Amid oil industry profits and anti-ESG campaigns, proxy votes see less support

Big investors appear to be showing less support for environmentally focused shareholder resolutions this year, with a handful of votes at oil companies being rejected by wide margins.

That was evident with proxy votes this week at ExxonMobil and Chevron that sought to push the oil companies to exclude their sold-off assets from their carbon reduction targets. Those shareholder resolutions, sponsored by As You Sow, each garnered 18% approval, based on early reports.

The results come amid a year of strong profits for oil and gas companies and as Republican politicians in the U.S. have waged a campaign against ESG.

The topic of sold-off assets has become a focal point in the sustainable investing world as oil companies have made pledges to reduce their greenhouse gas emissions. Selling older, often heavier-polluting properties and facilities can make companies look good on paper, but those assets don’t go away. A criticism is that such holdings are snapped up by smaller companies at a bargain, and that the fossil fuels extraction at the locations will simply continue — potentially with less oversight.

Excluding former holdings would make it harder for companies like Exxon and Chevron to show progress on their net-zero goals, but proponents stress that the net effects of such sales on climate change must be considered.

“A significant segment of investors have made it clear today that they expect the largest American oil and gas companies to be transparent about the real-world impact of their emissions targets,” As You Sow president Danielle Fugere said in an announcement Wednesday. “With today’s votes, investors underscore that they seek clear and accurate reporting from Exxon and Chevron on whether they are meeting their targets and reducing their contribution to climate change.”

OTHER VOTES

The asset divestiture resolutions weren't the only ones at Exxon and Chevron this year. Another proposal requested an audited report on how a reduction in the companies’ use of virgin plastic, rather than recycled, would affect their financial positions.

Chevron omitted that resolution from its ballot with the approval of the Securities and Exchange Commission. But the resolution went to a vote at Exxon, with 25% of shares approving it, down from over 36% support for the same resolution in 2022.

Those were among more than a dozen shareholder resolutions going to a vote at Exxon, most of which focused on environmental issues. One such proposal, filed by activist shareholder group Follow This, asked the company to set an greenhouse gas reduction goal in line with the Paris Accord, including for Scope 3 emissions. That category of emissions includes everything in a supply chain and customer base, which for Exxon would mean the gas burned by drivers.

That resolution attracted just 11% support, down from the level of 28% a version of the proposal saw last year. Similarly, a vote on an otherwise identical resolution at Chevron saw just 10% support, down from 33% last year.

Similar votes earlier this year at BP, Shell and Total Energies saw support of 17%, 20% and 30%, respectively, according to Follow This.

“We have made it easy for investors to use the power of their votes, but most investors have yet to decouple short-term profits from long-term risks for the company and their portfolios,” Follow This founder Mark van Baal said in an announcement. “Anti-ESG sentiments and short-term profits might have played a role for investors. BlackRock, State Street and Vanguard, the world's largest asset managers, seem to have succumbed to this pressure and most probably have voted against as they did in 2022.”

Two years ago, climate-aligned votes at Exxon to change board member seats, in a resolution brought by Engine No. 1, shocked the industry. Since then, the hedge fund firm and ETF sponsor has focused on corporate engagement and has not pursued proxy fights.

Last year, a resolution brought by As You Sow seeking an audited report on how the International Energy Agency's Net Zero by 2050 decarbonization pathway would affect Exxon's finances won 51% of shareholder approval. A similar proposal at Chevron saw nearly 39% approval.