Shareholders drop climate proposal, but ExxonMobil forges ahead with lawsuit

Shareholders have dropped their proposal to vote on stricter climate targets at ExxonMobil’s next annual general meeting after the oil major filed a lawsuit to block the resolution.

Investment groups Follow This and Arjuna Capital hoped that withdrawing their proposal for ExxonMobil to adopt Scope 3 targets would lead the company to drop its lawsuit, but Exxon announced on Friday (February 2) that it would forge ahead with the legal action. 

Companies normally appeal to regulators like the Securities and Exchange Commission (SEC) to block resolutions from going to a vote. But oil majors have grown frustrated with the SEC’s attempts to advance corporate climate action in recent years, including a proposed climate disclosure rule and the approval of climate-oriented shareholder proposals.

Now, ExxonMobil is looking to set a precedent that would limit the power of activist shareholders in pressuring management on climate issues.

In a statement about the lawsuit filed on January 22, ExxonMobil said Follow This and Arjuna’s proposals were driven by “an extreme agenda” that doesn’t serve investors’ interests, and asked the court to “apply the SEC’s proxy rules as written to stop this abuse and eliminate the significant resources required to address them”.

But for the two investors, the continuation of the lawsuit is unjustified since the proposal has been withdrawn – with a promise not to submit it again. "This amounts to tactics of intimidation and bullying," said Natasha Lamb, chief investment officer of Arjuna Capital.

ExxonMobil and Scope 3

Supply chain emissions have been a contentious issue in the oil and gas sector: most companies are choosing to decarbonise operations only and betting heavily on carbon capture and storage (CCS) in order to keep ramping up production.

But climate activists and NGOs warn that the commitments of the Paris Agreement cannot be met without transitioning away from fossil fuel production and use – wording also used in the outcome of last year’s COP28. Pushing for Scope 3 emissions to be included in oil companies’ climate targets is one way activist investors are trying to force a decrease in production. 

All Western oil majors are facing this type of action from shareholders who argue that they should align targets with the goals of the Paris Agreement, but ExxonMobil is the only Western oil major that doesn’t have any Scope 3 target. BP is aiming for a 20-30% reduction by 2030 (a target lowered last year from 34-40%); TotalEnergies wants to cut them by 40% by 2030; while Shell and Chevron have emissions intensity reduction goals that include Scope 3.