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June 13, 2023updated 04 Aug 2023 9:19am

How investors voted on climate change at Big Oil AGMs

Investor support for holding Big Oil companies’ feet to the fire appears to be growing in Europe, but fading in the US.

By Paul Hodgson

Big oil, climate change resolutions, Follow This
Are sustainability investors making a dent in Big Oil’s emissions reduction plans? It doesn’t seem so. (Photo by Novikov Alexsey via Shutterstock)
  • Five climate resolutions were filed by a total of 17 investors with around €1.1trn in AUM at Shell, BP, ExxonMobil, Chevron and TotalEnergies this year.
  • The resolutions claim oil majors have no credible plans to drive down overall emissions this decade and ask they align 2030 Scope 3 emissions targets with the Paris Climate Agreement.
  • The voting results at each of them were very mixed, though few investors have divested their shares as a result.

In early April, Follow This, a shareholder advocacy group, announced five resolutions it would file with Shell, BP, ExxonMobil, TotalEnergies and Chevron. Founded by Mark van Baal in 2016, Follow This comprises over 9,000 green shareholders in Big Oil.

The resolutions called for GHG reduction targets to account for the emissions caused by the use of the oil majors’ energy products – in line with Scope 3 reporting – and to align with the goals of the Paris Climate Agreement: to limit global warming to below 2°C and preferably to 1.5°C.

All resolutions were the same as last year’s and have now been voted on, the results of which reveal a little something about shareholder appetite across the Atlantic.

At BP’s AGM, 17% of shareholders voted in favour of the climate resolution, up from 15% in 2022. At Shell, the same proportion of shareholders (20%) voted in favour of a similar resolution in 2022.

Described as a “shareholder rebellion”, 30% of shareholders supported the resolution at TotalEnergies, up from 17% in 2020.

Failed the litmus test”

CA100+ lead Dutch investors, MN and PGGM, encouraged other investors to vote in favour at Shell’s AGM by pre-declaring their votes and flagging the climate resolution in the CA100+ alliance – CA100+ is an investor-led initiative designed to push companies to take action on climate change.

“When 80% of shareholders voted against the lead investors on the shareholder resolution at Shell, you can understand Shell saying – you don’t represent the opinions of CA100+. As an organisation, I feel [CA100+] failed the litmus test,” says Follow This’ van Baal.

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At the US companies, shareholder support fell significantly to 11% at ExxonMobil (28% in 2022) and 10% at Chevron (33% in 2022).

“The decline in the vote can also be explained by the fact that the most responsible investors who voted for our resolutions last year have sold [their shares] to, apparently, less responsible investors,” says van Baal. Van Baal also notes in a press release that the anti-ESG movement in the US has likely discouraged support among the largest asset managers there.

US investors less engaged on climate change

Follow This’ mixed fortunes appear to be down to a lack of support from major US asset managers, as well as inconsistent support from some CA100+ members. For example, the rise in support for the BP resolution came despite LGIM, EOS at Federated Hermes, and Fulcrum all voting against.

Support at Shell was all over the place. EOS at Federated Hermes, PIRC, the Church of England and LAPFF all recommended a vote in favour. Proxy advisor ISS recommended a vote for its sustainable customers, but against for its mainstream customers.

Proxy advisor Glass Lewis recommended against the resolution. The ISS justified its own against resolution as it believed it would “represent a change in strategy. However, it did offer a for recommendation at TotalEnergies because it believed it would help shareholders understand its commitment to Paris obligations, according to Follow This.

its sustainable-focused customers to vote for the resolution, but standard customers to vote against it, claiming “the proposal would represent a change in strategy”. Meanwhile, the ‘for’ recommendation came because it would help shareholders to understand what the company had planned in order to reduce emissions in line with the Paris Agreement.

ISS recommended a vote for the resolution at TotalEnergies, according to Follow This.

Voting was equally inconsistent last year. For example, an analysis by Follow This said that in 2022, the ten largest UK asset managers expressed “overwhelming support for Paris-aligned emission reduction targets at Oil Majors”, especially at US companies, with more “modest support for Paris-aligned emission reduction targets at Shell and BP”.

UK asset management voting habits

Although support generally increased over the course of 2017–22, there were differences in voting patterns among the top four largest UK asset managers in climate voting at Shell and BP.

Those asset managers also felt that Shell and BP misused the 'say on climate' resolutions to get “rubberstamp approval from shareholders for insufficient climate strategies”. Shell’s Energy Transition Progress resolution, which asks for shareholders to approve the company’s existing clean energy transition plans, received 80% of shareholder votes.

Van Baal also notes that at Shell, “up to 99% of shareholders voted along with the board on the other 25 resolutions”, thus even a 20% level of support “clearly indicates shareholder discontent”. He adds that the UK corporate governance code requires companies to report on “actions taken” within six months after a 20% or more vote against management at an AGM, so action should be expected.

Shareholder campaigner Majority Action also recommended votes against several ExxonMobil directors, including CEO Darren Woods, and against Chevron’s entire board. The protest votes were due to the companies’ failure to set a 1.5°C pathway. Voting results for directors have not been released by either company.

Big oil: Ready to wave goodbye?

So, is it time to divest from Exxon and Chevron and other big oil companies? Van Baal thinks not.

“Divestment doesn’t work. An investor can say ‘I can clean my portfolio, I can sell off all the fossil fuels', but it won’t help clean the world. And my remaining portfolio will still be in danger of devastating climate change.”

Van Baal points to another divestment failure; the tobacco industry. “Divestment doesn’t work to get rid of industries. Most European pension funds have excluded tobacco holdings, but Big Tobacco still exists. The cost of the access to capital [of tobacco companies] is 1–2% higher than ordinary companies. They have to pay more in interest to borrow money, but they don’t need to borrow much, because they have so much cash flow.”

But there are examples where big investors divest, say van Baal. In May 2021, ABP abstained from Follow This' climate resolution and instead voted in favour of Shell’s in-house climate resolution, effectively supporting Shell’s climate strategy. But only a few months later, ABP lost patience with Shell and sold its shares. “First you don’t vote and then you sell your shares,” says van Baal. “It’s an easy way out because it saves you a lot of trouble with letters from pensioners.”

To get another viewpoint, Capital Monitor checked in with Californian pension fund CalPERS, the lead investor at Chevron and Exxon for the resolutions there. CalPERS voted for the resolutions at Exxon and Chevron, as last year, but against the resolution at BP in both 2023 and 2022.

A CalPERS spokesperson said: “As for divestment, CalPERS focuses on engagement as the preferred method of ensuring companies are doing their part in the fight against climate change. The CalPERS board of administration recently voted to oppose a bill in the California legislature (SB 252) that would require fossil fuel divestments by 1 July 2031.”

Van Baal sums up: “The term investing is confusing. If you are an ‘investor’ in a fossil fuel company, you’re not investing, you’re an owner. Divestment or investment, the shares just change ownership. In the Netherlands, we have a different word for it that basically means ‘asset owner’, investment is something else entirely.”

[Read more: ESG initiatives: Asset owners must sharpen their teeth]

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