Oil Giants’ Stormy AGM Season

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    Stockholm (NordSIP) – A majority of shareholders chose short-term profitability over long-term sustainability at Shell’s annual general meeting (AGM) held today 21 May 2024 in London.  Despite publishing a new Energy Transition Strategy that the Anglo-Dutch oil giant claimed would ultimately transform the company into a net-zero emissions energy business, Shell’s journey to the 2024 AGM has been beset with criticism from not only climate campaigners but also a growing cohort of large institutional investors.

    Like many recent Shell AGMs today’s three-hour event in London was the scene of heated exchanges between company management and investors, as well as noisy disruptions from climate protesters.  Although the resolution to approve Shell’s climate strategy was passed, a significant 21.8% of shareholders voted against it.  A further resolution urging the company to align its decarbonisation targets with the goals of the Paris climate agreement garnered just 18.6% support.  It had been put forward by Dutch climate activist group Follow This and backed by 27 institutional investors with total assets amounting to $4 trillion.  The resolution aimed to get Shell to focus on its medium-term climate targets and address the Scope 3 emissions resulting from the use of its products.  Earlier this year Shell had said it would target a 15-20% reduction in net carbon intensity of its energy products by 2030 compared with 2016 intensity levels.  It had previously committed to a firmer 20% cut. Shell had also decided to cancel a previously stated 2035 objective, while reaffirming a plan to cut emissions to net zero by 2050.

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    During the London AGM Follow This founder Mark van Baal told the company: “Your board wants to continue with the business model of turning hydrocarbons into petrodollars.  They don’t want to step out of their comfort zone because they don’t know how to make profits with clean energy.”  Support for the Follow This resolution was marginally lower than last year’s, which achieved just over 20% of votes in favour.  Shell CEO Wael Sawan told the assembled press: “I’m pleased that we have seen the Follow This resolution get an even lower share of the votes compared to previous years.  That’s a sign of growing trust and confidence in our ability to navigate the energy transition.”  The company is keen to promote liquefied natural gas (LNG) as a so-called transition fuel and its stated belief is that fossil fuels will continue to play a vital economic role in the medium term.  It is nevertheless facing mounting external pressure and is currently appealing against a Dutch court’s ruling that it should reduce its carbon emissions by 45% by 2030 from 2019 levels.

    Similar trouble may also be brewing for US oil giant ExxonMobil in the run-up to its 29 May AGM.  The California Public Employees’ Retirement System (CalPERS), the largest public pension plan in the United States has signalled that it is losing patience with the company and may decide to vote against the re-election of CEO Darren Woods.  ExxonMobil has recently taken an aggressive stance against its own shareholders, going as far as pursuing a lawsuit against Follow This and activist investment firm Arjuna Capital.  The oil company is persisting with its litigation despite the resolution having been withdrawn following its complaint to a Texas court.  Speaking to the Financial Times CalPERS Chief Operating Investment Officer Michael Cohen said the pension fund was deeply concerned about the case, adding it appeared to be an effort to silence critical shareholders: “Exxon has gone well beyond any other company that we’re aware of in terms of suing shareholders for trying to bring forward a proposal.”

    Update on 22 May 2024: CalPERS has now confirmed its intention to vote against the ExxonMobil board in a strongly worded public statement, in which CEO Marcie Frost and President of the Board of Administration Theresa Taylor warn of a dangerous precedent being set if the oil company wins the ongoing lawsuit.  In their view, corporate governance in the US would be drastically skewed in the companies’ favour, with shareholders influence over all manner of issues beyond climate action being put in jeopardy.

    Image courtesy of Nikolas Noonan on Unsplash
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