Exxon Mobil also is feeling heat from the $254.7 billion California State Teachers' Retirement System, West Sacramento, which is supporting a shareholder campaign to shake up the energy giant's board of directors.
CalSTRS, which holds more than $300 million of Exxon Mobil stock, is backing Engine No. 1, an activist investment firm that in a Dec. 7 letter told the company it will nominate independent director candidates with strong energy industry experience at the company's 2021 annual shareholders meeting.
Citing the unique challenges facing the industry and a changing world, plus the company's underperformance and the board's lack of outside energy experience, "it is time for shareholders to weigh in," the Engine No. 1 letter said. It also called for serious plans for renewable energy, cost-cutting and management compensation reforms.
The goal, said Aeisha Mastagni, portfolio manager for CalSTRS' sustainable investment and stewardship strategies, "is to get new voices inside the boardroom. We are making sure we have the right alignment of interests in terms of the executive team," as opposed to the current board, which doesn't have experience in the energy industry or with energy companies in transition, she said. "This is providing a solution that we hope will drive performance."
"We've tried other tactics," including shareholder proposals with majority support "that the company has basically ignored," Ms. Mastagni said. "These other traditional engagement tactics have failed."
Investors will get critical backup from BlackRock Inc., which in 2021 plans to turn up the pressure on carbon-intensive companies to transition to a low-carbon economy and push for board directors capable of helping to achieve that. Instead of the 440 carbon-intensive companies it focused on during the last proxy season, it will now target 1,000 companies — representing 90% of major global emissions — for possible actions that include voting against directors. It will also be spending more time assessing the impact of climate change on the companies' business models, said Michelle Edkins, managing director and global head of BlackRock's investment stewardship team in New York.
"What we are seeing is growing urgency from investors to see (energy) companies set out meaningful transition plans, and a willingness to engage companies. There is growing recognition that more could be done," Ms. Edkins said.
Ms. Mastagni of CalSTRS also credits investor groups like Climate Action 100-Plus for harnessing the collective power of shareholders to get other energy companies to take climate change seriously. The global initiative now has more than 500 signatories with a collective $47 trillion under management, including CalSTRS and major asset managers such as BlackRock, Vanguard Group and State Street Corp.
The organization now engages with 167 companies globally to deliver Paris Agreement-aligned emissions cuts, implement strong climate governance frameworks and improve climate-related disclosures.
Another coalition of global investment organizations representing more than $103 trillion in assets is calling on companies and auditors to have their publicly released financial results reflect the effects of climate change.
"Ten or 15 years ago you did not see this collective action. I think these collective groups are shifting that resistance in the U.S., said Ms. Mastagni of CalSTRS. "Things are constantly evolving. It's about ensuring resiliency. It is part of what we are calling activist stewardship."