Some of the world’s largest oil companies are seeing climate activists and investors putting the fossil fuel business on the ropes. The Dutch court ruling that obliges Shell to reduce its carbon dioxide emissions by 45% is joined by another important victory on the other side of the Atlantic: the management of Exxon, the largest oil company in the United States, has forced to admit that two of its 12 members are those proposed by a minority investment fund whose action is focused on the fight against climate change.
Leaving oil and gas reserves underground is one of the requests that activists against climate change and many scientists have repeated for years as a formula to keep global warming within manageable limits. And leaving them underground is basically what the International Energy Agency (IEA) now proposes when it warned in a recent report that in order to comply with the Paris Agreement, no government in the world should authorize new exploitations of fossil fuels. The report marks a new blow to the table of the boards of directors of the big oil companies, now hit by the Shell ruling and the changes in the Exxon board.
“Both news are a victory for the climate,” says Betsy Middleton, member of the Dutch group of small investors Follow This, which has been lobbying Shell for years to make commitments to reduce its solid emissions. “The oil companies have been too slow until now,” he says. “We need investors to force them to change from within, and we need good policies and governance to guide them from the outside,” Middleton adds.
Change from within is what the small group of investors was looking for Engine No.1, which at this week’s shareholders’ meeting presented an alternative shortlist to that of Exxon’s management so that several experts in green energy could join the board of the oil giant. Finally, this fund, which defends the diversification of fossil fuels and reducing carbon emissions, managed to get two of its candidates to join the board of directors – made up of 12 members. With a small 0.02% of the shares, Engine No.1 began its awareness campaign to transform the practices and objectives of the oil giant in December and as of March managed to convince other shareholders, such as the powerful pension funds of New York and California public workers.
But among all the support obtained, that of the powerful BlackRock fund stands out, which owns almost 7% of the company’s shares and is committed to “the need to review the business strategy given the possibility that the demand for fossil fuels may decline rapidly in the next decades ”. Larry Fink, the CEO of BlackRock, already warned in a public letter earlier this year that the main bet of his fund would be investments related to climate change.
“Nothing like this has ever happened before,” explains Ana Barreira, director of the International Institute of Law and Environment. His organization has been practicing this activism since 2017 in the shareholders’ meetings of large companies such as Enel or Banco Santander, where they press for these companies to redirect their activities and investments related to fossil fuels. But, as Barreira explains, entering the board of directors of one of the oil giants is something that is unprecedented. Middleton of Follow This adds: “The message has been sent to other major oil companies that if they don’t take the necessary action, investors will demand change.”
The engineer Jorge Morales, author of the book Goodbye oil (Alianza Ensayo), considers that “the death sentence” for this fossil fuel “has been signed for many years.” “Since the 2007 oil crisis, investments in new fields have been reduced, but many of these companies have based their strategy on lying,” he adds, referring to studies that point to how Exxon misled for decades about the influence of oil companies. fossil fuels in global warming.
Exxon, along with Saudi Aramco, Chevron, Gazprom, National Iranian Oil Co, BP and Shell are part of the list of the 20 multinationals dedicated to fossil fuels that have been responsible for 35% of all carbon dioxide and methane emitted throughout the global energy sector since 1965, according to a study by Climate Accountability Institute. The Exxon case is also joined this week by what happened at the meeting of Chevron, another major US oil company: more than 60% of shareholders approved a statement asking the company to reduce its greenhouse gas emissions.
In the case of Exxon and Chevron, the pressure from activists and large investment funds is joined by the turnaround undertaken by Joe Binden in his country. After the stage of Donald Trump, who protected the fossil fuel industry, the Democratic president has set as one of his objectives the promotion of renewables and decarbonisation as a way to generate employment. Dario Kenner, a researcher at the University of Sussex and a contributor to the Climate Accountability Institute, appreciates the movements of activist investor groups, but does not believe that the complete solution to greenhouse emissions can come only in this way. Kenner recalls that these companies invest heavily in lobbying governments around the world to “secure fossil fuel subsidies and permits to extract” oil and gas. “It is important to recognize that the vast majority of fossil fuels will only remain in the ground if governments phase out the extraction of oil, gas and coal and the use of these fuels by industry and consumers,” says Kenner.
The other big knock this week was the Shell ruling, which forces the company to reduce its emissions by 45% in 2030 compared to 2019 levels, a more ambitious plan than the one presented by the management of the multinational up to now. “The ruling sent a clear message to all major oil companies and their investors that they have a legal responsibility for the impact their business has on the climate,” Middleton says.
Michael Burger, Executive Director of the Sabin Center for Climate Change Law, from Columbia University, argues that the most direct impact of this ruling – which will be appealed, which will now start a legal battle – would be that the company must “produce and sell less fossil fuels” to reduce its emissions. “The court found that the production and sale of fossil fuels threatens human rights and that fossil fuel companies like Shell, under Dutch law, have an obligation to reduce that threat,” explains Burger, an expert in climate litigation. In 2020, according to the study carried out together with the UN’s environment agency, there were 1,550 climate disputes active in the world – 80% in the United States. But Burger maintains that it is the first time that a court of law has ordered an oil company to reduce its emissions by a specified percentage.
Eddie is an Australian news reporter with over 9 years in the industry and has published on Forbes and tech crunch.