On May 31 Exxon-Mobil (XOM.N) shareholders will vote on a shareholder resolution asking the company to publish an annual assessment of the long-term portfolio impacts of technological advances and global climate change policies.
This relatively innocuous sounding request – asking a global business to assess the resilience of its business strategy in face of material risks — is being opposed by Exxon management, who are urging shareholders to vote against the motion.
Management’s opposition may have curbed shareholder support last year, when a similar proposal received 38.2% of the vote. However early indications are that management is facing a bigger challenge rallying its investors this year.
Already shareholders with more than $10 trillion in assets under management have indicated their intention to vote for the motion, and that number is steadily growing. The resolution, which was filed by the Church Commissioners for England and New York State Comptroller Thomas P. DiNapoli as Trustee of the New York State Common Retirement Fund, was co-filed by investors with more than $5 trillion in assets, including Quebec-based Fonds de Solidarite FTQ.
Investors are increasingly concerned about the implications of climate change and more likely to use shareholder engagement and proxy voting to express those concerns. Exxon has been falling behind its peers in coming to grips with the existential risk that climate change poses, as companies like BP, ConocoPhillips, Royal Dutch Shell and Total (who previously received shareholder proposals on the issue) have endorsed the 2 degrees scenario analysis called for in the Exxon proposal.
Management may be counting on what has become known as the “missing 60%”, the difference in the percentage of shareholders that voted in favour of a 2-degree scenario analysis proposal at Shell two years ago (98.9%) and for the same proposal at Exxon last year (38.2%). That difference appeared to be based solely on the fact that Shell management supported the resolution and urged investors to vote “yes” whereas Exxon management opposed the resolution and urged investors to vote “no”. This suggests that too many institutional investors voted passively with management rather than independently exercising their beneficiaries or clients’ proxy rights.
That may be changing, thanks to client and investor engagement with large asset management and mutual fund firms. A vote on a similar proposal at Occidental Petroleum (OXY.N) on May 12 this year received majority support; the yes side received a big boost when Blackrock, the world’s largest asset manager, switched its vote and supported the resolution. Blackrock holds a large position in Exxon as well. Last year it voted against the resolution.
The Exxon vote will be a further test of whether asset owners have been able to exert influence down the investment chain and bring that “missing 60” out of hiding. If you have not yet spoken with your manager about Item 12 on the Exxon ballot, now is the time to do so.