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Exxon Mobil Corp (XOM.N) has taken a proactive step to block a climate proposal by activist investors, marking the first time the energy giant has sought legal intervention to exclude such a proposal from a shareholder vote. The complaint, filed on a Sunday, aims to prevent the climate initiative from reaching a vote during Exxon’s upcoming shareholder meeting in May. This strategic move has sparked attention as it diverges from Exxon’s previous approaches to handling shareholder proposals.
Exxon’s Opposition to Climate Proposal
Exxon argues that the activist investors, led by U.S. activist investment firm Arjuna Capital and shareholder activist group Follow This, are pursuing an “extreme agenda” with proposals that allegedly do not align with investors’ interests or foster long-term shareholder value. The primary focus of contention is the call for Exxon and other oil majors to adopt more stringent climate targets.
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Scope 3 Targets and Investor Demands
Arjuna Capital and Follow This investors are urging Exxon to establish Scope 3 targets, a commitment to reduce emissions associated with using the company’s products. Notably, Exxon is the lone Western oil major among the top five that has yet to set such targets. The proposal is part of a broader trend where investors increasingly pressure oil companies to address environmental concerns and align with global climate goals.
Past Voting Trends and Exxon’s Justification
Follow This has previously presented similar proposals at shareholder meetings of various oil majors, with approval rates of 28% in 2022 and 10% in the previous year. Exxon contends that its shareholders have already rejected Scope 3 targets in the past, justifying its attempt to exclude the proposal from the upcoming proxy statement.
Legal Jurisdiction and Court Assignment
Exxon has filed the complaint in the U.S. District Court for the Northern District of Texas to enforce its stance. Notably, Exxon’s headquarters in Spring, Texas, typically falls under the jurisdiction of the Southern District Court. The case has been assigned to U.S. District Judge Reed O’Connor, known for favoring conservative causes and ruling on contentious issues such as gun regulations, LGBTQ rights, and healthcare.
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Exxon’s Allegations and Investors’ Counterargument
Exxon alleges that Arjuna and Follow This are pursuing a strategy to become shareholders solely to advocate changes that would diminish the company’s existing business. In contrast, Follow This contends that investing in the energy transition and adopting Paris-aligned medium-term targets for Scope 3 is in the best interest of shareholders. According to Follow This, such goals would mitigate risks related to capital markets, policy interventions, and potential losses associated with stranded assets.
Timeline and Relief Seeking
Exxon is seeking legal relief by March 19, with its proxy statement due to be filed by April 11, ahead of the annual shareholder meeting scheduled for May 29. The outcome of this legal challenge will likely set a precedent for how significant corporations respond to increasing shareholder activism related to environmental concerns.
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