Climate change developments rock Exxon, Chevron and Shell in single day

Some of the world’s biggest oil companies are facing stark pressure from activists concerned about climate change, prompting a string of startling developments on Wednesday.

At Exxon Mobil, an activist hedge fund won two board seats, while Chevron investors voted to force the company to cut emissions and a Dutch judge order Shell to drastically cut carbon.

The Exxon vote followed a fierce campaign from Engine No. 1, an upstart hedge fund owning a tiny fraction of the oil giant’s stock, with both sides making appeals to shareholders until the final minute, and the company delaying Wednesday’s vote by an hour.

Engine No. 1 had put forward a slate of four climate-conscious candidates for Exxon’s 12-member board, and in the end shareholders voted in favor of two of them: Gregory Goff, a 64-year-old former top executive at Marathon Petroleum and Andeavor, and former Neste Oyj executive Kaisa Hietala.

Gregory Goff

Gregory Goff

Kaisa Hietala

Kaisa Hietala

Activist investors succeeded in electing Gregory Goff (left) and Kaisa Hietala (right) to the Exxon board on Wednesday following a pitched battle with other shareholders

The two new board members face an insular corporate culture renowned for slow-to-change ways. Goff and Hietala will be two voices among a 12-person board that has had six directors handpicked by Exxon’s current chief executive Darren Woods.

Goff was unavailable to comment according to spokeswoman for hedge fund Engine No. 1. Hietala could not be immediately reached.

Both have extensive backgrounds in oil refining, a business where Exxon posted a $1.1 billion loss last year. 

Hietala got Finish refiner Neste into renewables and has been on the boards of investment giant Carlyle Group and paper and packaging firm Smurfit Kappa Group.

Goff in 2010 took over the predecessor to U.S. oil refiner Andeavor, built it through deals and expanded the business internationally. He later sold it to Marathon, giving investors a 1,200% return during his 8-year tenure.

Goff ‘understands the business very well, both the operational side and the commercial side, said John Auers of refining consultants Turner, Mason & Co. ‘He’s a very sharp, astute guy who takes prudent risks,’ he said.

In 2013, Goff bought a BP refinery in Carson, California, integrating it with a nearby refinery his company previously purchased from Royal Dutch Shell. Both happened as competitors were exiting the West Coast.

The two new board members face an insular corporate culture renowned for slow-to-change ways. The Exxon logo is seen above on the New York Stock Exchange in a file photo

The two new board members face an insular corporate culture renowned for slow-to-change ways. The Exxon logo is seen above on the New York Stock Exchange in a file photo

The two new board members face an insular corporate culture renowned for slow-to-change ways. The Exxon logo is seen above on the New York Stock Exchange in a file photo

Four years later, he jumped into Mexico’s fuel market through terminals, storage, and a retail network fed by its U.S. production. It was a bet that was rivaled that year by BP, Chevron and Exxon.

‘His reputation is exceptionally high among investors,’ said analyst Paul Sankey of Sankey Research. Goff will be ‘far more concerned with Exxon Mobil´s management structure and lack of entrepreneurship than some misguided attempt to target net-zero,’ he wrote.

Goff also can succeed as an outsider at Exxon, said a person who has known him for many years but declined to be named for business reasons.

‘He is disruptive in a pragmatic and constructive way,’ this person said. ‘He’s not stuck in the status quo.’

Exxon stock was up 1.22 percent at the closing bell on Wednesday, compared to a drop of 2 percent for the S&P 500 Energy Sector. 

Chevron investors demand more emissions cuts

Chevron shareholders on Wednesday voted in favor of a proposal to cut emissions generated by the use of the company’s products, a move that underscores growing investor push at energy companies to reduce their carbon footprint.

Shareholders voted 61 percent in favor of the proposal to cut so called ‘Scope 3’ emissions, according to a preliminary count announced by Chevron at its annual general meeting.

Although the proposal does not require Chevron to set a target of how much it needs to cut emissions or by when, the overwhelming support for it shows growing investor frustration with companies, which, they believe, are not doing enough to tackle climate change.

Chevron shareholders on Wednesday voted in favor of a proposal to cut emissions generated by the use of the company's products

Chevron shareholders on Wednesday voted in favor of a proposal to cut emissions generated by the use of the company's products

Chevron shareholders on Wednesday voted in favor of a proposal to cut emissions generated by the use of the company’s products

Oil and gas companies have long argued that they have little control over how their products are used, but with rising investor pressure they are forced to find new ways to cut emissions and fall in line with global climate change pledges. U.S. President Joe Biden has pledged to reach net zero emissions by 2050.

One shareholder proposal, which called on Chevron to prepare a report on the impact its business would have from the net zero 2050 scenario, was narrowly defeated with about 48 percent votes in favor of it. 

Chevron shareholders approved the slate of directors and executive pay by 96 percent and 94 percent votes, respectively, although they voted heavily in favor of other proposals Chevron had opposed.

Another proposal demanding the company report more information on its lobbying activities also received about 48 percent votes.

Chevron has pledged to limit carbon emissions that contribute to climate change, but has not set long-term targets to achieve net zero as many European oil companies have done.

Shares of Chevron finished the session up 0.3 percent on Wednesday. 

Shell is ordered to deepen carbon cuts in landmark Dutch climate case 

A Dutch court ordered Royal Dutch Shell to drastically deepen planned greenhouse gas emission cuts on Wednesday, in a landmark ruling that could trigger legal action against energy companies around the world.

Shell said it was ‘disappointed’ and plans to appeal the ruling, which comes amid rising pressure on energy companies from investors, activists and governments to shift away from fossil fuels and rapidly ramp up investment in renewables.

Judge Larisa Alwin read out a ruling at a court room in The Hague, ordering Shell to reduce its planet warming carbon emissions by 45 percent by 2030 from 2019 levels.

‘The court orders Royal Dutch Shell, by means of its corporate policy, to reduce its CO2 emissions by 45 percent by 2030 with respect to the level of 2019 for the Shell group and the suppliers and customers of the group,’ Alwin said.

Climate activist Donald Pols, Director of Milieudefensie, reacts holding a copy of a verdict in a case brought on against Shell by environmentalist and human rights groups

Climate activist Donald Pols, Director of Milieudefensie, reacts holding a copy of a verdict in a case brought on against Shell by environmentalist and human rights groups

Climate activist Donald Pols, Director of Milieudefensie, reacts holding a copy of a verdict in a case brought on against Shell by environmentalist and human rights groups

Earlier this year, Shell set out one of the sector’s most ambitious climate strategies. It has a target to cut the carbon intensity of its products by at least 6 percent by 2023, by 20 percent by 2030, by 45 percent by 2035 and by 100 percent by 2050 from 2016 levels.

But the court said that Shell’s climate policy was ‘not concrete and is full of conditions…that’s not enough.’

‘The conclusion of the court is therefore that Shell is in danger of violating its obligation to reduce. And the court will therefore issue an order upon RDS,’ the judge said.

The court ordered Shell to reduce its absolute levels of carbon emissions, while Shell’s intensity-based targets could allow the company to grow its output in theory.

Shell Chief Executive Ben van Beurden rejected absolute reduction targets at its annual general meeting this month.

‘Reducing absolute emissions at this point in time is predominantly possible by shrinking the business,’ he said.

Shell said that it would appeal the court verdict and that it has set out its plan to become a net-zero emissions energy company by 2050.

‘This is arguably the most significant climate change related judgment yet, which emphasises that companies and not just governments may be the target of strategic litigation which seeks to drive changes in behaviour,’ said Tom Cummins, dispute resolution partner at law firm Ashurst.

A Shell storage tank is seen at petrochemical industries in the port of Rotterdam, Netherlands

A Shell storage tank is seen at petrochemical industries in the port of Rotterdam, Netherlands

A Shell storage tank is seen at petrochemical industries in the port of Rotterdam, Netherlands

Shares in Shell’s London-traded stock closed flat, compared with 0.7 percent gains in the broader European energy sector.

The lawsuit, which was filed by seven groups including Greenpeace and Friends of the Earth Netherlands, marks a first in which environmentalists have turned to the courts to try to force a major energy firm to change strategy.

It was filed in April 2019 on behalf of more than 17,000 Dutch citizens who say Shell is threatening human rights as it continues to invest billions in the production of fossil fuels.

‘This is a huge win, for us and for anyone affected by climate change’, Friends of the Earth Netherlands director Donald Pols told Reuters.

‘It is historic, it is the first time a court has decided that a major polluter has to cut its emissions,’ Pols added.

Michael Burger, head of the Sabin Center for Climate Change Law at Columbia Law School said that ‘there is no question that this is a significant development in global climate litigation, and it could reverberate through courtrooms around the world.’

Burger is also a lawyer representing local governments in the United States in climate change lawsuits, including against Shell.

Shell, which is the world’s top oil and gas trader, has said its carbon emissions peaked in 2018, while its oil output peaked in 2019 and was set to drop by 1 to 2 percent per year.

While its climate targets surpass those of its U.S. rivals such as Exxon and Chevron, which ignore emissions from the combustion of its fuels, the Anglo-Dutch company’s spending will remain tilted towards oil and gas in the near future.

A rapid reduction in its carbon dioxide emissions would effectively force it to quickly move away from oil and gas.

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