Wednesday, May 31, 2017

18% of the ownership and a ton of influence

And with that, 3 major institutional owners, Black Rock, Vanguard and State Street Advisers helped push a climate friendly shareholder proposal to a 62% win.
ExxonMobil management was defeated Wednesday by a shareholder rebellion over climate change, as investors with 62.3 percent of shares voted to instruct the oil giant to report on the impact of global measures designed to keep climate change to 2 degrees centigrade.

The shareholder rebellion at the ExxonMobil annual meeting in Dallas was led by major financial advisory firms and fund managers who traditionally have played passive roles. Although the identity of voters wasn’t disclosed, a source familiar with the vote said that major financial advisory firm BlackRock had cast its shares in opposition to Exxon management and that Vanguard and State Street had likely done the same. All three financial giants have been openly considering casting their votes against management on this key proxy resolution.

The shareholder vote on climate change came on a day when President Trump appeared to be nearing a decision on whether to exit the Paris climate agreement, underlining the deep political and economic divisions over how to deal with the global challenge. Even as the Trump administration’s commitment to the climate accord wavered, the Exxon vote showed that climate concerns were gaining ground in the business world.

BlackRock and Vanguard are the biggest shareholders in ExxonMobil, owning 13 percent, or $43.6 billion worth, of the company’s stock. State Street Global Advisers, another big financial advisory firm that has called for greater climate disclosures, is close behind with 5.1 percent of the stock. The vote by them against management marked an important step for groups that have been trying to force corporations to adopt greater disclosure and transparency about the financial fallout of climate change.

BlackRock, which said that climate disclosure is one of its top priorities, had warned on its website that “our patience is not infinite.”

“This is an unprecedented victory for investors in the fight to ensure a smooth transition to a low carbon economy,” said New York State Comptroller Thomas P. DiNapoli, a trustee of the New York Common Retirement Fund which sponsored the proxy resolution. “Climate change is one of the greatest long-term risks we face in our portfolio and has direct impact on the core business of ExxonMobil.”

The resolution says that the company “should analyze the impacts on ExxonMobil’s oil and gas reserves and resources under a scenario in which reduction in demand results from carbon restrictions and related rules or commitments adopted by governments consistent with the globally agreed upon 2 degree [Celsius] target.”

The resolution adds that “this reporting should assess the resilience of the company’s full portfolio of reserves and resources through 2040 and beyond, and address the financial risks associated with such a scenario.”

It notes that other major oil companies including BP, Total, ConocoPhillips and Royal Dutch Shell have endorsed the two degree analysis.
The resolution was only non-binding but management would ignore it at their own peril. With the big shareholders flexing their muscles, eliminating board members does not remain beyond reach.


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