Norway oil fund boss criticises ExxonMobil’s ‘aggressive’ climate lawsuit

Unlock the Editor’s Digest for free

Roula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.

The world’s largest sovereign wealth fund has sharply criticised ExxonMobil’s decision to sue two shareholders that filed a climate proposal at the US oil major, pursuing the litigation even after they dropped the resolution.

Nicolai Tangen, chief executive of Norway’s $1.5tn oil fund, told the Financial Times he was concerned about Exxon’s action against Follow This and Arjuna Capital, which submitted the motion calling on the company to set more ambitious emissions targets at its annual meeting.

Tangen said: “It’s a worrisome development. We think it’s very aggressive and we are concerned about the implications for shareholders rights.”

His intervention is significant as the oil fund is one of Exxon’s top-10 shareholders with a 1.4 per cent stake worth $5.4bn at the end of 2023.

Follow This and Arjuna withdrew their proposal last week, but Exxon — valued at more than $400bn — has insisted it will proceed with the case, arguing they could return with similar motions in future years. The oil company has argued the petition is in breach of rules prohibiting repeat motions that fail to win a minimum number of votes and preventing investors from “micromanaging” businesses.

The decision by the biggest western oil company to persist with what is likely to be an expensive legal case has provoked concern in the investor community that it will discourage small investors filing similar petitions in the future.

The Norwegian fund is increasingly active on climate issues and has backed shareholder resolutions on the environment at several oil and gas groups. It also filed its own proposals for the first time last year at four companies.

Carine Smith Ihenacho, the fund’s chief governance and compliance officer, said: “We are concerned with anything that takes away shareholder rights . . . This is a shareholder proposal that is quite similar to shareholder proposals we have supported earlier.”

Environmental, social and governance motions have proliferated at US companies after regulators made it easier for small shareholders to file petitions.

Exxon’s lawsuit is unusual because companies rarely go to court over such petitions, usually turning instead to the Securities and Exchange Commission for permission to throw them out. But the company argued the US regulator has become too willing to let them advance to a vote.

“We share the same concerns about shareholder rights being preserved, which is why we want clarity on a process that has become ripe for abuse,” Exxon told the Financial Times.

“Proposals like this are obviously not in investors’ best interests. We hope our suit motivates the SEC to go back to applying the proxy rules as they were written, not as they’ve been interpreting them over the last few years,” the company said.

The Norwegian oil fund voted in favour of a Follow This proposal at Exxon’s annual meeting last May to adopt a medium-term greenhouse gas reduction plan. It backed some other shareholder proposals on issues such as tax and plastics demand, and voted against re-electing chief executive Darren Woods because he also holds the role of board chair.

The fund, which was set up in 1996 to invest the proceeds of Norway’s oil and gas industry, also backed similar shareholder proposals last year at Chevron, the second-biggest western oil group, where it owns a 1 per cent stake.

Asked about Chevron’s decision to not back a decarbonisation pledge at the recent COP climate summit, Wilhelm Mohn, global head of active ownership at the Norwegian fund, said: “We like that charter, that pledge.”

He added: “What we would like to see is a clear path, good intermediate targets, and an acknowledgment that we need to be at net zero around 2050. Some companies are not there yet and then we would vote for a well-crafted shareholder proposal.”

Chevron did not respond to a request for comment.