareholders' desire for change. Exxon needs to join its peers and set out a strategy for transition to net-zero emissions. Investors will not tolerate a board that is not capable of steering a course consistent with the goals of the Paris Agreement."

The shareholder intervention at ExxonMobil is part of a wave of shareholder activism in the U.S. that aims to boost coporate climate ambition. Last week, shareholders at rival U.S. oil company Chevron also rejected a proposal to split the chair and chief executive roles, despite voting in favor of requiring the company to report on its climate change lobbying.

And in early May, a shareholder resolution at JPMorgan Chase asking that the bank curb lending activities that exacerbate climate change was defeated by a fraction of a percent.

To some activist shareholders' dismay, the bank's shareholders also endorsed the re-election of former ExxonMobil chief executive Lee Raymond to the bank's board, although his tenure as lead director will come to an end in September.

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