The Chess Game Continues: Exxon, Under Pressure, Says it Will Take More Steps to Cut Emissions. Investors Are Not Impressed

Shareholders want the oil giant to reduce spending on new production and add clean energy expertise to its board, but the company’s responses have seemed incremental.

Signage at an ExxonMobil gas station in Houston, Texas, on Wednesday, Oct. 28, 2020. Credit: Callaghan O'Hare/Bloomberg via Getty Images
Signage at an ExxonMobil gas station in Houston, Texas, on Wednesday, Oct. 28, 2020. Credit: Callaghan O'Hare/Bloomberg via Getty Images

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ExxonMobil made two moves this week that say a lot about the company’s struggle to negotiate a declining market and increasing pressure from investors, while still keeping to its agenda of producing more oil well into the future.

On Monday the oil giant announced a new venture to commercialize emissions-cutting technologies including carbon capture and storage. A day later, the company released new details about its plan to limit capital spending and appoint a new member to its board of directors.

Exxon is facing efforts by shareholders to force the company to address climate change and the weaker oil market in more aggressive ways, including adding new members with expertise in clean energy to the board of directors and pairing back spending on new oil and gas production.


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Andrew Logan, senior director of oil and gas at the sustainable investment advocacy group Ceres, said the company’s announcements were aimed at a handful of big investment firms that control a large portion of Exxon’s shares, and therefore hold the power to force the company to change.

“It’s all about how do you get the votes of BlackRock or State Street or Vanguard,” Logan said. “That’s who will decide whether these efforts are successful.”

But Logan and others who are pressing for change greeted Exxon’s announcements with disappointment. In a statement, Engine No. 1, a small investment firm that is sponsoring one of the efforts to remake Exxon’s board, said, “A Board that has underperformed this dramatically and defied shareholder sentiment for this long has not earned the right to choose its own new members or pack itself in the face of calls for change.” 

The statement continued, “Today’s patchwork of announcements do not materially alter ExxonMobil’s long-term trajectory nor do they position it to succeed in a changing world.”

Oil companies are in a vice-grip of increasing pressure. Last year, the coronavirus pandemic sent oil prices to historic lows, driving billions of dollars in losses across the industry. Exxon said Tuesday it lost $20 billion in the last three months of 2020, driven by a sharp reduction in the value of its natural gas assets.

The Biden administration and a Congress newly controlled by Democrats have committed the United States to a faster transition away from fossil fuels, including a shift to electric vehicles. Other nations are stepping up goals to phase-out gasoline-powered cars, and last week, GM said it would convert its fleet to emissions-free models by 2035.

Seeing this wave coming, the credit agency S&P Global Ratings last week said it was considering lowering its ratings for many oil and gas companies, including Exxon, Chevron and Shell, in large part because it sees greater risk for the industry and investors from a transition away from fossil fuels. BP saw its outlook go from stable to negative.

That move came as Larry Fink, the chief of BlackRock, one of Exxon’s largest shareholders, said he expects companies to detail how their business will align with a “net-zero economy.” In November, State Street Global Advisors, another large Exxon shareholder, said it would join the Climate Action 100+, a group of investors seeking to support an energy transition.

Going Bigger on Carbon Capture 

Exxon’s response, however, has seemed incremental. In December, it announced its first corporate-wide emissions targets, but those fell short of what many hoped to see and covered only a fraction of the company’s overall emissions.

On Tuesday, Darren Woods, the company’s chief executive, said the new low-carbon venture would treat carbon capture and storage, or CCS, essentially like any other of the company’s lines of business.

“We’re beginning to see a broader recognition of the importance of that technology,” Woods said during a call with investors, noting that governments are enacting new subsidies and regulatory frameworks for developing carbon capture technology. “Now is the time to bring a more concerted effort in this space.”

But many elements of the new venture, including efforts to expand or deploy carbon capture projects in Wyoming, the Netherlands and Scotland, were already underway. A consortium of companies, including Exxon, recently asked the Dutch government for billions of dollars in subsidies for a CCS project there.

Exxon said it will spend $3 billion on low-carbon investments, including CCS, through 2025. That would represent no more than 3 percent of the company’s capital spending over the period.

Most of Exxon’s carbon capture so far has come at a facility in Wyoming, where the technology allows the company to exploit a natural gas deposit that is rich in carbon dioxide. Exxon then sells the majority of the CO2 it captures to other oil companies, which inject the gas into depleted oil fields to increase their output.

Woods also detailed that in coming years, Exxon would limit its capital investment and would focus on low-cost oil and gas projects. But the company appears to remain convinced that oil demand will stay strong for decades, with its long-term modeling showing oil demand growing to 2040, when it says petroleum will still provide more energy than any other resource. 

But Andrew Behar, the chief executive of As You Sow, a shareholder advocacy nonprofit, said, referring to carbon capture, “It’s magical thinking that this technology is going to allow them to continue to do what they’ve always done.”

He added, “It’s dangerous, is what it is.”

In its continuing chess game with investors, the question now is whether Exxon will make more announcements ahead of its annual meeting in May, when any resolutions to remake the company’s board would face a vote. Behar is skeptical that the company can avoid a reckoning with shareholders.

“It’s too little, too late,” he said. “They need transformation.”