ExxonMobil sues activist shareholders to block climate resolution

ExxonMobil has filed a historic lawsuit against two of its own shareholders to prevent a resolution asking it to include Scope 3 emissions in its climate agenda from going to a vote at its next annual general meeting in May.

The US oil giant is suing activist shareholder group Follow This and US investment firm Arjuna Capital over their proposal to include Scope 3 emissions in its decarbonisation agenda. The company argues that shareholders already rejected Scope 3 targets last year, so there is no point in submitting this proposal to another vote.

The lawsuit has been filed with the U.S. District Court for the Northern District of Texas, and its outcome could set a powerful precedent in the world of corporate climate action. This is  the most aggressive pushback so far against activist investors like FollowThis, who buy stocks in oil and gas firms to influence their climate policy.

If the court rules in favour of ExxonMobil, it could severely limit the power of these shareholders in the future.

Scope 3 in the oil and gas sector

Scope 3 emissions have been a contentious issue in the oil and gas sector: most oil majors’ net zero commitments (including the decarbonisation charter signed at COP28) only include Scope 1 and 2 operational emissions, which they plan to reduce by using carbon capture and storage (CCS) at extraction and processing sites. 

But beyond the fact that carbon capture remains an unreliable technology, activists and NGOs argue that the bulk of greenhouse gas emissions from the sector is produced when fossil fuels are burned by customers – a Scope 3 category known as products in use. 

Including that in oil companies’ climate targets would quite simply mean reducing output – something most have been unwilling to consider. Some have set limited Scope 3 reduction targets, but have also been known to backtrack on these commitments: BP, for instance, lowered its 2030 Scope 3 emission reduction targets from the 35-40% pledged in 2020 to 20-30% last year.

ExxonMobil: A new type of climate litigation?

This case is also historic as it is the first time an oil and gas company sues its own shareholders over a climate resolution – perhaps creating a new type of climate litigation. These cases so far have been brought on by climate activists or regulators against companies or governments for not doing enough to protect the planet from the worst effects of climate change.

ExxonMobil itself has been the target of such lawsuits at least 11 times so far in the US. It has taken defensive action against its accusers, such as appeals, but the case against FollowThis and Arjuna takes its defence to an entirely new level.