Exxon Mobil Faces Off Against Activist Investors on Climate Change

The oil company will hold a contested election for four board seats at its annual shareholders meeting on Wednesday.

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HOUSTON — Exxon Mobil’s management will face a big challenge over its climate change policies at an annual shareholder meeting on Wednesday as activists contest the election of one-third of the company’s board.

Analysts who follow the company said they could not recall an election in which board candidates nominated by Exxon had lost. A defeat for even one of its nominees would be a rebuke to Darren W. Woods, Exxon’s chairman and chief executive.

Led by Engine No. 1, an activist hedge fund, a coalition of investors concerned about the environment has argued that Exxon has not invested enough in cleaner energy, which will hurt its profits in the future. These investors argue that the company should follow European oil companies like BP and Total that have begun investing heavily in renewables like wind and solar energy.

Much depends on whether much larger Exxon shareholders back Engine No. 1’s campaign. All eyes are on BlackRock, the world’s largest asset manager, which has cast itself as a leader in efforts to press companies to do more to reduce emissions of carbon dioxide and other gases that cause global warming.

Engine No. 1 is seeking to defeat the election of four of the company’s 12 director candidates with four of its own. Some big pension funds, including the New York State Common Retirement Fund and the California Public Employees’ Retirement System, have joined Engine No. 1, which was started last year.

“We listen, and we hear,” Mr. Woods said in an interview in which he tried to take a conciliatory tone. “We don’t always agree, but we always understand there is an opportunity to improve.”

Exxon has argued that it is addressing climate change via its investments in technology that captures carbon at factories, before it is released in the atmosphere, and stores it. This technology includes a proposal involving emissions from industrial plants along the Houston Ship Channel. On Monday, it announced that later this year it would add two new directors to the board, including a climate expert, but it has not committed to investing in renewable energy.

Engine No. 1 dismissed Exxon’s Monday announcement. “What the board needs are directors with experience in successful and profitable energy industry transformations,” the hedge fund said in a statement. “This vote is too important to be influenced by this type of cynical, last-minute maneuvering.”

Energy analysts say the dissidents could win seats on the board, but that would not necessarily change Exxon’s direction substantially, at least not immediately given that most of the board would still be made up of directors picked by the company’s management.

“I don’t expect a meaningful change in strategy such as large investments in renewables,” said Allen Good, a Morningstar analyst. But he said a victory for the dissidents “would be a signal that shareholders don’t think current initiatives have gone far enough, and that could spur further change.”

There have been several challenges to Exxon’s management over the years, but the dissidents gained strength last year when the company did not increase its dividend and slashed its $200 billion investment program by a third. And the company’s stock dropped by nearly half. Its share price has regained much of those losses in recent months but remains about 17 percent lower than it was in January 2020, before the pandemic took hold.

Engine No. 1’s candidates are Gregory Goff, a former chief executive of Andeavor, a refinery company; Kaisa Hietala, a former executive at Neste, a Finnish energy company; Alexander Karsner, a senior strategist at X, a lab owned by Google’s parent, Alphabet; and Anders Runevad, the former chief executive of Vestas Wind Systems, a wind turbine maker.

Much depends on whether shareholders with large stakes in Exxon vote with Engine No. 1.

Reuters reported on Tuesday that BlackRock, which has a 6.7 percent stake in Exxon, had backed Engine No. 1’s campaign by voting for three of the hedge fund’s candidates. A BlackRock representative declined to comment on the report or its Exxon votes.

BlackRock’s critics say its deeds have not matched its talk on getting companies to do more to reduce carbon dioxide emissions. But the investment firm has said that engaging with management has produced results, and it has contended that voting against directors proposed by management can compel companies to make changes that would benefit the environment. BlackRock said that last year it voted against 64 directors on the boards of companies that generate a lot of carbon emissions.

This year, BlackRock told The New York Times that its ambition was for its entire investment portfolio to be at “net zero” emissions by 2050 at the latest. In other words, the companies and other entities in which BlackRock invests would, in aggregate, be adding zero planet-warming gases to the atmosphere because they took out as much as they put in.

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