Big oil braces for shareholder revolt during proxy voting season

Members of the environmental group Just Stop Oil blockade a BP petrol station in London on April 28, 2022. The activist group has called on the UK government to issue new fossil fuel licenses and pledge to stop production.

Christian Bush | In the picture Getty Images

LONDON – With some of the world’s largest corporate executives facing the possibility of a shareholder uprising this month, climate-related votes are set to spike throughout the proxy season.

Oil and gas chiefs on both sides of the Atlantic are scheduled to hold their annual general meeting in the coming weeks. Existing climate strategies are ready to vote on a range of investor-led resolutions aimed at reducing emissions.

In Europe, Norway’s Equinor and Britain’s BP will hold their respective AGMs on Wednesday and Thursday. The UK-based Shell will hold its annual shareholder meeting on 24 May and the Total Energy AGM in France on 25 May.

Stateside, Chevron and ExxonMobil will hold their respective AGMs on May 25.

The impending proxy season comes amid intense pressure on Big Oil to set short- and medium-term goals in line with the landmark Paris Agreement. The 2015 agreement is widely recognized as critical to avoiding an irreversible climate crisis.

Currently, none of the oil and gas majorities are consistent with the goal of the Paris Agreement to prevent global warming from 1.5 degrees Celsius above pre-industrial levels.

They will not change the engagement. They’re only going to change if you give them a crystal clear – and the only way to do that is to vote.

Mark Van Ball

Follow this founder

The Dutch group Follow This, a small working investor and campaign group with partnerships in several large oil companies, is set to introduce a number of climate resolutions this month. It is urging investors to take advantage of their agency and force power chiefs to align themselves with the Paris Agreement.

“The message is, and I’ve been trying to get it for years. They will not change their will. They will not change their engagement. They will only change if you are clear to them – and the only way to do that is to vote. Granted, “Follow Van Mark Ball, founder of Follow This, told CNBC via video call.

“If you want to achieve the Paris Climate Agreement, you have to vote for this resolution,” Van Baal said. “These resolutions do not ask for anything extreme. It is a fair demand.”

‘Obscure, generic, disruptive’

Shareholders in U.S. oil producer ConocoPhillips on Tuesday voted against a proposal to include consumer emissions aimed at reducing its greenhouse gases. The motion put forward by Follow This has 39% support.

It marked the highest turnout for the Paris-compliant emissions proposal submitted by the environmental group, reflecting the growing impatience of investors to refuse to curb Big Oil emissions by 2030.

The resolution targets Paris-adjacent direct and indirect emissions, the so-called scope 1 and 2, and the emissions generated by consumers using their oil and gas, known as scope 3.

The board of ConocoPhillips recommended that shareholders vote against the proposal. The exploration and production company said that while engaging with stockholders, many investors “expressed particular concern” that “setting a Scope 3 target could actually harm our business and their interests in the long run.”

U.S. oil producer Occidental Petroleum’s shareholders also voted last week against a ‘follow this’ proposal to increase the firm’s existing carbon emissions reduction target.

After touching the reception desk at Shell’s headquarters, on April 13, 2022, police officers arrested a climate activist in the protest group Extinction Mutiny. XR has consistently protested in an attempt to shut down the fossil fuel economy.

Tolga Akmen | AFP | Getty Images

Major oil investors such as Shell, ExxonMobil and Chevron voted in favor of climate-related resolutions last year, and campaign groups expect more success this month. These expectations are based in part on the risk of liability for directors and institutional investors of major oil and gas companies.

Shell’s board of directors won a landmark lawsuit against the oil giant in May last year, according to environmentalists at Paulusen Advocate, for “risking future personal liability” for not aligning itself with the Paris Agreement. Shell has appealed against the verdict.

In an additional letter to investors April 25, Paulussen Advocaten’s attorneys said: “Current and expected legal developments regarding the risks of climate change liability for directors and institutional investors of oil and gas measures are additional reasons to use this opportunity. [to vote for climate resolutions]”

Nevertheless, Equinor, BP and Shell all recommend that investors vote against the follow-up proposal this month.

BP said the campaign group’s move was “vague, general, disruptive and would create confusion about the accountability of the board and shareholders. So it threatens long-term value creation.” Shell, meanwhile, described the resolution as “unrealistic.”

France’s TotalEnergy has decided not to include an investor-led climate resolution in its AGM, a request that is “contrary to French law.”

US oil giant Chevron’s profit more than quadrupled in the first quarter of 2022.

Justin Sullivan | Getty Images News | Getty Images

Nine of the 10 largest Dutch investors pre-announced their vote for a climate resolution, a move by Van Baal that was “really remarkable”, while leading proxy advisory firms split Institutional Shareholder Services and Glass Lewis based on their recommendations.

The ISS has advised shareholders to vote for climate change in Valero, Occidental, ConocoPhillips, Philips 66 and Equinox, but against BP. Glass Lewis, who also has influence among oil shareholders, advised investors to vote against all of these climate resolutions, except in the case of Valero.

‘We need a majority’

“I expect growth and I expect a majority because we need a majority to make that change,” said Van Ball, adding that “a lot has happened” since last year’s proxy season and investors have become increasingly concerned.

For example, the International Energy Agency has warned that no new fossil fuel infrastructure could be built to prevent the world from crossing a critical global heating threshold, a Dutch court has ruled that Shell must reduce its carbon emissions by 45% between 2019 and 2030. And the world’s leading climate scientists have released three major reports on the depth of the climate crisis.

Follow this, in the case of the shell, support for its climate resolution has increased from just 2.7% in 2016 to more than 30% in 2021.

To be sure, the UK Corporate Governance Code states that for more than 20% of shareholder votes, companies must go back to investors to discuss their concerns.

“The oil industry is now using the energy crisis as an excuse to suspend climate action. And I have no idea if investors will accept that statement,” Van Baal said. Resolution.

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