Exxon AGM: Major European pension investors react to ‘historic’ vote

In what has been described as a historic vote, a majority of ExxonMobil shareholders yesterday voted to replace two of the oil major’s board of directors with candidates from a slate nominated by climate activist shareholder Engine No.1. IPE asked major European pension investors for their thoughts, with several seeing the outcome as an encouraging example of active ownership.

According to preliminary vote estimates, Gregory Goff, former CEO of Andeavor oil refining company, and Kaisa Hietala, former executive vice president of renewable products at Neste, will be joining the Exxon board of directors, with eight of ExxonMobil’s nominees also having been elected.

Votes for five nominees, including Engine No. 1 candidate Alexander Karsner, were too close to call, the oil major reported yesterday. A fourth Engine No. 1 candidate, Anders Runevad, was not elected. CEO Darren Woods will remain on the board, also as chairman.

Lothian Pension Fund was among the shareholders who voted for all of the board directors nominated by Engine No.1, with responsible investment lead David Hickey having in advance of the meetings declared that the candidates “represent a blend of excellent experience in the oil business, alongside a great track record in innovation and development of low carbon business models”.

Commenting today, Bruce Miller, CIO at the Scottish local authority pension fund, told IPE that the shareholder support for the alternative slate of directors was “an encouraging example of the effectiveness of shareholder engagement and action”.

“The ability of responsible investors acting in concert to drive change at companies, through both engagement and voting, has long been used as an argument against divestment,” he said.

“We’re now in a position where there is enough critical mass behind this approach and we are seeing notable votes passing, with the Exxon vote being a prime example in relation to climate-related resolutions.”

The sentiment was pithily echoed by Karoliina Lindroos, head of responsible investment at Ilmarinen in Finland: “This is an important step forward in context of climate action and a good example what active ownership can achieve,” she said.

Her counterpart at defined contribution master trust NEST in the UK, Diandra Soobiah, said the AGM showed “the power of being active stewards and voting at AGMs should not be underestimated”.

“It’s important all institutional investors challenge boards of companies to ensure they are making the right long-term decisions, if they are to be sustainable,” she said.

NEST voted in favour of all four of the candidates put forward by Engine No.1. Church Commissioners for England and California teachers’ pension fund CalSTRS did, too, having supported the campaign since December, when it began. CalPERS and New York State Common Retirement Fund also gave their support to the full slate.

APG voted in favour of three out of four candidates put forward by Engine No.1, according to a spokesman for the Dutch asset manager. He said the outcome of the vote made clear there is appetite for change at Exxon from investors.

“We hope the entire board of Exxon will embrace this change and will set a clear focus and strategy on thriving in the energy transition,” he told IPE.

BlackRock, the second largest shareholder in Exxon, also voted for three of the four Engine No.1 candidates (not Runevad). In an overview of its position, it flagged the recent net-zero 2050 scenario from the International Energy Agency (IEA), saying Exxon and its board needed to further assess the company’s strategy and board expertise against the possibility that demand for fossil fuels may decline rapidly in the coming decades, as discussed in the IEA pathway. 

“The company’s current reluctance to do so presents a corporate governance issue that has the potential to undermine the company’s long-term financial sustainability,” it said.

Several European pension investors are no longer shareholders in the US oil major. At AP7 in Sweden, Johan Florén, head of communications and ESG, said the buffer fund had Exxon blacklisted, but “we would have voted to reenergize Exxon” – referring to the slogan chosen by Engine No.1. for its campaign.

“I see this as one of many steps in the transition of the oil sector, but a step of great importance since it’s such a clear shift in the relationship between owners and management,” said Florén.

The Engine No.1 campaign had introduced a collaborative strategy among active owners that the world would see a lot more of in the coming years, he added.

Investors also spoke about a signal being sent to Exxon and other companies, or at least that they hoped for this.

“Yesterday’s Exxon AGM sends a clear message to companies that investors want to see real action on climate change and if they don’t, then we’ll vote against boards,” said Soobiah at NEST in the UK. “I hope this unprecedented vote sends a strong signal to other big oil companies that investor concerns on climate change shouldn’t be ignored.”

Kiran Aziz, senior impact investment analyst at KLP Asset Management, said the Norwegian investor hoped the Exxon AGM outcome would “send a clear signal about the direction of which we are going forward”.

Exxon is not the only oil and gas major to have suffered a management defeat in relation to climate change. With Chevron yesterday, three US oil and gas companies have now seen a majority vote for a Follow This resolution calling for more ambitious target-setting. Shareholders were less convinced about the activist resolution at European oil and gas majors, although support more than doubled.

KLP’s Aziz said oil and gas companies were under a lot of pressure from various actors. “The oil and gas sector has to make dramatic transformations in order to realign the business to the goals of the Paris Agreement, and it’s important they align their activities according to the ambitions in the Paris Agreement,” she said. “We investors would like to use all the available tools and be able to influence important board decisions.” 

ATP is not invested in Chevron or Exxon, but Ole Buhl, its head of ESG, said the Danish investor viewed the votes at Exxon and Chevron as “examples of a maturing investor influence, not least when it comes to climate issues”.

In a blog on its website, Climate Action 100+ said the votes at ExxonMobil and Chevron were “the capstone to a stunning proxy season for investor action within the oil and gas industry”. Shareholders will tomorrow give their verdict on the energy transition strategy at French oil and gas major Total – Dutch pension funds PME and PME, Ircantec in France, and asset manager Meeschaert are among those who are due to vote against management.

additional reporting by Rachel Fixsen

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