ExxonMobil is facing its latest shareholder clash after the UK’s biggest asset manager said it would oppose the re-election of chief executive and chairman Darren Woods at the US oil group’s annual meeting this month.
Legal & General Investment Management, which oversees about $1.5tn in assets, said it would also back shareholder resolutions calling for an independent chair and for the Texan company to disclose its lobbying activities, arguing it was falling behind global peers by failing to act on climate change.
Wednesday’s move by LGIM, whose roughly $1bn stake makes it a top-20 Exxon investor, according to data provider CapitalIQ, adds to mounting pressure on the US group a fortnight before its AGM.
Church Commissioners, which oversees the Church of England’s investments, and the New York State Common Retirement Fund, the third-largest US public pension plan, wrote an open letter to Exxon shareholders late last month urging them to “make clear, via their voting, that the time has come for change in . . . governance and strategy”.
Meryam Omi, head of sustainability and responsible investment strategy at LGIM, said the fund manager was concerned about Exxon’s “lack of strategic ambition around climate change”. Unlike rivals such as BP and Shell, Exxon has not set “net-zero” ambitions or targets.
“We are seeing many of Exxon’s peers step up and reaffirm their sustainability ambitions even amid the current testing circumstances,” she added. “The world, and Exxon’s investors, cannot afford the company to fall behind.”
LGIM introduced a policy to vote against combined chair and chief executive roles this year. Ms Omi said Exxon’s ability to respond effectively to climate change could be bolstered by having an independent chair and disclosing its lobbying efforts, including around global warming.
Big asset managers rarely announce their voting intentions ahead of an annual meeting, making LGIM’s move unusual. Last year the asset manager dumped Exxon from a range of its funds over climate change concerns but remains a big investor across its passively managed products that track an index.
The New York State Common Retirement Fund, which holds about $470m of Exxon stock, last week said it was backing a proposal to separate the top roles. The California Public Employees retirement system (Calpers), with a similar-sized stake, supported the motion along with another calling for lobbying disclosure.
Liz Gordon, executive director of corporate governance at the NYSCRF, said engagement with Exxon on climate change and the risks it posed to the company’s business were a “frustrating endeavour”.
“We watch our colleagues in other Climate Action 100+ engagement groups with other oil and gas majors who are having very, very different experiences . . . seeing a much greater openness to that dialogue and that engagement,” she said, referring to the investor lobby group pressing big companies to address their emissions.
Exxon’s long-term energy-demand forecasts failed to include “any recognition in any of the scenarios of the downside impacts of unfettered global warming,” she added. “That’s one of the reasons we as investors are so worried.”
Exxon referred to public comments where it acknowledged “the importance of a strong, independent board”, but rejected the notion that a combined top job impeded “effective oversight or that it constitutes a conflict”, noting the “significantly enhanced” responsibilities of a lead director. It said the company had a “rigorous oversight process governing public positions and lobbying”, which were already aligned.
Exxon also referred to its 2020 Energy and Carbon Summary, which sought to address shareholder concerns, saying the company’s investment strategy was aligned with the targets in the Paris climate agreement and that it had spent $10bn in emissions-reducing technologies.
The Church Commissioners and NYSCRF have previously pushed a motion to separate the chair and CEO roles at Exxon but without success. However, support for the motion has grown, with 40.7 per cent of shareholders backing it at last year’s AGM against 38.7 per cent in 2018.
Endorsement of the resolution calling for a report on lobbying has also increased, with 37.3 per cent of shareholders backing it last year compared with 26.2 per cent in 2018.
Calpers declined to comment on the fund’s support for activist motions at the forthcoming Exxon AGM.