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Investors have withdrawn a climate resolution at ExxonMobil after the oil giant took legal action against the groups, a development likely to have a chilling effect on shareholder activism.
Follow This, an Amsterdam-based green shareholder group, said that in response to the lawsuit filed by Exxon last week, it had decided to abandon its call for the company to set more ambitious climate goals.
“Given Exxon’s preference to fight in court rather than giving shareholders the freedom to vote at the annual meeting, we have decided to withdraw the climate proposal,” founder Mark van Baal said in a statement on Friday .
The decision not to continue pushing for a shareholder vote on the resolution comes after Exxon took the unusual step of suing Follow This and its co-sponsor, investment advisor Arjuna Capital, to block the motion, arguing that it violates the guidelines of the Securities and Exchange Commission.
Activists in recent years have filed motions against companies ranging from Wall Street banks to Big Tech groups, calling on them to take stronger stances on environmental, social and governance issues.
Companies rarely go to court to block shareholder requests and Exxon’s case is the first time this has happened. Instead, they usually appeal to the SEC for permission to remove unwanted resolutions from the ballot. But Exxon argued that the regulator had become too willing to put such motions to a vote.
Exxon said it had withdrawn a request for expedited hearing of its case, but it was not dropping the case. “We believe that there are still important issues that the court must resolve. There is no change in our plans and the litigation continues,” the company said in a statement.
Arjuna Capital did not immediately respond to a request for comment.
The activist investors’ decision was announced hours after Exxon reported its second-best annual profit in a decade as it boosted oil production in the US and Guyana.
Exxon Chief Financial Officer Kathy Mikells declined to comment Thursday on whether the company’s decision to file a lawsuit marked the beginning of the end for so-called Trojan Horse activism.
“We support the right of investors to submit proposals,” she said. “But the process for excluding proxy proposals is simply flawed, with activists posing as investors making the same proposals year after year and gaining minimal support along the way.”
In 2021, Exxon was defeated in a shareholder revolt by activist hedge fund Engine No. 1, which despite a small stake in the company, won three seats on the board with the demand that it make more serious plans for the energy transition.
Exxon has since set a goal to reduce emissions from its own operations to zero by 2050, but unlike many of its peers, it has no target to reduce so-called Scope 3 emissions from the use of its products.
The proposal from Follow This and Arjuna called on Exxon “to move forward [its] current plans” and accelerate the pace of greenhouse gas emissions reductions, including Scope 3.
Similar motions failed to gain majority support at previous Exxon annual meetings, with shareholder votes in favor falling from 27.1 percent in 2022 to 10.5 percent in 2023.
Exxon, which filed the lawsuit in a U.S. court in Texas, claims Follow This and Arjuna’s proposal violates SEC rules for such investor petitions.
It said previous versions of the motion had failed to gain enough support to be refiled under SEC guidelines. It also said the proposal violated an SEC rule that prevents shareholder proposals from attempting to micro-manage business decisions.