Tiny Hedge Fund Lowers the (Green) Boom on Exxon-Mobil’s Board of Directors, How’d They Do It?! Oil Giant Shell Loses in Climate Change Court, Climatecasechart.com

EXXON-MOBIL BOARD OF DIRECTORS RECKONING

Exxon-Mobil finds itself part of the battle to combat climate, despite its best efforts not to be, AND thanks to a tiny hedge fund, Engine No. 1, which shocked Wall Street by winning two seats on Exxon-Mobil’s Board of Directors.

Engine No. 1 is an upstart hedge fund, founded in 2020 for the express purpose of placing four, highly qualified directors on the Exxon-Mobil board. 

It began waging its longshot board campaign back in January. They called it ReEngergize Exxon. If your definition of “longshot” is “trying to hit the moon with a rock you just threw,” then you’ll appreciate the enormity of this hedge fund’s ability to gain two seats at the table. 

And this is why Wall Street’s  little Engine No. 1 coup matters to us on Mainstreet. It represents that old saying, “the best way to change the culture is from within.” Public companies have a board of directors that are responsible for oversight of the CEO and overall corporate strategy. Well there’s no deeper “in” than a seat on the board of directors of one of the planet’s biggest carbon emitters. 

Exxon CEO and Chairman of the Board, Darren Woods, welcomed the new board members, saying “we look forward to working with them constructively and collectively on behalf of all shareholders.”

Meanwhile, Engine No. 1 continues its ReEnegize Exxon campaign, hoping to place two more highly qualified, independent directors on the Exxon-Mobil board.

DEEPER DIVE: Reuters, ExxonMobil, Engine1.com, Anchorage Daily News

HOW DID ENGINE NO. 1 DO IT?

It’s the story so nice, we had to report it twice! The hedge fund Engine No. 1’s historic win to gain two seats on the ExxonMobil board is more than that. It’s also unprecedented. Activist shareholders have spent decades trying to persuade companies to cut their carbon emissions. So, achieving this feat at ExxonMobil, once the world’s most influential oil company, makes the feat all the more stupendous.

Members of the boards of public companies are technically elected by shareholders, and normally the elections are uncontested; voting is just a formality. So how did Engine No. 1 do it?

One word—moxie.

Engine No. 1 sent a scathing letter to Exxon-Mobil’s board. In it, the hedge fund rebuked Exxon’s claims of alignment with the Paris Climate agreement goals. The letter said, “Engine No. 1 believes that scrutiny of ExxonMobil’s claims reveals that the Company’s efforts fall short of what is needed to position ExxonMobil for long-term value creation in a rapidly changing world, AND highlights the significant long-term risks associated with the Company’s current business model.”

“This is not just a climate issue but a fundamental investor issue – no different than capital allocation or management compensation – given the immense risk to ExxonMobil’s current business model in a rapidly changing world,”

Engine No. 1 also stated, “None of the Company’s new claims change its long-term trajectory which would grow total emissions for decades to come. This is not consistent with, but rather runs directly counter to the goals of the Paris Agreement. We also continue to believe that without new members of the Board with the necessary expertise and experience, ExxonMobil will have little choice but to continue seeking to create the appearance of transformative long-term change, rather than working to make it a reality.” OUCH.

Just before the board vote, Charlie Penner, CEO of Engine No. 1 lambasted the investment community for accepting “the idea that humanity will inevitably drive itself off the cliff is sound business practice.” And that’s why Engine No. 1’s victory matters to us. Because it’s not.

DEEPER DIVE: BusinessWire, Reddit

ROYAL DUTCH SHELL LOSES IN COURT IN THE HAGUE

Major energy company Shell was on the losing end of a court case in the Netherlands that ordered the company to cut its carbon emissions to 45% of 2019 measurements by 2030.

Royal Dutch Shell was first brought to the Hague courtroom back in November, with organization Friends of the Earth acting as the lead plaintiff in the case along with other non-government organizations, or N-G-Os, and private citizens of the Netherlands as well. In fact, over 17,000 Dutch people signed onto the suit. 

The case ruling called Shell’s original plan of “net-zero by 2050” inadequate. The judge also made clear that, while an appeals process is expected, Shell must abide by the decision in the interim.

A statement by Shell acknowledges, “Urgent action is needed on climate change.” The company has made major investments in both solar and off-shore wind energy production, and their original 20-50 net zero plan did include end-to-end reductions.

Why this matters to us: 

While many countries, including the Netherlands, have signed up to the Paris Agreement on climate change, corporations like Shell were not required to sign on. However, back in 2019, 75 corporations protested then US president Donald Trump’s decision to pull the US out of the Paris Agreement by signing on. Signatories include the CEOs Total, Apple, Google, Goldman Sachs, and Royal Dutch Shell. Dutch presiding judge Larisa Alwin stated in her decision, that companies have a burden to shoulder too. “Companies have an independent responsibility, aside from what states do. Even if states do nothing or only a little, companies have the responsibility to respect human rights.”

Shell is headquartered in the Netherlands — where the verdict is binding. The case will be scrutinized in other countries amid a new era of litigation related to climate change.

(17,000 plus people from the Netherlands joined that suit? Gives a whole new meaning to the term, “going Dutch.”)

DEEPER DIVE:Reuters, Shell Corp., Financial Review, World of Oil News

ULTIMATE CLIMATE WONK: CLIMATE CASE CHART

Oh my Dad. Talk about the ultimate in climate change warrior wonkiness. There is an actual cadre of legal experts who track climate change litigation. It’s called climatecasechart.com — started back in 2007 as the U.S. Climate Litigation Chart by attorneys Michael B. Gerrard (a former partner at Arnold & Porter,among the most prestigious and largest law firms in the world) and J. Cullen Howe, an environmental law specialist. Climatecasechart.com is a joint project of the Sabin Center for Climate Change Law at Columbia Law School and Arnold & Porter. 

Climatecasechart.com has since evolved into TWO databases that track climate change litigation, one for cases in the U.S. and beginning in 2011, a chart for non-U.S. cases. Climatecasechart.com also tracks developments in litigation and administrative proceedings related to climate change.

Here’s why climatecasechart.com matters to us: Its U.S. chart currently includes 1387 cases* with links to 7513 case documents. The Non-U.S. chart currently includes 439 cases, with links to 695 case documents. And it’s updated monthly.

DEEPER DIVE: ClimateCaseChart, Wikipedia, Ivy Style