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ExxonMobil shareholders defy board in 'historic' climate change vote

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A majority of ExxonMobil shareholders voted in favour of a climate change disclosure resolution despite the company urging them to oppose it, in sharp contrast to the fate of a similar resolution filed by shareholders last year. 

The resolution called on the company to report on how its portfolio of reserves and resources would be affected by global efforts to limit the average rise in temperatures to below 2° Celsius. 

The company said it agreed with the importance of assessing the resiliency of its resource portfolio, but recommended investors oppose the resolution as it already conducted such assessments.

However, at the oil major’s annual general meeting yesterday, some 62% of shareholders rejected the board’s recommendation by voting in favour of the resolution, according to the Church Commissioners, which manages the Church of England’s £7.9bn (€9.2bn) endowment fund and co-filed the shareholder resolution along with the New York Common Retirement Fund.

The filing also had the backing of a coalition of institutional investors with some $5trn (€4.5trn) of assets under management, including the likes of Dutch pension managers APG and MN.

Investors with a further €7trn of assets under management had pre-declared their support for the shareholder resolution.

The outcome of the vote had nonetheless been keenly anticipated, in particular to see how major US fund managers such as Vanguard and BlackRock would vote.

Last year the same resolution was supported by only 38% of shareholders, with Vanguard and BlackRock having voted against, in line with the company’s recommendation.

A source following the ExxonMobil vote speculated that the 62% vote in favour of this year’s resolution suggested all three of the oil and gas major’s largest shareholders – Vanguard, BlackRock and StateStreet – had voted in favour of the motion.

Edward Mason, head of responsible investment for the Church Commissioners, said yesterday’s vote was “historic”.

“Despite strong opposition from the board, the majority of Exxon’s shareholders have sent an unequivocal signal to the company that it must do much more to disclose the impact on its business of measures to combat climate change,” he said.

“We are grateful to all of the investors who supported the proposal, and we call on the company to begin urgent engagement with shareholders on how to bring its disclosures in line with those of its peers.”

Mason previously argued that the outcome of last year’s ExxonMobil shareholder resolution underscored the need for a “cultural shift” among institutional investors – especially large US asset managers – to become more willing to challenge management. 

The vote at ExxonMobil comes after recent majority votes at US fossil fuel companies Occidental Petroleum and PPL Corporation, where a majority of shareholders voted against the companies on climate change disclosure resolutions. At Occidental, the motion was passed by 67%, thought to be a record for a non-management backed shareholder resolution.

Raj Thamotheram, CEO at think tank Preventable Surprises, suggested the vote helped make the case that the US’s expected withdrawal from the Paris climate change agreement – which president Donald Trump may announce today – will not meaningfully undermine the investor-backed move towards a low-carbon economy.

Thamotheram said: “Investors voting against management at Exxon is a powerful rebuke to the climate denialist policies of this White House. Markets are moving and Corporate America would be foolish to bet so much on the protection from this regime.”

Representatives of campaign groups, investor groups, and energy economists also hailed this year’s vote at ExxonMobil as a significant development.

Tom Sanzillo, director of finance for the Institute for Energy Economics and Financial Analysis, said the shareholder vote was “an exciting moment in activist-investor history”.

Fiona Reynolds, managing director of the Principles for Responsible Investment, said: “More and more investors are facing up to the material risks around climate change and they are not afraid to engage the companies in their portfolios on this issue and demand answers on how these companies are preparing to transition to a low carbon environment and the impact it will have on their businesses.”

Catherine Howarth, chief executive of ShareAction, a responsible investment campaign organisation, said the resolution was “excellent news, marking a step-change in investor sentiment for climate engagement”. 

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