Exxon picks on proxy proposals

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Jan 23, 2024 View in browser   By Jordan Wolman THE BIG IDEA ExxonMobil CEO Darren Woods speaks during the APEC CEO Summit. | Eric Risberg/AP Photo PROXY PROBLEMS — ExxonMobil has gotten the annual battle over corporate shareholder proposals off to an early and explosive start by suing a pair of sustainable investment firms over a resolution calling on the company to accelerate reduction of greenhouse-gas emissions. The energy giant's move was significant and surprising, and it promises to raise the temperature leading into the height of proxy season. For one, it bypasses the usual path of companies to petition the Securities and Exchange Commission to omit certain proposals from the shareholder ballot. And resolutions like these usually fail to gain majority support at shareholder meetings -- a trend that only accelerated last year. They're also nonbinding, so companies don't have to act on them even if they are approved. So why did ExxonMobil choose to ignore those factors and file suit in a likely friendly Texas-based federal court? It might have something to with the company's thinking about its chances at winning at the SEC, said Danielle Fugere, president and chief counsel at As You Sow, a shareholder advocacy nonprofit. The agency’s 2021 decision to allow more proxy proposals dealing with social issues to appear on the ballot — and make it harder to get those proposals omitted — has spurred a surge in climate-linked resolutions as investors seek to obtain more climate information from companies and encourage emissions reductions and transition plans. “The SEC has very clearly said that investors think that climate change is important, and whether companies are addressing climate risk and reducing their emissions is an important financial factor to shareholders,” Fugere said. “So what Exxon is doing is going to a very conservative court, forum shopping, in effect, to attempt to say that all greenhouse gas emission issues are part of the company's ordinary business.” Exxon said in its court filing that the climate proposal presented by the two groups closely resembled resolutions that were rejected by shareholders in 2022 and 2023, Niina H. Farah reports for POLITICO’s E&E News. "Defendants should not be permitted to continue to misuse the shareholder proposal rules to submit a proposal that interferes with ExxonMobil’s ordinary business operations and when close to 90 percent of voting shareholders rejected the 2023 Proposal," Exxon told the court. Though the proposals don’t guarantee or require satisfactory company action, a majority vote does put pressure on a company to change or respond to the resolution and are a good way of measuring what’s on investors’ minds. Exxon asked for a court ruling by March 19 prior to its annual shareholder meeting in late May. While Fugere thinks the investor-company relationship is still important and doesn’t expect a flurry of similar lawsuits, the litigation is likely to be closely watched on both sides within the context of a broader anti-ESG onslaught. WASHINGTON WATCH OILY POLITICS — Donald Trump and Nikki Haley are competing for the Republican Party’s presidential nomination while sharing the popular GOP campaign promise to boost fossil-fuel drilling in the name of energy independence. But industry analysts and officials say presidential pronouncements don’t have much impact on near-term oil-and-gas production or the prices consumers pay at the pump, Shelby Webb reports for POLITICO’s E&E News. “It’s very little,” said Ryan Kellogg, a professor at the University of Chicago’s Harris School of Public Policy. “It’s not zero, but it’s pretty close.” Still, decisions around fossil fuel production on federal lands, for instance, can move the needle for industry — but likely years down the line when the president who set those policies may no longer be in power. “I do think when it comes to the president and the administration, policy signals really do matter, words really do matter,” said Dustin Meyer, senior vice president of policy, economics and regulatory affairs with the American Petroleum Institute. “This is a long-term investment industry, and it is very difficult to make those investments when you have very misguided policy signals coming from the Oval Office.” AROUND THE NATION CARBON COPY — A third blue state is set to consider legislation modeled after California's first-in-the-nation corporate climate disclosure law, Jordan reports. Illinois has joined New York and Washington by introducing a measure that would require large companies to publicly disclose their greenhouse gas emissions, including the supply chain output known as Scope 3. The Illinois bill from state Rep. Kimberly du Buclet, a Chicago Democrat, was assigned to the House Rules Committee. The move comes as groups on both sides of the issue are expressing concern over the potential unintended consequences in state-level action in multiple jurisdictions. “The California climate disclosure laws set a dangerous precedent for state-by-state reporting requirements that will lead to greater fragmentation and greater investor confusion, higher costs for companies, and increased liability risk," Evan Williams, executive director at the U.S. Chamber's Center for Capital Markets Competitiveness, said in a statement. Ceres, a sustainability nonprofit that led the fight for California’s law, also isn’t in favor of other states taking up the issue. YOU TELL US GAME ON — Welcome to the Long Game, where we tell you about the latest on efforts to shape our future. Join us every Tuesday as we keep you in the loop on the world of sustainability. Team Sustainability is editor Greg Mott and reporters Jordan Wolman and Allison Prang. Reach us all at gmott@politico.com, jwolman@politico.com and aprang@politico.com. Sign up for the Long Game. It's free! WHAT WE'RE CLICKING — U.S. colleges and universities are turning to geothermal heating to reduce their carbon footprints, the New York Times reports. — Net-Zero Insurance Alliance members are rethinking their strategy amid defections prompted by the backlash against ESG policies, according to the Financial Times. — While offshore wind continues to face struggles, on-shore wind is making a comeback thanks to the Inflation Reduction Act. Bloomberg has that story.   Follow us on Twitter Debra Kahn @debra_kahn Greg Mott @gwmott Jordan Wolman @jordanwolman Allison Prang @AllisonPrang   Follow us

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