Big Oil Vs. Green Finance: Exxon Sues Sustainable Investment Firms

Oil giant ExxonMobilXOM is wading into a heated battle over climate change and corporate governance. ExxonMobil is suing two sustainable investment firms (Arjuna Capital and Follow This) in an attempt to block a shareholder proposal from going to a vote at their annual shareholder meeting.

The proposal urges Exxon to set bolder emission reduction targets and, for the first time, address the wider emissions stemming from the use of its products by its customers (“Scope 3” emissions).

Exxon, historically resistant to aggressive climate action, claims the proposal threatens its core business and seeks to “force ExxonMobil to change the nature of its ordinary business or to go out of business entirely.”

The company claims the proposal infringes on management’s authority, while supporters argue it’s a vital way for shareholders to protect their investments from climate risks.

The crux of the matter:

  • Investment firms Arjuna Capital and Follow This, submitted a proposal requesting Exxon to accelerate its emission reductions and also address its customers’ emissions.
  • Exxon argues the proposal interferes with its day-to-day operations and seeks to alter its product mix, potentially even forcing it out of business.
  • The lawsuit comes amid:
  • Growing political opposition to ESG investing (environmental, social, and governance).
  • A decline in interest in ESG funds on Wall Street.
  • Increased SEC scrutiny of attempts by companies to block shareholder proposals.

Exxon has filed the lawsuit in a Texas court known for its pro-business leanings in an attempt to bypass the traditional Securities and Exchange Commission approval process.

Under the Biden administration the SEC has become less receptive to corporate attempts to squash such proposals.

This lawsuit shines a spotlight on the heated ESG debate: on one side there are advocates who view such considerations as crucial for tackling climate change and on the other there are those who see these proposals as undue interference in corporate affairs.

The potential outcomes of this legal match are far-reaching. A court ruling could either empower shareholders on climate issues or uphold Exxon’s claim, setting a precedent for future lawsuits. Even if the proposal reaches a shareholder vote, it may face an uphill climb, given the lukewarm reception such initiatives received last year.

But regardless of the immediate outcome, this lawsuit has already sent waves through the corporate landscape. This lawsuit may potentially prompt other companies to re-evaluate their approaches to ESG and shareholder engagement.

In fact, the WSJ recently reported that some CEOs are no longer publicly discussing their ESG efforts, opting for alternative terms like “responsible business” or focusing on specific goals like sustainability. This shift reflects the growing complexity and politicization of ESG.

Ultimately, this legal battle is highlighting the growing tension at the intersection of climate change, corporate accountability, and investor activism. Its resolution will have an impact on shaping the future of how we balance economic priorities with the demands of climate change.

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