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The world’s largest sovereign wealth fund has sharply criticized ExxonMobil’s decision to sue two shareholders who submitted a climate proposal to the US oil company, continuing the lawsuit even after withdrawing the resolution.
Nicolai Tangen, CEO of Norway’s $1.5 trillion oil fund, told the Financial Times he was concerned about Exxon’s action against Follow This and Arjuna Capital, which filed the motion calling out the company at the annual meeting to set more ambitious emissions targets.
Tangen said: “It is a worrying development. We consider this very aggressive and are concerned about the impact on shareholder rights.”
His intervention is important because the oil fund will be one of Exxon’s ten largest shareholders at the end of 2023, with a 1.4 percent stake worth $5.4 billion.
Follow This and Arjuna withdrew their proposal last week, but Exxon – valued at more than $400 billion – has insisted on pursuing the case, arguing they could return with similar motions in coming years. The oil company has argued that the petition violates rules that ban repeated motions that fail to win a minimum number of votes and prevent investors from “micromanaging” companies.
The decision by the largest Western oil company to proceed with what is likely to be a costly lawsuit has raised concerns among the investment community that it will discourage small investors from filing similar petitions in the future.
The Norwegian fund has been increasingly active on climate issues and has supported shareholder resolutions on the environment at several oil and gas groups. Last year it also submitted its own proposals to four companies for the first time.
Carine Smith Ihenacho, the fund’s Chief Governance and Compliance Officer, said: “We are concerned about anything that takes away shareholder rights. . . This is a shareholder proposal that is very similar to the shareholder proposals we have previously supported.”
Environmental, social and governance motions have been on the rise at U.S. companies after regulators made it easier for small shareholders to file petitions.
Exxon’s lawsuit is unusual because companies rarely go to court on such petitions and instead usually turn to the Securities and Exchange Commission for permission to dismiss them. But the company argued that the US regulator has become too willing to let them vote.
“We share similar concerns about preserving shareholder rights and that is why we want clarity on a process that has become ripe for abuse,” Exxon told the Financial Times.
“Proposals like these are obviously not in the interests of investors. We hope that our lawsuit motivates the SEC to return to applying the proxy rules as they were written, and not as they have interpreted them in recent years,” the company said.
The Norwegian Oil Fund voted in favor of a Follow This proposal to adopt a medium-term greenhouse gas reduction plan at Exxon’s annual meeting last May. It backed a number of other shareholder proposals on issues such as taxes and plastics demand, and voted against the re-election of CEO Darren Woods because he also holds the role of chairman.
The fund, which was set up in 1996 to invest the proceeds of Norway’s oil and gas industry, also backed similar shareholder proposals last year at Chevron, the second-largest Western oil group, where it owns a 1 percent stake.
Asked about Chevron’s decision not to back a pledge to decarbonize the economy at the recent COP climate summit, Wilhelm Mohn, global head of active ownership at the Norwegian fund, said: “We love that charter, that pledge .”
He added: “What we would like to see is a clear path, good interim targets and a recognition that we need to get to net zero by around 2050. Some companies are not there yet and then we would vote for a well-educated shareholder. proposal.”
Chevron did not respond to a request for comment.
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