Three key moments in 24 hours yesterday demonstrate how far ahead of governments courts and investors are when it comes to reining in the pollution of fossil fuel companies — and why the Morrison government is desperate to curtail the rights of investors and proxy advisers.
In the Netherlands, a court ordered Royal Dutch Shell to cut its emissions by 45% by 2030, not the 20% envisaged in the own company’s transformation plan.
That action was filed in April 2019 by seven activist groups — including Friends of the Earth and Greenpeace — on behalf of 17,200 Dutch citizens. They argued Shell’s business model “is endangering human rights and lives” by posing a threat to the goals of the Paris Agreement aimed at keeping global temperature rises well below two degrees. The court has ruled that Shell must comply not merely with Dutch law, but with broader climate goals to which its home country is a signatory. Similar actions are on foot in other European countries, although Shell intends to appeal.
In the US, a tiny hedge fund called Engine No. 1 succeeded in getting two of its nominees elected to the board of ExxonMobil at the oil and gas giant’s annual meeting in Houston, with the position of a third nominee still uncertain, but close to being elected if a vote recount confirms the poll.
Get Crikey FREE to your inbox every weekday morning with the Crikey Worm.
A majority of Exxon shareholders selected the directors nominated by Engine No. 1, which has waged a proxy campaign against the energy giant since last December, saying the oil and gas group’s focus on fossil fuels had put it at “existential risk”.
Engine No. 1 has a 0.02% stake in Exxon, and nominated four independent director candidates to the 12-member board. Before the meeting, it had won support from large pension funds, including CalPERS, CalSTRS, and New York State Common Retirement Fund. Exxon’s top five shareholders include giant fund managers Vanguard, BlackRock, and Fidelity. BlackRock is the world’s largest asset manager, and Exxon’s second largest shareholder, and is reported to have backed three of the four dissident board candidates.
The fossil fuel company has already buckled under the sustained pressure from Engine No. 1: in March it added two new directors to its board, including ESG investor Jeff Ubben, who founded Inclusive Capital Partners. On Monday, trying to stave off defeat, Exxon said it would nominate two environment expert directors in the near future.
Both Exxon and Chevron (America’s second biggest oil group, which also held its annual meeting on Wednesday) faced similar resolutions urging them to change their accounting methods to take greater account of environmental costs, while Chevron faced a motion to reduce emissions from its fuels.
There’s an Australia angle to all this, by the way: does the Future Fund, chaired by Frydenberg’s mentor Peter Costello, have shares in Exxon and Chevron and, if so, how did it vote? The example reinforces the case for the Fund to disclose all its investment positions.
Yesterday also brought a win here for a group of eight children who had initiated an action against the federal government to prevent it from approving an expansion of the Vickery coal mine in NSW by National Party-linked coal company Whitehaven. While failing to obtain an injunction against the approval in advance, the court ruled that the government owed them a duty of care.
That seemingly innocuous statement, that a government owes a duty of care to its citizens and particularly children, had been contested by the government’s lawyers, who argued that despite the fact that the Vickery expansion would worsen the catastrophic damage caused by climate change, the government owed no duty of care to the plaintiffs.
The legal tactic was another demonstration of how determined the government is to continue to support its fossil fuel donors in the face of community sentiment, economics, and the interests of Australia’s younger generations.
The same applies to Josh Frydenberg’s attempt to restrict and regulate the use of proxy advisers by investors in order to protect large corporations and their directors from independent scrutiny. Frydenberg’s attempt to censor free speech and the rights of investors to obtain advice from whomever they like would limit the ability of proxy advisers and investors to work together to reshape boards — as has now happened to Exxon.
Ditto Frydenberg’s outrageous attempt to give himself the power to direct superannuation funds on their investments, as part of the latest Liberal attack on super funds. The proposed power of direction has drawn together employer groups, the ACTU, and the likes of former Liberal MP Craig Kelly and crossbenchers in opposition. The willingness of super funds to use their investment power to direct boards on ESG matters, including climate action, and their divestment from fossil fuels has already drawn attacks from climate denialists in the Coalition — and Frydenberg’s proposed new directions power would give the Coalition powerful leverage over super fund investment decisions.
Increasingly, the Morrison government’s defence of fossil fuel companies looks like a beleaguered last stand. And that means increasingly desperate tactics to stave off defeat.