Exxon Mobil shareholders, backed by three of the largest U.S. pension funds, voted to replace at least two board directors Wednesday with activist investor nominees.
Taking issue with the company's direction, hedge fund firm Engine No. 1 put forth a slate of four independent director candidates. Exxon's board "needs are directors with experience in successful and profitable energy industry transformations who can help turn aspirations of addressing the risks of climate change into a long-term business plan, not talking points," Engine No. 1 said in a news release Monday.
The $458.9 billion California Public Employees' Retirement System, Sacramento, $299.8 billion California State Teachers' Retirement System, West Sacramento, and $254.8 billion New York State Common Retirement Fund, Albany, backed the Engine No. 1 candidates.
"This is a company that has a myriad of underperformance issues and while they've made some steps in the right direction, now the hard work begins," said Aeisha Mastagni, portfolio manager with CalSTRS' sustainable investment and stewardship strategies unit, during a call Wednesday hosted by Climate Action 100+, a global investor engagement initiative on climate change. "It's about developing those long-term strategies to compete in a decarbonizing world, and it's about righting some of those incentives that currently (are) misaligned and it's about doing a better job of communicating with its shareholders about those strategies."
New York State Comptroller Thomas P. DiNapoli, sole trustee of the pension fund, said in a statement that Exxon shareholders "chose real action to address the climate crisis over business as usual in the fossil-fuel industry."
Investors have sought assurance that Exxon's board "took the climate crisis seriously and was acting to put the company on a path to succeed in the low-carbon economy, and for years received platitudes and gas lighting in response," Mr. DiNapoli added. "Now we are sending new board members, seasoned in managing change in the fossil-fuel industry, to help put the company back on track."
Exxon has yet to release the final vote tallies and the makeup of its 12-member board is still unclear. While eight Exxon-backed candidates were also elected, two board seats remain undecided, including one contested by a third Engine No. 1 candidate.
Also Wednesday, a resolution asking Chevron to issue an audited report assessing how a dramatic reduction in fossil-fuel demand — as laid out in the International Energy Agency's Net Zero by 2050 scenario and report — will affect the company's financial position and underlying assumptions earned 48% support, according to As You Sow, an environmental non-profit that introduced the resolution.
Results on same resolution filed at Exxon are not yet available, As You Sow noted.
Separately, a Dutch court ruled against Royal Dutch Shell in a climate change-related case, ordering the oil company to reduce carbon emissions by a net 45% by the end of 2030.
A court in The Hague ruled in favor of Milieudefensie — Friends of the Earth Netherlands — along with 17,000 co-plaintiffs and six organizations in its legal action against Shell. Milieudefensie said in a news release that the "historic verdict has enormous consequences for Shell and the fossil-fuel industry."
In a response published on its website, Shell said it will continue to take significant steps to accelerate the transition of its business to net-zero carbon emissions, working with suppliers, customers and other partners.
Sophie Baker and Bloomberg contributed to this story.