It’s proxy season, that time of year when investors have a chance to influence corporate policies and make direct asks to corporate decisionmakers, and in 2023 an unwelcome guest is making its presence felt in the boardroom. That would be the straw man erected by defenders of the fossil fuel industry who claim that facing climate change is a doctrinaire liberal policy. The public statements by most oil and gas companies disavow this argument, but the companies’ actions show that they are more than willing to hide behind it.
A straw-man fallacy is a debating tactic where one side distorts the argument of the other by creating a non-issue and then attacking it. This year, many on the far-right are attempting to rebrand Environmental, Social and Governance (ESG) investing as “woke capitalism.” ESG is an investing term used to describe stocks and funds that embrace those ESG principles, and many of those mounting the crusade against it are longtime climate deniers, now targeting companies that publicly embrace ESG goals or principles.
I got an early taste of this trend while scrutinizing Chevron’s 2022 annual financial report and reading a paragraph that stood out from the usual boring boilerplate. “Some stakeholders…have divergent views on our ESG-related strategies and priorities,” the paragraph began, “…calling for increased production of oil and gas products rather than new business lines and climate-related targets.”
The paragraph appeared in a section on risk disclosure. But Chevron—the highest carbon-emitting public oil and gas company in the world and an environmental and human rights violator—was not classifying demands to increase production as a risk. Instead, the company was likely referring to a letter that anti-ESG opportunist and long-shot presidential candidate Vivek Ramaswamy sent Chevron’s board last December after his firm Strive Management invested in the company. “Our goal in writing this letter is to liberate you from constraints imposed on Chevron by its ESG-promoting ‘shareholders,’” the letter reads. The authors go on to accuse Chevron of bending to pressure from large institutional investors such as BlackRock, whose CEO, Larry Fink, has become a far-right whipping boy for recognizing that climate change poses financial risks.
“Liberate” is the operative word here. Conveniently, anti-ESG activists like Ramaswamy are pressuring oil and gas companies to roll back climate commitments and increase production at the same time that the war in Ukraine has sent oil prices—and dividends—soaring. The promise of profits has led companies like BP to roll back climate targets in favor of boosting production. Chevron declares in the “Business Outlook” section of its report that the company plans to “grow its traditional oil and gas business.” So Chevron is essentially doing what Strive wants it to, while still telling investors that it stands behind its climate-related targets.
Playing both sides
Ramaswamy is not the only anti-ESG activist to have filed resolutions asking oil and gas companies to toss out emissions reduction targets and ramp up production. Another such resolution was filed for consideration at Chevron’s annual meeting on May 31 by Steven Milloy, a former Heartland Institute board member and longtime spreader of climate disinformation. Milloy’s resolution seeks to rescind a successful 2021 resolution from the Dutch activist shareholder Follow This that called on Chevron to substantially reduce its so-called Scope 3 global warming emissions which come from burning the oil and gas the company extracts and which account for 90 percent of its total emissions. Milloy’s resolution claims that reducing Scope 3 emissions is “inconsistent with Chevron’s fiduciary duty.”
Chevron recommends voting against the resolution, but not because it disagrees with its purpose. And in keeping with the straw-man theme, Chevron notably did not ask the Securities and Exchange Commission to let the company exclude Milloy’s proposal from its proxy statement. In fact, the Board of Directors’ response states that “reducing Chevron’s absolute Scope 3 greenhouse gas (GHG) emissions is not in stockholders’ interests, nor should it be Chevron’s responsibility.” The Board thinks shareholders should reject the resolution because Chevron’s new method of measuring emissions takes care of the issue, and that “asking stockholders to ‘rescind’ a nonbinding proposal from two years ago does not represent good governance.”
Follow This, however, says Chevron’s emissions reduction goals “will not lead to large-scale (net) reductions in absolute emissions in this decade,” according to a resolution the organization filed this year asking for a medium-term, Paris-aligned target. Chevron recommends investors reject the Follow This resolution because it would “require shrinking Chevron’s business.”
Though anti-ESG activists filed a record number of shareholder resolutions attempting to block ESG initiatives at corporations this year, such resolutions are not new (nor exclusively focused on climate). One group that has filed resolutions in the past is the far-right National Center for Public Policy Research, which fossil fuel companies including ExxonMobil have funded.
ExxonMobil and Chevron—the largest oil and gas companies in the United States—have funded other anti-ESG crusaders. The American Legislative Exchange Council (ALEC) and State Financial Officers Foundation have drafted or promoted more than a hundred laws at the state level to prevent state governments from doing business with companies or financial firms that publicly support climate policy—often at the expense of state residents. Several of the organizations behind this effort, including ALEC, are “dark money” groups, meaning their funders are anonymous. However, fossil fuel companies are frequent donors to these networks. While ExxonMobil left ALEC in 2018, Chevron includes ALEC on its most recent list of trade association memberships, and the company has even sponsored the organization’s annual meetings.
The climate emergency is more urgent than ever
This is all happening against a backdrop of truly terrifying climate science. The United Nations’ Intergovernmental Panel on Climate Change recently released a synthesis of its most recent round of research that concluded the world is dangerously far from the path that would limit global warming to 1.5 degrees Celsius above pre-industrial levels. The International Energy Agency’s comprehensive report said reaching global climate targets requires a complete overhaul of our energy system—and no new investments in new oil, gas and coal from 2021 onwards. The fossil fuel industry, building on its history of denying and delaying climate science, has responded with rhetoric about the need for “energy security” and government incentives for low-carbon energy sources.
Climate change poses a far greater risk to our financial system than any effort to stop companies from addressing it. Scientists, legal scholars, and economists know this, as do the financial regulators around the world finally compelling corporations to disclose those risks. Investors know it too, hence the swell in demand for ESG financial products and success of climate-related shareholder proposals. Of course, anti-ESG activists are also well aware of this fact, which is why they are working to create a chilling effect on corporate sustainability efforts and give companies cover for backing off climate pledges.
The oil and gas industry cannot hide behind this straw man. If Chevron wants investors to trust its climate-related pledges, it must stop opposing resolutions like those presented by Follow This and other climate-conscious investors. Proxy season comes only once a year, but climate change is forever.