ExxonMobil has filed an unprecedented lawsuit against its own investors in an attempt to block shareholder proposals related to climate change from being voted on at its upcoming annual meeting.
Exxon Seeks to Skirt Typical SEC Process
In a highly unusual move, Exxon bypassed the typical SEC process for challenging shareholder resolutions and instead filed a lawsuit directly in federal court in Texas to keep the climate proposals off its proxy ballot (Bloomberg). The oil giant is seeking a court injunction against hedge fund Engine No. 1 and religious shareholder group Follow This, claiming their requests for emissions reductions targets and lobbying disclosures promote an “extreme environmental agenda” (Washington Examiner).
Legal experts have called the move “extremely rare” and “aggressive,” while shareholder advocates accuse Exxon of seeking to intimidate investors (Reuters).
“They have bypassed the SEC process entirely because they knew the SEC would reject their reasons for exclusion,” said Follow This founder Mark van Baal (Guardian).
Investors Call for Emissions Cuts, Disclosure
The Exxon shareholders want the company to publish a report addressing how its lobbying activities align with the climate goals of the Paris Agreement, and set company-wide emissions reduction targets consistent with limiting global warming to 1.5°C (CNBC).
Exxon claims these proposals are intended to “promote the sponsors’ own narrow social agenda” rather than benefit the company’s business (Oil & Gas 360). However, Engine No. 1 and Follow This counter that climate action is vital for Exxon’s long-term success and investor returns.
“Exxon would rather sue its shareholders than be transparent with investors about its role in climate change,” said Engine No. 1 partner Charlie Penner (Guardian). “We refuse to be intimidated, and we will continue to push for real action on climate.”
Exxon Faces Growing Pressure Over Climate Inaction
Shareholder pressure on Exxon to address climate change has ramped up considerably in recent years. In 2021, Engine No. 1 shocked the oil industry by winning three board seats at Exxon in a proxy fight centered on criticism of Exxon’s climate approach (Axios).
Now investors managing over $1.5 trillion in assets are backing various Exxon resolutions calling for emissions cuts, clean energy investments, and other climate actions – signaling growing dissatisfaction with Exxon’s reluctance to transition in a warming world (NY Times).
“ExxonMobil has continuously dismissed all shareholder concerns about climate change,” said Tim Smith of Boston Trust Walden, co-filer of a resolution for scope 3 emissions targets. “This lawsuit is just an extension of Exxon’s increasing isolation and anger at shareholders” (The Hill).
| Shareholder Resolution Topics |
|–|–|
| Lobbying report |
| Emissions reduction targets |
| Invest in renewable energy |
| Clean energy/low carbon business |
| Greenhouse gas metrics |
Table showing types of climate proposals Exxon shareholders have filed for 2023 annual meeting (Sources: multiple)
Lawsuit Called Exxon’s “Courtroom Gamble”
Legal experts say Exxon faces an uphill battle convincing a judge to essentially override an SEC process that has governed shareholder resolutions for decades (Law360). Shareholders argue there is little valid basis for Exxon’s claims that their resolutions focus on non-material issues or seek to “micromanage” the company (WSJ).
But the Texas court venue also raises some advantages for Exxon – even if the injunction ultimately fails, Exxon may benefit by deterring future climate proposals and sending a message to activist investors (WION).
Several shareholder advocates have also expressed concern that if Exxon succeeds in removing these resolutions, it may encourage other companies to pursue similar legal tactics to dodge climate accountability (Bloomberg Law).
Next Steps: Proxy Fight Likely Ahead
The court will soon decide whether to grant Exxon’s request for a preliminary injunction. If denied, shareholders say they will campaign vigorously for the climate proposals and continue urging Exxon’s Board to chart a path toward decarbonization (Environment & Energy Leader).
“We are long-term investors and will fight this vigorously on behalf of all Exxon shareholders,” said Engine No. 1 (NY Post).
Most expect a contentious proxy battle ahead regardless of the lawsuit’s outcome, as Exxon seeks to beat back the climate proposals amid rising pressure to address emissions and prepare for a low-carbon future (Financial Times).
“Exxon finds itself in an uncomfortable position and is using hardball legal tactics to try and make that discomfort go away,” said shareholder advocate Richard Brooks. “But growing climate concerns aren’t disappearing – and Exxon needs a better long-term strategy than fighting its own investors in court” (USA Today).
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