Exxon and Chevron investors shoot down climate proposals after a year a record profits

• Investors shot down proposals urging Exxon and Chevron to set more ambitious climate targets.
• Weak support comes two years after an activist hedge fund forced a shake-up on Exxon's board.
• Climate-minded investors blame Big Oil's soaring profits and Republicans' criticism of ESG.

Investors pressuring ExxonMobil and Chevron to speed up their decarbonization efforts faced setbacks on Wednesday after climate proposals didn't attract much support at the oil major's annual meetings.

A drop in support comes two years after the small activist hedge fund Engine No. 1 forced a shakeup on Exxon's board with the backing of asset managers such as BlackRock and Vanguard, along with some large public pension funds. The proxy battle led to the installation of three board members at Exxon and sparked hope among climate-minded investors that the company would adopt a more aggressive shift away from fossil fuels.

But since then, the global energy crisis sparked by Russia's war in Ukraine led oil and gas companies to cash in on record profits and US Republicans criticized environmental, social, and governance policies. These factors have shifted how investors view Big Oil compared to several years ago when the industry was losing money, shareholders told Insider.

"They can't decouple short-term profits from long-term risk," Mark van Baal, founder of the activist shareholder group Follow This, which filed resolutions at five oil companies this year, told Insider. "It's incomprehensible why investors are accepting this when they have more to worry about than the profits of Big Oil. They see themselves as stewards of the global economy, and still they think that short-term profits are more important."

Follow This urged Exxon to set a 2030 target for reducing greenhouse-gas output generated when drivers, airlines, manufacturers and other customers burn its oil and gas products. Exxon is one of only a few oil companies that hasn't set a goal for so-called Scope 3 emissions, even as they account for the vast majority of the sector's heat-trapping gasses.

Only 11% of shareholders backed Follow This, down from 28% in 2022. A similar proposal at Chevron only got 10% support, down from 33% the previous year. While Chevron aims to slash the carbon intensity of the fossil fuels it sells to customers by 5% by 2028, Follow This said that plan isn't aligned with global climate goals and urged Chevron to be more ambitious.

Exxon and Chevron have argued that Scope 3 emissions are out of their control and adopting the proposed reduction targets would shrink their business at a time when demand for energy is on the rise and not all industries have low-carbon solutions at scale.

Despite a weaker showing for climate issues this proxy season, some experts said shareholder activism does make an impact.

Engine No. 1 declined to comment on how it voted its shares at Exxon this year. But the firm last year listed steps Exxon had taken to reduce emissions, such as announcing a net-zero target in the Permian Basin — the largest oilfield in the US — by 2030 and allocating $15 billion for low-carbon solutions in the coming years.

Critics argue such steps aren't sufficient and that they're dwarfed by investments in oil and gas. Exxon in December said more than 70% of its capital investments in the coming years would flow to fossil-fuel development.

"Everyone is realizing that replacing three people on a 12-member board won't get you dramatic change, but incremental change," Andrew Logan, the senior director of oil and gas at Ceres, a sustainability nonprofit that works with investors, told Insider. "To be fair, we have seen change at Exxon in the last two years. It all looks very modest, but it is change."