| By Linyi Zheng |

Legacy Oil and Gas Producer Resists ESG Pressures

Amidst the uncertainties permeating the energy market, global oil and gas enterprises find themselves navigating a complex landscape of pressures aimed at either sustaining or enhancing production levels. On January 21st, ExxonMobil, the American oil giant, launched a legal offensive against two prominent Environmental, Social, and Governance (ESG) advocacy investment institutions, Arjuna Capital and Follow This. ExxonMobil’s objective is to stifle the advancement of these organizations’ emission reduction proposals into the shareholder meeting voting process. While Arjuna Capital and Follow This withdrew their proposal on February 2nd, ExxonMobil’s legal maneuver is widely perceived as a retaliatory strike against climate advocates and the ESG investment community.

Fortifying A Stance Amidst Market Dynamics and Shareholder Expectations, Despite Climate Change Realities

This development occurs against the backdrop of shifting industry dynamics. Three years post facing a “climate coup” in its board elections, ExxonMobil’s conservative stance has garnered support among its fossil fuel peers. Despite this, ExxonMobil’s stock price witnessed a temporary dip upon the disclosure of the incident, only to rebound with a notable 6.3% increase by the end of the subsequent week, according to the Financial Times. All eyes are now on Scope 3 emissions reduction, with ExxonMobil’s lawsuit primarily aimed at safeguarding its oil and gas production and market share.

According to Reuters, as ExxonMobil fortifies its production position, shareholder support for emission reduction proposals has dwindled from 27.1% to 10.5%. Yet, ESG investors persist in applying pressure. Follow This, in collaboration with 26 other institutions, submitted similar proposals to Shell’s forthcoming shareholder meeting, signaling a broader industry-wide push for climate protection actions.

Fossil Fuel’s Fading Future

Amidst the changing energy landscape, a crucial question arises: Why are global oil and gas companies slow in their transition efforts? Despite profiting from the European energy crisis, these companies prioritize profit over transitioning to cleaner fuels. This is reflected in the fact that only 1% of global clean energy investments are made by oil and gas companies, with most of the investments coming from private entities.

As the industry grapples with these challenges, the struggle for oil and gas production amidst ESG pressures highlights the complexities of navigating the energy transition terrain. The slow transformation of the global energy system and the continued high demand for fossil fuels are some of the reasons why major oil companies are hesitant to embrace significant transformations.