By Barney Smith
Exxon Mobil (American) is arguably the largest publicly traded Western international Oil and Gas company. It is also perhaps equally well known for being resistant to any dramatic policy movement because of a perceived change in the earth’s climate.
But some see this year’s AGM, on 26 May, as an opportunity to force through major alterations in policy to reflect a changed international focus. An activist Hedge Fund, Engine No 1, has put forward a resolution to force Exxon Mobil to confront the new reality, as well as proposing the names of four new Board members to replace four existing members. Both will be voted on at the forthcoming AGM. Engine No 1 claim that if there is no change, Exxon Mobil’s emissions will actually rise by 2025.
One sign that the overall perspective for the future has altered is to be found by looking at Varun Sivaram’s excellent book on Solar power, Taming the Sun. At various points, he suggests that renewables investment should be increased in a way analogous to what obtains in the Oil and Gas industry. The book was published in 2018, but subsequently there has been a crucial change: BP and some other oil companies have now started direct investment in renewables as part of the process of transformation of an oil company into an energy company
The fact is that the world has seemingly changed for oil and gas companies; for the most part the fossil fuels they find and sell are no longer seen as part of the solution to development, but rather as part of the problem of decarbonisation. BP and Shell have chosen to take account of this new wind, but Exxon Mobil has held to its traditional belief in the long-term future of oil and gas.
The Exxon Board are firm. They claim that they are already signed up to net zero by 2050; they point to their December 2020 announcement of a target of 15 to 20 per cent reduction in the “Intensity” of their products by 2025; they also put forward the company’s experience in carbon capture and biofuels and argue that the company’s plans are “consistent” with the goals of the Paris Agreement.
Needless to say, Engine No 1 disagrees. The future cannot be “steady as she goes” when governments are turning against fossil fuel emissions. There must be some effect on oil prices long term and action must start now. But besides climate change considerations, Engine No 1 also points to the fact that Exxon Mobil’s historic economic record has been significantly worse than other oil companies, particularly in terms of total shareholder return.
So the stakes are considerable. A number of investors have stressed the need to make climate concerns central to their investment strategy., The New York state pension fund, Calstrs, the Church Commissioners for England and Vanguard will probably all vote for the Engine 1 motions, but they will take their cue from Blackrock who have recently made public their concern for account to be taken of the problems posed by climate change.
The crucial question now is whether will there be enough support at the forthcoming Exxon Mobil AGM for the Engine 1 proposals to be successful.