Exxon Advises Voting Against Reducing Scope 3 Emissions

Exxon Advises Voting Against Reducing Scope 3 Emissions
ExxonMobil directors have advised shareholders to vote against a climate proposal that requests Paris-consistent emissions reductions targets.

ExxonMobil directors have advised shareholders to vote against a climate proposal submitted by green shareholder Follow This that requests Paris-consistent emissions reductions targets.

In 2021, the majority of shareholders voted in favor of the Follow This climate resolution at Chevron, Conoco, and P66. They also voted in three new non-executives, proposed by activist shareholder Engine No. 1, in the board of Exxon, Follow This reminded.

“ExxonMobil can expect a shareholder rebellion,” says Mark van Baal, founder of Follow This. “More and more investors do not accept Big Oil’s refusal to take adequate action against the climate crisis anymore. With the negative voting advice, the directors of ExxonMobil tell shareholders that they are unwilling to take responsibility at a time of devastating climate change.”

Follow This pointed out a key sentence in ExxonMobil’s directors’ negative response which noted that a proposal to constrain leading companies from producing products that currently have insufficient practical alternatives ‘simply transfers that production and associated emissions to other producers.’

The organization stated that this response by ExxonMobil showed a lack of imagination beyond oil and gas and that the board of the company fails to see that fossil fuels can be replaced by renewables.

“With ExxonMobil's attitude, the goal of the Paris Climate Agreement will never be achieved. The world doesn't demand oil and gas as such. The world demands energy and increasingly renewable energy.”

ExxonMobil stating that Scope 3 was not their responsibility is like Shell’s attitude in 2017, BP’s and Equinor’s in 2019, and Chevron’s, ConocoPhillips’, and Phillips66’ in 2021. Namely, all five claimed Scope 3 was beyond their management scope and all five reluctantly set a Scope 3 target after investors’ votes.

"The rejection of this climate resolution shows the board does not want to commit to the Paris Climate Agreement. In May, responsible investors will show ExxonMobil that Scope 3 is essential to mitigate the climate crisis by voting for this climate proposal, as they did with its peers Shell, BP, Equinor, Chevron, ConocoPhillips, and Phillips66 who all followed the same pattern,” van Baal added.

In May 2022, the Follow This climate resolutions will again come to a vote at the shareholders’ meeting of Shell, as well as eight or nine other oil majors. In 2021, investors’ votes in favor of these resolutions showed, what Follow This described as, a ‘shareholder rebellion at Big Oil.’ But regardless of the investors asking for climate action, the companies responded with emissions reduction targets that fall short of the Paris alignment.

Follow This also quoted Hans-Otto Pörtner, the co-Chair of the most recent Intergovernmental Panel on Climate Change report, who said: “The scientific evidence is unequivocal – climate change is a threat to human wellbeing and the health of the planet. Any further delay in concerted global action will miss a brief and rapidly closing window to secure a livable future.”

Financial And Legal Issues

Apart from the climate issue of the matter, Follow This also reminded Exxon of a growing international consensus that emerged among financial institutions that climate-related risks are a source of financial risk. This meant that banks will be starting to pull out from investments that do not limit global warming. The most recent such example was Dutch banking giant ING, which backed out from further oil and gas investments last month.

The supermajor was also reminded that a Dutch court ordered Shell in 2021 to severely reduce their worldwide emissions – Scope 1, 2, and 3 – by 2030. This indicates that oil majors and large investors also have an individual legal responsibility to combat dangerous climate change by reducing emissions and confirming the risk of liability.

Exxon’s Response

Exxon defended its stance by reminding that it was undertaking several initiatives to reduce greenhouse gas emissions including the plan to achieve Scope 1 and Scope 2 net-zero greenhouse gas emissions from operated assets by 2050.

The company added that it had net-zero roadmaps for major assets, covering about 90 percent of its GHG emissions which are scheduled to be completed by year-end 2022, and the remainder in 2023.

Exxon also plans to reduce Scope 1 and Scope 2 greenhouse gas emissions through 2030 compared to 2016 levels that are consistent with Paris-aligned pathways. The plans are expected to result in a 20-30% reduction in corporate-wide greenhouse gas intensity, including reductions of 40-50% in upstream intensity, 70-80% in methane intensity, and 60-70% in flaring intensity. ExxonMobil will also invest more than $15 billion by 2027 in carbon capture and storage, hydrogen, and biofuels.

It accused Follow This that it ‘does not acknowledge the significant work and commitment by ExxonMobil to reduce its emissions as well as the emissions of its customers’ and pointed to an interview on Follow This’ website in which it claimed that the proposal was designed ‘with the explicit intent to constrain ExxonMobil’s future investments in oil and gas.’

“But advocating for ExxonMobil to decrease production and supply at present, without any commensurate reductions in corresponding demand, would result in customers simply choosing other suppliers, which could have unintended consequences. A proposal to constrain leading companies from producing products that currently have insufficient practical alternatives simply transfers that production and associated emissions to other producers. If the other producers are less efficient and have higher emissions intensity, society’s overall emissions would likely increase,” Exxon said in its recommendation to stakeholders.

It also pointed to flaws in the measurement system of Scope 3 emissions by claiming that ‘multiple methodologies are presently employed using questionable, often double counted (or more), estimates with widely acknowledged deficiencies and inconsistencies when calculating and reporting Scope 3 emissions.’

Exxon ended its explanation for why the vote should be against by stating that the Board of the supermajor supports its approach toward net-zero which is divided into three segments.

The first is measuring, monitoring, and managing reductions of the company’s emissions, the second entails providing lower emissions-intensive products as the energy transition progresses that help our customers increasingly reduce their emissions, and the final regards advancing the commercialization of emissions-reduction, and emissions-sequestration technologies.

“Taken together, this is a more effective response to credibly addressing the risks of climate change than excess reliance on unreliable methodologies and inadequate assumptions intended to characterize a single company’s Scope 3 emissions. Therefore, the Board recommends a vote against this proposal,” Exxon concluded.

To contact the author, email bojan.lepic@rigzone.com


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