Black gold blues: Climate wins signal sea change for Big Oil

Environmental defeats against ExxonMobil and Royal Dutch Shell show energy giants that fail to decarbonise aggressively could be forced to do so.

Shareholders of ExxonMobil pulled off a resounding win against the company’s management on Wednesday by electing at least two out of four candidates for board seats selected by activist investors [File: Jim Young/Reuters]
Shareholders of ExxonMobil pulled off a resounding win against the company’s management on Wednesday by electing at least two out of four candidates for board seats selected by activist investors [File: Jim Young/Reuters]

Climate advocates scored two landmark victories this week in the United States and Europe, shifting the battle lines for how the oil industry will contend with the low-carbon transformation.

At a shareholder meeting, activist investors at US-based ExxonMobil secured the election of two climate-friendly candidates to the company’s board. And in the Netherlands, a Dutch court ruled that Royal Dutch Shell must accelerate efforts to cut carbon dioxide emissions.

Taken together, the dual defeats for the oil supermajors show the groundswell of support for more investment in clean energy, as fossil fuel firms stare down pressure to go green more aggressively.

“The investor rebellion at Exxon, the court decision on Royal Dutch Shell and even President Biden’s Executive Order on Climate-Related Financial Risk are all signs that point to an inevitable shift away from climate-destructive behaviours,” said Roberta Giordano, a finance campaigner at the Sunrise Project.

“Fossil fuel companies and their financiers are finally being forced to reckon with their business models and take full responsibility for their role in driving climate change,” she told Al Jazeera.

“It is time to stop with new fossil fuel expansion,” Giordano added, referring to the International Energy Agency’s recent recommendation for how to keep global warming well under 2 degrees Celsius. “Fossil fuel companies [should] actively plan for a low-carbon economy or become irrelevant.”

For those companies whose core business is the extraction and sale of oil and gas products, future viability could hinge on their short-term power to withstand government regulation on carbon emissions while also quickly innovating for the long term in the alternative energy space.

Exxon vs Engine No. 1

Shareholders of ExxonMobil pulled off a resounding win against the company’s management on Wednesday by electing at least two out of four candidates for board seats selected by activist investors.

Analysts say that is a historical first for the industry, as a coalition of Exxon investors wants the company to invest more in renewable energy — expressly to maximise future profits.

And now more than half of Exxon’s shareholders appear to agree with that approach.

Eli Kasargod-Staub is executive director of Majority Action, a non-profit organisation dedicated to empowering shareholders to hold corporations and their leadership accountable.

A gas pump is seen in a car at a Shell gas station in Washington, DC, the United States [File: Andrew Kelly/Reuters]
He told Al Jazeera that the Exxon changes represent a “fundamental” break towards a net-zero future in which “decarbonisation is not optional”.

“The importance of this kind of challenge cannot be overstated, because shareholders’ strongest power to redirect a company’s strategy is their ability to declare collectively to corporate boards, ‘Here is the bright line of what responsibility looks like’,” he said.

The hedge fund leading the rebellious climate campaign, Engine No. 1, may yet see more of its candidates land board seats, pending the final proxy tally.

This week’s surprising vote results are a rebuke of ExxonMobil Chairman and CEO Darren Woods, who has been reluctant to modify the company’s environmental policies.

Exxon says that its business model is better suited to capture carbon from industrial plants and store it underground — rather than retooling its work into renewables production.

Kasargod-Staub said that Woods “can either lead the company in that direction or be replaced with leaders who will”.

“Whether he wants to be a part of [Exxon’s] future, or not, is ultimately up to him,” he added, referring to the previously “impenetrable fortress of a corporate boardroom”.

Shell vs Friends of the Earth

The District Court in the Hague ruled on Wednesday that Royal Dutch Shell, Europe’s biggest oil company, is legally “obliged” to slash its emissions 45 percent by 2030 from 2019 levels.

Netherlands-based Shell — as a global producer and supplier of oil and natural gas — had already committed to substantial emissions cuts. However, the judicial ruling will force the company to move faster and sets a precedent for a court dictating business prerogatives.

A Shell spokesman called the ruling “disappointing” and promised to appeal it. The company says it has invested substantially in biofuels, hydrogen technology and electric vehicle charging.

The Chevron Pascagoula Refinery in Pascagoula, Mississippi, the United States [File: Jonathan Bachman/Reuters]
Milieudefensie, the environmental defence organisation that won the lawsuit, is the Dutch branch of Friends of the Earth International, an NGO network.

“For the first time in history, a judge has held a corporation liable for causing dangerous climate change,” said a statement about the victory from Friends of the Earth.

The historic ruling compelling a corporation to comply with Paris Agreement climate targets could mean that large energy firms in other countries will face similar judgements.

Sara Shaw, an international programme coordinator at Friends of the Earth, said she hopes the verdict “will trigger a wave of climate litigation against big polluters”.

The verdict cites human rights violations of people impacted by global warming and also applies to “scope 3” emissions by Shell customers.

‘Big Oil’ vs the future

With the Exxon and Shell developments, as well as a vote by Chevron shareholders to reduce that company’s scope 3 emissions, climate activist Bill McKibben said on Twitter that Wednesday was “an utterly crushing day for Big Oil”.

Meanwhile, a new report ranking the progress of oil companies in meeting their emissions targets was released this week by Carbon Tracker, which studies the impact of climate on financial markets.

Mike Coffin, a senior analyst at Carbon Tracker and the report’s author, said that Exxon and Chevron still lack net-zero targets entirely and that they are among the firms resisting absolute cuts to production — committing instead to only reducing the energy intensity of certain products.

While European oil companies such as BP, Total, and Eni have already begun investing significantly in renewable sources like solar and wind energy, US firms are late to the party.

The report only looked at publicly traded Western firms, and not the climate policies of huge state-owned companies like Saudi Aramco, China National Petroleum Corporation and Gazprom in Russia. But they too have investors focused on the bottom line and an aversion to becoming dinosaurs as major economies move away from fossil fuels by 2050 or earlier.

Shareholder rebellions and political forces have urged companies to avoid the prospect of being stuck with stranded assets as oil demand inevitably drops in the future.

“At the highest level we’ve seen growing recognition of the risks,” Coffin told Al Jazeera, referring to the combination of investor, regulatory and consumer pressures.

“ExxonMobil’s strategy of doubling down as laggards in the energy transition response and continuing business as usual … is destroying value for shareholders,” he added.

Coffin said that climate awareness in Europe is years ahead of the pace in North America but that all fossil fuel companies should “reframe their businesses and wind down production to [guarantee] sustainable incomes”.

Source: Al Jazeera

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