Exxon sues to block climate proposals from shareholder vote

ExxonMobil has sued two activist investors to prevent their proposal calling for emissions cuts at the oil giant from being voted on by shareholders.

In a complaint filed in the U.S. District Court for the Northern District of Texas on Sunday, Exxon accused the investors, Arjuna Capital and Follow This, of abusing the shareholder vote proposal process to advance their priorities through votes “calculated to diminish the company’s existing business.” “.

Arjona filed a motion in December for a non-binding resolution urging Exxon to accelerate its plans to reduce carbon emissions and expand the scope of the emissions it measures to include its suppliers and customers. Follow This joined in support of the proposal shortly thereafter, according to the complaint.

The proposal “does not seek to improve ExxonMobil's economic performance or create shareholder value,” but instead “restricts and micromanages” the company's operations, Exxon said in the complaint.

Exxon said it had already planned to exclude the proposal from appearing on the shareholder ballot at the company's annual meeting in May, arguing that U.S. securities law allows the company to raise petitions that “deal with matters relating to the ordinary business operations of the company.” In an unusual development, the company has also sued investors in an attempt to get a “declaration” from a judge supporting its move to dismiss the proposal.

The guidance provided by staff at the SEC was informal and could be subject to interpretation, the company said. A court ruling in Exxon's favor could lead to stricter scrutiny of the types of shareholder proposals companies allow to be put to a vote in the future.

Under the Biden administration, the SEC has adopted a tougher standard for corporate challenges to activist proposals, said Joshua T. White, a finance professor at Vanderbilt University.

“This is what Exxon is saying: If the SEC is no longer an option for us to leave proposals out of the agency that we believe will destroy value, then we will go straight to the courts,” he said.

Exxon noted in its suit that similar proposals from Follow This in 2022 and from Follow This and Arjuna in 2023 were rejected by a large majority of shareholders.

Mark Van Baal, founder of Follow This, said in a statement on the company's website that the move shows that Exxon “wants to prevent shareholders from exercising their rights.” Agona did not immediately respond to a request for comment.

Exxon's complaint comes during a backlash against climate and related measures, as some companies and investors have begun to distance themselves from environmental, social and governance — or ESG — initiatives.

The volume of ESG proposals at companies rose in 2023, but support among shareholders fell from the previous year, the largest decline for environmental proposals. according to Conference Board.

Investors pulled more than $13 billion from environmental, social and governance funds last year. According to a recent report by Morningstar.

Environmental, social, and governance issues have also become a hot political issue on Capitol Hill and on the campaign trail. Republicans in Congress have proposed measures to restrict investments that take into account environmental, social and governance factors, and some presidential candidates have sworn to suppress the movement.

Lawrence D. expressed Fink, CEO of BlackRock, a long-time proponent of “conscious capitalism,” expressed frustration at a conference in June about how the term ESG has become a political “weapon.”