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An Unusual Annual Meeting Season Saw Investors Ratchet Up Climate Pressure on ExxonMobil and Chevron

, Corporate Analyst and Engagement Specialist | July 31, 2020, 11:44 am EDT
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Earlier this year, we promised to watch fossil fuel companies’ statements and actions carefully over the annual general meeting season. While COVID-19 changed how activists and investors were able to engage with companies, as well as the way companies presented themselves, we and others were still able to hold fossil fuel companies and the financial firms that back them to account for failing to adequately respond to the climate crisis.

A diverse array of climate-related issues were again on company agendas at this year’s annual meetings. Major fossil fuel companies – especially ExxonMobil and Chevron – remain on the hot seat due to shareholder and activist pressure. Attention was also focused on the actions of major asset managers like BlackRock and the role of banks such as JPMorgan Chase in fueling the climate crisis by continuing to funnel money into fossil fuel expansion, including from the high-emitting tar sands extraction process.

Here are five major takeaways on climate action or inaction from this year’s corporate reports and annual meetings.

1. BlackRock had a few climate-friendly votes, but ultimately didn’t live up to its promise

We kept a close eye on the world’s largest asset manager and its voting record on climate-focused resolutions, and with BlackRock’s new sustainability report released this month, we can finally report back. Overall, we are underwhelmed. While the asset manager supported a few climate-conscious votes, it failed to live up to the bold promise to address climate change by reallocating capital that CEO Larry Fink made in his 2020 letter.

As BlackRock’s sustainability report points out, the company either supported climate-related shareholder proposals or voted against the reelection of one or more board directors at 53 companies this year. While this sounds good and is certainly better than previous years, only a handful of these votes will truly pressure the leadership of companies in which BlackRock is a major shareholder to respond. By opposing directors rather than supporting climate-focused shareholder resolutions, BlackRock has left the door open for companies to respond through opaque engagements rather than by taking the actions explicitly requested in the resolutions. Additionally, despite being a brand new, high-profile member of the Climate Action 100+, an investor initiative that aims to ensure that the world’s largest producers of heat-trapping emissions take necessary action on climate change, BlackRock voted for only 2 of the initiative’s 12 priority votes.

2. Former ExxonMobil CEO allowed to say on board at JPMorgan Chase

Lee Raymond, the former CEO of ExxonMobil during its most active and pernicious climate change-denying years, has been a member of JPMorgan Chase’s board for 33 years and the Independent Lead Director for 19 years. JP Morgan is also the largest global funder of fossil fuel expansion, providing $196 billion in lending and underwriting from 2016 to 2018, well after the 2015 establishment of the Paris Agreement’s goal to limit global average temperature rise. The problems of this relationship are numerous and well documented. After growing activist and shareholder pressure to remove Raymond from the board, JPMorgan acquiesced (a little bit) and removed him as Lead Independent Director, but allowed him to keep his seat on the board. BlackRock has been waving this change as a victory of engagement, but ultimately BlackRock helped enable Raymond to keep his board directorship. Majority Action, a climate advocacy group, has authored a scathingly thorough breakdown of BlackRock’s 2020 votes for more information.

3. Majority of shareholders request climate lobbying disclosure at Chevron

The financial behemoth’s weight was most visible at the Chevron meeting, where BlackRock supported a shareholder resolution asking the company to report on its climate-related lobbying—helping the proposal secure majority support (53 percent). While the resolution is not binding, a company ignores the wishes of the majority of its shareholders at its peril. The proposal requests that Chevron’s board of directors issue a report before the 2021 annual meeting describing how the company’s lobbying activities align with the Paris Agreement’s goal to limit global average temperature rise. Chevron currently discloses very little about its lobbying activities, although it is an active lobbyist both directly and indirectly through trade associations, including the American Petroleum Institute and the National Association of Manufacturers.

Chevron also has decidedly unambitious climate goals, giving itself 7 years to reduce its emissions intensity (the amount of heat-trapping emissions produced from each barrel of oil or natural gas equivalent) by less than 0.15%. Additionally, the company continues to refuse to take responsibility for its scope 3 emissions, which come from the end-use of its products, despite a trend among European competitors, like Repsol, BP, and Eni, to do so. This is concerning given Chevron’s recent acquisition of Noble Energy, which will expand Chevon’s natural gas operations in the Permian Basin—located in the southwestern United States—and offshore reserves in the Mediterranean Sea off the coast of Israel. While no shareholder resolutions called for the company to adopt scope 3 emissions targets, BlackRock did oppose several climate-focused resolutions, including a requested report on petrochemicals and the creating of a board committee to address climate change.

4. Darren Woods gets to keep both his CEO and Board Chair hats at ExxonMobil

BlackRock also supported a shareholder resolution at ExxonMobil calling for the company to remove CEO Darren Woods as Chair of the board (because he shouldn’t be his own boss), and voted against two directors. As the purpose of the board is to provide oversight of company management and evaluate long-term risks, installing an independent Chair in place of ExxonMobil’s CEO would provide greater independence and allow for a more thorough consideration of climate risks.  Unfortunately, the pressure from major investors was not enough; the shareholder resolution was rejected by the majority of investors and the directors were reelected. BlackRock also chose not to support shareholder resolutions calling for better lobbying and political spending disclosure. Ultimately, ExxonMobil came out of shareholder season relatively unscathed, despite another disappointing climate disclosure report, inexplicably small climate targets, and a continued refusal to take responsibility for the emissions that come from the end-use of its products.

5. BP and Shell moved closer to EU expectations

Unlike their US-based competitors, BP and Shell both released new climate ambitions this year and avoided BlackRock’s climate voting list. While both companies’ ambitions raise unanswered questions, need to be supported by swift and aggressive action, and fall short of Paris alignment, both are substantially more comprehensive than the incremental emissions reduction efforts of US-based fossil fuel companies. The fossil fuel companies should not get all the credit for this climate shift – EU regulators are calling for swift reductions in heat-trapping emissions and targeting net-zero emissions by 2050. In particular, fossil fuel companies based in the EU have begun to address their companies’ scope 3 emissions, which come from the end-use of their products (although BP and Shell still hedge on accepting full responsibility for these emissions). Including scope 3, however, is not enough to reach Paris alignment or respond to the demands of climate-conscious shareholders. While a shareholder proposal calling for specific short-, mid-, and long-term targets was withdrawn at BP after the company announced new climate goals, a similar proposal filed at Shell by the climate action group Follow This received over 14 percent support.

Moving forward

The climate movement has been building a huge amount of momentum over the last four years.  The recent shift from financial institutions, even if small, speaks to climate activism’s influence.  But this success doesn’t mean we can let up any of the pressure.  Keep holding BlackRock to its promise to support climate action.  Push ExxonMobil and Chevron to take responsibility for the emissions that come from the burning of the oil and gas they extract, transport, refine, market, and sell.  Watch BP and Shell closely to ensure they follow through on their shiny new climate ambitions.  If climate activism has taught us anything, it’s that words without actions do not and cannot count as progress to avoid the worst impacts of climate change.

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