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May 29, 2015
Resolutions Request Emissions Reduction Goals by Exxon and Chevron
    by Robert Kropp

A process for shareowners to declare their intention to vote in favor of emissions reduction resolutions at the annual meetings of the oil and gas giants does not appear to have led to substantial votes in favor, but signal that investors who choose engagement as a strategy will remain aggressive.

Earlier this year, European oil majors BP and Royal Dutch Shell surprised many advocates for environmental justice by declaring their support for shareowner resolutions calling for meaningful emissions reduction strategies.

But in the US? In his opening remarks at Wednesday's annual general meeting, ExxonMobil CEO Rex Tillerson failed to even mention climate change, despite the presence on the company's ballots of several resolutions addressing the issue in different ways. Voted on by shareowners at both Exxon and Chevron—which also held its AGM on Wednesday—were resolutions calling for quantitative and time-bound Greenhouse Gas (GHG) reduction targets; an independent director with environmental expertise; and the right of shareowners to nominate independent directors. Also, at Chevron, a resolution called for an end to unconventional exploration practices that will only add to stranded assets already counted as assets on the books of the company, but which must stay in the ground if the worst effects of climate change are to averted.

Considering the advocacy skills developed over decades of corporate engagement by Interfaith Center on Corporate Responsibility (ICCR) members Sister Patricia Daly and Michael Crosby, Tillerson could not avoid the subject of climate change altogether, and his statements indicate just how far Exxon has to go to accept the urgency of addressing climate change.

Insisting that current scientific climate change models are inadequate, Tillerson dismissed the idea of the company beginning a transition to renewables. "We choose not to lose money on purpose," he said, arguing that without subsidies renewable energy technologies would lose money. And when reminded that Exxon and other fossil fuel companies receive subsidies far greater than those accorded renewables, Tillerson said, “We don't receive any subsidies.”

(His statement is belied by a recent
International Monetary Fund (IMF), which reveals that in addition to $492 billion in direct subsidies to the fossil fuel industry globally, $5.3 trillion a year is spent on indirect subsidies such as paying for the health effects of air pollution and climate change mitigation costs. Unless a way is found to put an end to the externalization of such costs, they are certain to increase dramatically in a short period of time.)

Despite the best efforts of ICCR and other sustainable investors—along with member Tri-State Coalition for Responsible Investment, ICCR organized a
process for shareowners to declare their intention to vote in favor of emissions reduction resolutions, and a coalition of investors representing $1 trillion in assets under management expressed its support for the resolution—only about ten percent of shareowners at each company voted in favor of the resolution.

A significant reason for the low support for the resolutions this year is the decision by Institutional Shareowner Services (ISS), the influential proxy advisory firm, to recommend votes against the resolutions. In previous years, ISS has always recommended a vote in favor of them.

The other climate-related shareowner resolutions fared better; in fact, the resolution calling for proxy access, submitted by the New York City Comptroller's office, received 55% of shareowner votes. At Exxon, the vote in support was only slightly lower. The resolution requesting an independent director with environmental expertise gained about 20% support at each company.

The Chevron resolution referencing stranded assets—submitted by
As You Sow and Arjuna Capital—a first-time resolution, received enough shareowner support to be included on the company's proxy ballot in 2016. “Shareholders request the Board of Directors to adopt and issue a dividend policy increasing the amount authorized for capital distribution to shareholders in light of the growing potential for stranded assets and decreasing profitability associated with capital expenditures on high cost, unconventional projects,” the resolution stated.

The request by shareowners to have revenues returned to them as dividends, instead of being devoted to high-risk unconventional projects, makes sense when one considers the recent poor financial performances by both oil and gas majors. Share prices for both Exxon and Chevron have declined by about eight percent this year, making them the fourth and fifth worst performers in the Dow Jones Industrial Average thus far.

“Chevron is on an economically unsustainable path,” As You Sow CEO Andrew Behar stated after the shareowner vote. “Chevron has lost money in 9 of the last 10 quarters due to poor capital investment decisions.”


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