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Investors withdrew a climate resolution at ExxonMobil after the oil major sued them, in a withdrawal likely to have a chilling effect on similar forms of shareholder activism.
Follow This, an Amsterdam-based green shareholder group, and Arjuna Capital, a U.S.-registered investment adviser, said that in response to Exxon’s lawsuit filed last week, they had decided to drop their appeal to the company to set more ambitious climate targets at its next annual meeting.
Arjuna said Exxon’s decision to fight in court would result in “silencing investors who express concerns about climate risks.”
“Not only is the company circumventing a critical corporate accountability mechanism that has guaranteed shareholder freedoms for decades, it amounts to intimidation and harassment tactics,” said Natasha Lamb, chief investment officer at Arjuna.
In recent years, activists have filed petitions against companies ranging from Wall Street banks to major technology groups, calling on them to take tougher stances on environmental, social and governance issues.
Exxon took the unusual step of suing Follow This and Arjuna to block their climate proposal, arguing that it violated Securities and Exchange Commission guidelines.
Even after investors withdrew their resolution Friday, Exxon said that even if it dropped its request for an expedited hearing, it would pursue the case.
“We believe there are still important questions that the court must resolve.” There is no change in our plans, the lawsuit continues,” the Texas-based company said in a statement.
Companies rarely go to court to block shareholder requests. Instead, they typically appeal to the SEC for permission to remove unwanted resolutions from the ballot. But Exxon argued that the regulator had become too willing to allow such motions to be put to a vote.
The activist investors’ move was announced hours after Exxon reported its second best annual profits in a decade as it ramped up oil production in the United States and Guyana.
“Given Exxon’s preference to fight a battle in court rather than allow shareholders the freedom to vote at its annual meeting, we have decided to withdraw the climate proposal,” said Follow This founder Mark van Baal.
Speaking Thursday, ahead of the announcement, Exxon Chief Financial Officer Kathy Mikells declined to say whether the company’s decision to sue marked the beginning of the end of the Trojan Horse’s so-called activism.
“We support the right of investors to present proposals,” she said. “But the process of excluding proxy proposals is simply flawed, with activists posing as investors making the same proposals year after year and garnering minimal support along the way.”
In 2021, Exxon was defeated in a shareholder rebellion of activist hedge fund Engine No. 1, which, despite having a minimal stake in the company, won three board seats by demanding that it develop more serious plans for the energy transition.
Exxon has since set a goal of reducing emissions from its own operations to zero by 2050, but unlike many of its peers, it does not have a target for reducing so-called Scope 3 emissions linked to energy. use of its products.
The proposal submitted by Follow This and Arjuna called on Exxon “to go beyond [its] current plans” and accelerate the pace of reductions in greenhouse gas emissions, including Scope 3.
Similar motions have failed to gain majority support at Exxon’s previous annual meetings, with shareholder voting falling from 27.1% in 2022 to 10.5% in 2023.
Exxon, which filed the lawsuit in a U.S. district court in Texas, claims Follow This and Arjuna’s proposal violates SEC rules regarding such investor requests.
He said previous versions of the motion failed to garner sufficient support to be resubmitted under SEC guidelines. He also said the proposal violated an SEC rule that prevented shareholder proposals from attempting to “micromanage” business decisions.
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