Is your 401(k) allowing Exxon to continue denying climate science?
By Naomi Ages and Rachel Curley
Heading into Exxon Mobil’s annual meeting on May 31 in Dallas, Texas, the corporate tide has turned toward acknowledging climate science. Major mutual fund giants like Vanguard and BlackRock recently made historic moves to support climate change-related shareholder proposals just weeks before the same proposal is considered at Exxon. Among the nine shareholder proposals expected to be presented at the Exxon meeting, the company faces one proposal requesting a report on the impacts of climate change policies on the company’s business and one asking the company to be transparent about its lobbying activity and trade association memberships.
These proposals show increased investor interest in corporate transparency and accountability from corporate managers at companies like Exxon and others. For example, at Occidental Petroleum’s May 12 annual meeting, shareholders voted to approve a proposal directing the company to report on the business impacts of climate change, despite management’s recommendation that shareholders vote against the proposal. Last year, this same proposal received 42 percent of shareholder support, but what pushed it over the edge this year was support from Vanguard and BlackRock, which, combined, control almost 15 percent of voting shares in Occidental. Shareholders are showing that they want companies to take the effects of climate change seriously. In addition to the proposal at Occidental, a similar proposal received majority support at energy provider PPL Corp. just days later.
This proxy season, shareholders also are calling on management at companies across the country to disclose information about company assets being used to lobby policymakers. These lobbying disclosure resolutions ask corporations to publish a report made available annually to shareholders that details all state and federal lobbying as well as memberships in and payments to trade associations.
At Exxon in particular, shareholders are concerned about the reputational risk associated with the company’s potential misleading of investors and policymakers on the effects of climate change. Moreover, the company does not disclose a complete list of the trade associations it pays to lobby on its behalf such as the American Petroleum Institute, the Business Roundtable, the Western States Petroleum Association and the National Association of Manufacturers, all of which spend millions of dollars a year lobbying federal lawmakers. Both the American Petroleum Institute and the Western States Petroleum Association have actively sought to mislead the American public on the very real danger presented by denying climate science. A 1998 memo from the American Petroleum Institute shows the trade association planned to attempt to convince average Americans that climate science is uncertain. Additionally, as recently as 2011, the group was still attempting to undermine progress on curbing the effects of climate change by suing the EPA over the agency’s plan to regulate carbon emissions. Similarly, the Western States Petroleum Association has been active in derailing climate change progress by dispersing misinformation and spending $18.7 million between 2015 and 2016 to push back against climate and clean air legislation in California. Furthermore, Exxon has publicly stated its support for the Paris Climate Agreement, yet remains a member of these trade associations that actively lobby against it. Transparent shareholder reporting would reveal whether Exxon’s assets are being used to fund these efforts, which are in direct conflict with investors’ long- term interests.
Vanguard and BlackRock’s support for the climate change report shareholder proposal at Occidental not only is significant for the mutual fund companies individually, but is illustrative of an industry-wide shift away from what had been a major problem: mutual fund companies showing extreme reluctance to supporting these types of shareholder proposals despite their immense power to change the status quo.
As the managers of Americans’ retirement savings, Vanguard, BlackRock and the other large mutual fund companies control significant voting shares in America’s most powerful companies. At Exxon, Vanguard and BlackRock control seven percent and six percent of shares respectively. Both firms have a history of voting against shareholder proposals that attempt to address climate impacts and bring corporate political activity into the light. Between 2015 and 2016, Vanguard and BlackRock voted against every climate-related proposal up for a vote, and their voting patterns on lobbying disclosure have not been much better.
Many Americans would be surprised to know that the stewards of their retirement savings are enabling large corporations like Exxon to continue denying the validity of climate science and lobbying against policies that attempt to roll back and prevent the devastating effects of an increasingly warming planet. Now that Vanguard and BlackRock are beginning to change their tunes, we urge them to keep the momentum going by supporting shareholder calls for more sustainable and transparent business practices, particularly at Exxon.
Naomi Ages is the Climate Liability Project Lead at Greenpeace USA and Rachel Curley is Democracy Associate with Public Citizen’s Congress Watch division.