Our thinking

Invested interests

26 January, 2024

For most public businesses, keeping investors happy is a key concern. And as climate change rises up many investors’ agendas, this often means measuring emissions and setting reduction targets in order to demonstrate commitment to climate action.

Unless, of course, you are ExxonMobil, in which case it means taking your investors to court.

In an unprecedented move, earlier this week, ExxonMobil launched a lawsuit against two of its investors to try to block a proposal calling for emissions cuts from going to a shareholder vote. Exxon’s argument is that the “extreme agenda” set out in the proposal breaches Securities and Exchange Commission (SEC) rules which define the types of proposals that shareholders can submit for consideration.

The investors in question aren’t your average investors looking solely for financial returns; they’re activist investors, using their stakes in companies to push for environmental and social changes. In this case, they’re urging Exxon to step up its game in reducing greenhouse gas emissions.

Why is this worth paying attention to? This legal battle has the potential to reshape the playing field for shareholder influence in corporate decisions. If Exxon succeeds in court, it could set a precedent, limiting the power of shareholders to sway company policies on crucial issues like climate change. Additionally, this case puts the spotlight on the SEC and could redefine the SEC’s role in balancing corporate interests with shareholder activism, particularly under varying political climates. It’s also hard to separate this move from the growing anti-ESG sentiment in financial and political spheres – a concerning shift we’ve written about before.

We’ll be watching closely to see how the Exxon case plays out. Investor voices matter, and the freedom to challenge companies to do better for shareholders and society is one that is worth preserving.

By Louise Podmore