May 26 may go down in history as one of the gloomiest days for the world’s fossil fuel industry. Three events on that day may be a harbinger of change to come for oil companies that have largely resisted altering their business model to address the global climate crisis.
In a landmark ruling, a court in the Netherlands ordered Royal Dutch Shell to cut its carbon emissions by 45 percent from 2019 levels by 2030. Then Chevron Corp shareholders voted in favor of a proposal to cut emissions generated by the use of the company’s products. And another shareholder rebellion at Exxon Mobil, the world’s largest oil company, witnessed the Engine No. 1 hedge fund elect two, and possibly three new board members over the company’s strenuous objections, who pledged to push the company to address climate change.
Between The Lines’ Scott Harris spoke with Nicholas Kusnetz, a reporter with the Pulitzer prize-winning news outlet Inside Climate News. Here, he talks about his recent article that covers the success of Exxon Mobil shareholders’ challenge, while assessing the power of investors to change fossil fuel industry policies as the world confronts the climate crisis.
NICHOLAS KUSNETZ: Companies across the corporate spectrum, but oil companies in particular, have been facing lots of these proposals from shareholders. A lot of them are kind of maybe activist shareholders who hold, you know, a small number of shares, trying to get the companies to disclose more about climate change or cut their emissions. So these have been coming for years and years, but there was a lot more attention and pressure over the last couple of years. And then this year in particular and this vote at Exxon I think was different than what we’ve seen. So in particular, there’s this small investment firm, it’s called Engine Number One, and they nominated a slate of four directors to replace essentially four of Exxon’s 12 current directors on the corporate board and the firm, Engine Number One was saying that basically Exxon needs to change, it’s not adapting and preparing itself for the energy transition away from fossil fuels. And this firm pointed to Exxon’s relative under-performance so oil and gas companies in general have performed much worse than big stock indexes, like the S and P 500 over the last five, 10 years and Exxon in particular has done poorly. And so this firm pointed to that, saying, look, the market is reacting and Exxon needs to change and it’s not changing itself. And so we need to basically force it to change by giving it new directors.
SCOTT HARRIS: We’ll just take a step back. The past week was really a bad one for the fossil fuel companies in terms of their agenda of keeping the oil being pumped out of the ground and selling it to all of us. Summarize if you would, this important week, last week, and what occurred, not only with this Exxon board vote, but on a couple of other fronts in terms of a court in the Netherlands and Chevron was another target of some shareholder initiatives.
NICHOLAS KUSNETZ: That’s right. Yeah. And it actually all came on the same day on Wednesday. And so first, chronologically was this court decision that you mentioned in the Netherlands. Some activists and citizens of the Netherlands with more than 17,000 plaintiffs, I think had sued Shell, which is a Dutch-Anglo company, based there. So they’re basically saying that the company is violating their rights by failing to cut emissions in line with the goals of the Paris agreement. And on Wednesday, a judge agreed and ordered the company to cut its emissions. So Shell has pledged to reduce its own emissions, but what the plaintiffs were asking for and what the judge ruled was a much more aggressive, rapid elimination of I think it was 45 percent by 2030 reduction in the company’s emissions. And importantly, this also covers not just the emissions that come from refineries and other operations that Shell is directly running, but also from all the emissions of the oil and the gas that Shell sells and that people burn in their cars or planes or wherever it goes, which is a much bigger share.
So this was a really big deal. I mean, I think it’s the first such ruling anywhere that’s mandating this kind of change from an oil company. And then just hours later, was this vote from Exxon, where the company was —against its will — having its board of directors reshaped basically to kind of urge the company more quickly down this energy transition. The third came with a vote at Chevron, which I think was a little more in line with what we’d seen. But again, it was a really big deal. In that case, it was a shareholder vote that called on the company to again, reduce the emissions from all of the products themselves, all the oil and gas itself, which if you take a barrel of oil, basically 80-85 percent of the emissions from that comes when it’s burned in the car or the plane or wherever it’s burned.
So Chevron had said, we’ll cut our own direct emissions, but had said nothing about that much, much larger share. And what that really means is that the company to start selling less oil and gas. So it either needs to simply ramp down its oil and gas, or if it wants to continue being an energy company, it has to start producing cleaner energy. So all those three both together, I mean, I think the kind of takeaway is that courts and investors are now forcing these companies to change. And it was a real wake up call, I think because you know, a lot of people who spend their lives watching these financial analysts, for example, all see the votes and the court case as now kind of precedents that other people are going to try to push harder on the same companies and all of their competitors.