Big Oil struggles to ignore pollution amid investors and court pressure
Yesterday was a bad day to be an oil company.
First, a Dutch court ruled that Royal Dutch Shell must cut emissions more than expected to meet Paris Agreement targets. The court ordered the oil supermajor to cut carbon pollution by 45% by the end of the decade.
Next, ExxonMobil shareholders elected at least two nominees to the board of directors – and possibly a third – proposed by activist investors who want the company to curb its sprawling oil and gas business and invest more in it. clean energy.
Finally, Chevron shareholders pushed back the company’s board of directors to approve a proposal to reduce emissions from the use of its products, such as gasoline combustion.
Together, the court ruling and shareholder votes appear to represent a sea change in the way courts and shareholders plan to hold oil companies accountable in the face of climate change.
The Shell decision goes the furthest, requiring more emissions reductions than the company had originally planned. Like its European counterparts and contrary to US companies, Shell has adopted a plan, including interim targets, on how it will achieve net zero emissions by 2050. But plaintiffs in the Dutch case have argued that Shell’s target of a reduction 20% by 2030 did not go far enough and consequently violated human rights by shifting the majority of the burden onto future generations.
The broad outlines of the ruling echo the outcome of a recent German court case in which the government was sued for reducing emissions after 2030. In that case, the Constitutional Court ordered the German government to act more aggressively and to detail the emission reductions between 2030. and 2050. Less than a week later, government officials ad that they had pushed back the net zero deadline by five years and set milestones 65 percent below 1990 levels by 2030 (10 percent more than before) and 88 percent by 2040.
Other European oil companies like BP and Total have set emissions targets that mirror those of Shell. Following the judgment, they may also be the target of legal proceedings. Shell has promised to appeal, so that the outcome of the case can be in a few years. But the move was a clear warning that oil companies should start taking serious action to cut emissions.
Exxon’s board vote sounded a similar warning. Hedge fund Engine n ° 1, which Bloomberg reports As having no history of activism in the oil and gas industry, present a list of four candidates to the board of directors. Their goal is to push the Standard Oil descendant towards more investment in clean energy and to force the company to reduce new capital spending on oil and gas projects. Exxon spent $ 35 million to defeat the candidates and reject the proposals.
The No.1 engine was in part victorious thanks to the votes of BlackRock, Exxon’s second largest shareholder and the world’s largest investment manager, with more than $ 8.6 trillion under management. The company took a increasingly aggressive stance on how the companies in which it invests should approach climate-related risks.
Two of the No.1 engine candidates won their elections outright, and the count for a third was too close to be announced. The new board members are Kaisa Hietala, former vice president of renewable products at Neste, a Finnish oil refiner, and Geoffrey Goff, former CEO of Andeavor, another oil refiner. The third candidate who could still win is Alexander Karsner, senior strategist at X, the Alphabet division.
In addition, Exxon shareholders approved two proposals to increase the transparency of the company’s lobbying efforts. One requires that all lobbying expenses be reported, and another requires the board to report whether the company’s lobbying of lawmakers is in line with the Paris Agreement.
Chevron shareholders have also expressed unhappiness with the way the company has handled environmental concerns. Over 60% voted for a proposal to reduce “scope 3 emissions,” which are produced when customers use the company’s products. For the oil and gas companies, that’s a lot – a lot of what they sell goes up in smoke. Chevron own data suggests that its Scope 3 emissions eclipse its direct emissions by at least an order of magnitude.
Moreover, none of these decisions will result in a significant reduction in carbon emissions or do much to mitigate climate change. But taken together, they start to add up. And more broadly, they can represent a turnaround. Big oil and gas companies are under increasing scrutiny and this situation is not expected to change anytime soon.