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Climate fight comes to Big Oil

Exxon, Shell, Chevron, Total & stakeholder climate activism

The last weeks have seen the largest energy companies in turmoil. Through different paths, stakeholders have brought the climate change agenda to the boardroom of the "major" energy companies. These climate-conscious stakeholders seem capable of forcing some of the largest energy companies in the world to accelerate the pace of change in their transition toward a decarbonized economy.


Activist investor Engine No. 1, whose nominee's slate included the former CEO of Tesoro, recently managed to secure three seats in Exxon's twelve-member board of directors. Engine No. 1 will now be able to push further its agenda of "more significant investment in clean energy, to help the Company profitably diversify and ensure it can commit to (an) emission reduction target."

What is particularly remarkable is that Engine No. 1 is a six-month-old hedge fund that manages around $250 million in assets and owns a meager 0.02% of ExxonMobil, the oil and gas giant worth $250 billion.


A court in the Netherlands found Shell liable for its contributions to climate change and ordered it to cut its emissions by 45% by 2030 compared to 2019 levels.

Seven environmental groups, including Greenpeace and Friends of the Earth the Netherlands, also known as Milieudefensie, filed the lawsuit against Shell in April last year on behalf of more than 17,000 Dutch citizens.

Campaigners argued that Shell was violating its international climate obligations and threatening the lives of these citizens by continuing to invest billions every year in expanding its oil and gas production.

The judge ruled that Shell’s current climate strategy is “not concrete enough and full of caveats,” adding that the oil major has a legal obligation to reduce its emissions in line with international climate goals.

Shell stated that it would appeal the decision.


At Chevron, most investors backed and obtained approval for an activist proposal calling on the company to reduce "scope 3" emissions associated with company operations. Scope 3 emissions are "indirect emissions resulting from activities of the organization, but occurring from greenhouse gas sources owned or controlled by third parties, such as other organizations or consumers, including emissions from the use of third-party purchased crude oil and gas." Most of the emissions (over 80%) should fall within scope 3 emissions if the company operates in an environmentally prudent manner.

Chevron's management had sought to exclude the scope 3 emissions reduction proposal from the agenda for the shareholders' meeting by arguing that "it impermissibly seeks to impose prescriptive methods for implementing complex policies related to the Company’s strategy for addressing greenhouse gas (“GHG”) emissions." It also tried to justify its position by explaining that "The Company believes that continued or increased fossil fuel production by the most efficient and responsible producers is not inconsistent with a decrease in overall fossil fuel emissions. If demand shifts to products from the most efficient producers, then companies like the Company could see an increase in their Scope 3 emissions while overall global emissions decrease. The Company does not support establishing targets associated with the use of the Company’s products (emissions related to the energy demand of consumers) as this would only shift demand to other (and likely less responsible) producers ...".

Other proposals at Chevron's last shareholders' meeting that failed to get enough votes were: to report impact based on a Net Zero 2050 scenario (like Repsol and other European majors); report on its lobbying activities; establish an independent chair; and become a benefit corporation.


Total SE went through a rebranding exercise, now called TotalEnergies, "anchoring its strategic transformation into a broad energy company in its identity." With this name change, TotalEnergies adopted a new visual identity, including a multi-color logo. Despite this announcement, 80% of its revenues in 2030 will still come from oil and gas sales.

Energy in transition

Achieving the Paris Agreement goals requires a shift to investing in low-carbon energy transition solutions. I believe that all investments in the energy industry could be allocated 100% to renewables and batteries, although a 100% renewable energy global supply may not be achievable by 2050.

The green energy agenda has been part of the board decisions for all majors for a long time. They have been addressing climate change issues at different speeds, probably due to sunk costs. Also, due to capture by what Prof. Clayton Christensen identified as limits to disruptive innovation: the company's existing clients and current shareholders (I am thinking about you - pension fund counting on collecting stable dividends from energy companies).

There are plenty of investment opportunities in the green energy economy with attractive potential returns. Major oil and gas companies are well-funded and will probably reconvert in time. As Jim Collins mentioned in his book "Good to Great," not all companies transition from good to great. Similarly, not all oil and gas companies will succeed in the transition to being good energy companies, and far fewer will be great at it.


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"RDS has made executive remuneration dependent on reaching short-term targets. In the 2019 Annual Report, it was reported that the performance indicator ‘energy transition’ counts towards 10% in the weighting. The other 90% is linked to other, mostly financial performance indicators".

Case C/09/571932 / HA ZA 19-379

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