Exxon and Chevron held their annual meetings for shareholders on Wednesday, where the companies were once again confronted by strong support for resolutions asking them to do more on climate change. This year, climate-related proposals at the two oil majors centered around three main issues: methane emissions, climate risks, and emissions targets.
There was no major reckoning compared to last year’s upheaval at Exxon, when shareholders ousted three board members due to concerns the company was not doing enough to prepare for the inevitable decline of fossil fuel demand. But there were two proposals that received majority support.
At Chevron, 98 percent of shareholders voted in favor of a resolution calling on the company to re-evaluate its methane emissions numbers. Methane is a powerful greenhouse gas that is leaked or vented into the atmosphere throughout the U.S. oil and gas system. Cutting methane emissions is one of the fastest ways to slow climate change, and Chevron has already committed to reduce its methane emissions by 50 percent below a 2016 baseline. But that baseline is based on models developed by the Environmental Protection Agency that have been found to be grossly underestimating the problem.
The resolution asks Chevron to directly measure its methane emissions via drones, satellites, and other leak detection methods, and prepare a report comparing the results to its previously published estimates. “The expectation is that would then lead the company to revisit its targets, which were based on the old approach,” said Andrew Logan the senior director of oil and gas at the shareholder advocacy organization Ceres.
While the 98 percent vote might seem like an extraordinary turnout, it was driven by an unusual circumstance: Chevron’s board supported the proposal, and actively encouraged shareholders to vote for it. “I’ve never heard of an oil company supporting a shareholder proposal, certainly not on climate, before,” said Logan.
In a statement provided to shareholders last month, Chevron explained that it already planned to release an updated methane strategy later this year that will address its methane measurement and disclosure practices and include some of the information shareholders are asking for.
Another significant vote occurred at Exxon, where 52 percent of shareholders supported a resolution asking the company to analyze and report how a decline in fossil fuel demand would affect its financials — also known as “climate transition risk.” Investors are concerned that the company is not adequately contemplating how its commitment to growing its fossil fuel business could put their investments at risk.
“Their current financial statements don’t truly take climate risk into account,” said Danielle Fugere, president of the shareholder advocacy group As You Sow. “They are looking at significant growth of fossil fuel assets and fossil fuel demand over the next two or three decades. What happens to your business if we are successful in meeting the net-zero goals that we set in Paris? How many write- offs are there? What happens to your asset retirement obligations?”
The resolution specifically calls on the company to look at a scenario released by the International Energy Agency, or IEA, last year that showed how the world could reduce emissions to net-zero by 2050 while also limiting warming to 1.5 degrees. The scenario showed that exploration for new oil and gas reserves would need to end immediately and that oil production would decline from nearly 100 million barrels a day to around 24 million a day by mid-century.
As You Sow filed an identical resolution at Chevron, but only 39 percent of shareholders voted in favor of it on Wednesday. Fugere attributed the lower response to the fact that Chevron released an analysis based on the IEA net-zero scenario in the company’s climate change resilience report last year. However, Fugere said the findings were more qualitative than quantitative, and that unlike financial statements, the claims in a climate report aren’t audited. “That climate risk is simply not brought into financial statements,” she said.
The third bucket of climate resolutions were filed by a Dutch shareholder advocacy group called Follow This. Rather than analyze how the transition to clean energy will affect their bottom lines, the resolutions called on Exxon and Chevron to actually transition their business and set targets to reduce their emissions in line with the Paris Agreement. These proposals received 28 and 33 percent support at Exxon and Chevron, respectively, but Mark Van Baal, the founder of Follow This, still called it a “rebellion.”
“More and more institutional investors want all companies in which they are invested to commit to Paris,” he said, “because they foresee that they cannot make a decent return on their capital in a world economy disrupted by devastating climate change.”