Editor’s note: activist groups file motion to dismiss ExxonMobil lawsuit

The latest edition of our Sustainable Views newsletter

Dear reader,

In today’s breaking news, Dutch investment activist group Follow This and investment adviser Arjuna Capital have filed a motion to dismiss a lawsuit brought against them by ExxonMobil. 

Follow This and Arjuna Capital had filed a shareholder resolution demanding the oil giant speed up its emissions reductions. In January, Exxon went on the offensive and sued the pair in a Texan district court, accusing the shareholders of trying “to directly interfere with management’s business judgement and micromanage ExxonMobil’s core business”. 

Since the US Securities and Exchange Commission relaxed its policing of shareholder resolutions in 2021, companies have faced increasing numbers of ESG resolutions — with 449 proposals in 2021, 522 in 2022 and 616 in 2023, according to Morningstar. Indeed, Exxon has received similar shareholder proposals from Follow This and Arjuna Capital in recent years.

The pair withdrew their resolution in response to Exxon’s legal action, but the oil giant said it would forge ahead with its lawsuit in an apparent bid to get the SEC to take a stricter approach to shareholder resolutions. Investment experts and campaigners warned me last week of the worrying precedent this case might set, potentially paving the way for more resolutions to be knocked back by companies threatening legal action.

In their motion to dismiss Exxon’s lawsuit, Follow This and Arjuna Capital argue there is no “case” or “controversy”, since they withdrew their resolution and agreed not to refile it. “Exxon’s continued legal attack … reveals the company’s true intention: to circumvent the SEC in order to prevent any shareholder [from exercising] the right to table a shareholder proposal about whether or not to accelerate efforts to cut greenhouse gas emissions,” says Follow This founder Mark van Baal. ExxonMobil has been contacted for comment.

While the SEC’s actions on shareholder democracy are now firmly in the spotlight, so too are its delays over its mooted disclosure rules for companies, which it proposed back in 2022. This dilly-dallying contrasts significantly with progress made in the EU, whose Corporate Sustainability Reporting Directive, which entered into force at the start of 2024, requires companies to disclose Scope 1 and 2 emissions and, where appropriate, Scope 3 emissions.

New data from provider MSCI reveals the gulf in emissions reporting in private markets between Europe and North America. MSCI says SEC’s rules could increase climate transparency and narrow differences between the two regions. You can find my data piece on this issue here.

Investors also want to see greater focus on the “just transition”, ensuring that people are not left behind as ambitious climate policies are implemented. Certain groups of farmers have reacted furiously across Europe to environmental policies in recent weeks, prompting the European Commission to remove emissions reduction targets for agriculture in last week’s Securing Our Future climate package. Asset managers have warned Mark Nicholls of the financial consequences of ignoring people in the transition to net zero. You can read the full article here.

Until tomorrow,

Alex

Alex Janiaud is the senior investment correspondent for Sustainable Views