Frustrated with ExxonMobil’s Failures on Climate Change? Blame BlackRock and Vanguard
The most important climate votes this week were not in Congress: they were at the ExxonMobil shareholder meeting today. Top institutional investors were pushing measures to hold the board of directors accountable for its failure to engage responsibly on climate change, backing resolutions demanding that the company fully disclose its political and lobbying activity and ensure independent board leadership. Those votes saw unprecedented levels of support: a resolution demanding an independent chair at ExxonMobil received 41% support, and 37% of voting shareholders supported a resolution calling for greater disclosure over ExxonMobil’s notorious lobbying activity. Many investors went so far as to vote against the re-election of ExxonMobil’s board of directors, the strongest action they can take to force reform.
Unfortunately, the fund managers that control the largest blocks of ExxonMobil’s stock appear once again to have shielded ExxonMobil’s leadership from accountability by preventing these critical accountability efforts from receiving majority support. BlackRock and Vanguard control 14.7% of ExxonMobil’s outstanding shares between them, and both voted against similar resolutions at ExxonMobil last year. 14.7% is more than enough to have put each of those resolutions over the top. But if past is prologue, they appear to have used their swing vote once again to torpedo what should have been a critical moment of accountability.
While official reports of asset manager voting will not come out until August, today’s votes are likely further confirmation of what our research has shown over multiple years: the biggest obstacle to resolving the climate crisis and ensuring long-term sustainability is no longer the fossil fuel companies themselves. That responsibility now lies with giant fund managers like BlackRock and Vanguard that have outsized voting power over these companies’ boards of directors — but are systematically failing to use it to hold them accountability.
When it comes to climate responsibility, ExxonMobil lags far behind both investor expectations and its international peers like Shell and BP. As the New York State Common Retirement Fund and the Church of England summarized in a filing with the SEC:
“In spite of the clearly demonstrated shareholder concern regarding the impact of climate change on the company, ExxonMobil:
· has no business-wide targets for GHG emissions reductions at its own operations;
· does not disclose the GHG emissions associated with the use of its products;
· has no targets for the reduction of GHG emissions associated with the use of its products;
· offers no guidance on the extent of its ambition to reduce over time the GHG emissions associated with the use of its products.
This can be contrasted with ExxonMobil’s supermajor peers:
· BP has recommended that its shareholders support a proposal asking the company to set operational emissions reductions targets and disclose how it evaluates capital expenditures’ alignment with the goals of the Paris Agreement.
· Chevron has set operational emissions intensity reductions targets through 2023 linked to employees’ variable pay.
· Royal Dutch Shell has declared an ambition to halve the net carbon footprint of the energy products it sells (i.e. combined operational and product emissions) by 2050, aiming for a reduction of 20% by 2035 as an interim step, with aligned incentive compensation.
· Total has set an ambition to reduce the carbon intensity of the energy products it sells (i.e. combined operational and product emissions) by 15% between 2015 and 2030, and a longer-term ambition to reach a reduction of 25–35% by 2040.”
Majority Action joined the Church of England and New York State Comptroller Thomas DiNapoli in their call to vote against the entirety of the ExxonMobil board of directors for its failure to engage responsibly on climate change, and to back resolutions demanding that the company fully disclose its political and lobbying activity end ensure board independence from management. Without changes to the governance, shareholders have no way to ensure that the board will responsibly manage the significant climate risks to the company.
Together with our partners, Majority Action organized nearly 130,000 signatures calling on BlackRock, Vanguard, and other top fund managers to finally use their outsized voting power responsibly on key climate votes this year. BlackRock itself said only a month ago that “climate change is a risk investors can’t ignore.” Yet as our research has shown, year over year BlackRock ranks at the bottom of the largest fund managers when it comes to using their voting power to promote climate responsibility at short sighted energy and utility companies whose executives would far rather maintain the status quo. In 2018, for example, BlackRock supported 99% of management-nominated directors at US fossil fuel companies while voting for just 23% of climate change reporting proposals. And despite the outsized and shadowy influence of US energy and utility companies on climate policy at every level of government, BlackRock voted against every political influence disclosure proposal at those companies in 2018.
BlackRock is the largest money manager in the world, but the funds it manages belong to individuals, institutions and governments. It’s time BlackRock’s clients held this fund manager accountable for its complicity in accelerating climate change.
We will be releasing our 2019 Asset Manager Climate Scorecard in September with updated results from this season’s key climate votes.