As a leader in the oil and gas industry, Samik Mukherjee knows that an activist driven lawsuit or shareholder battle due to lack of alignment on the strategic roadmap for energy transition is rarely considered great for a company. Still, he acknowledges that there is a silver lining in these events, as it gives companies the opportunity to show their commitment to protecting the planet by reducing emissions and environmental impact. Recently, leaders in the oil and gas industry have faced a variety of obstacles as the importance of environmental protection gains traction. Here, Samik discusses the lawsuit involving Royal Dutch Shell and the shareholder battles at Exxon Mobil and Chevron- providing insights on what experts believe this will mean for oil and gas leaders moving forward.
Royal Dutch Shell Ordered by Dutch Court to Lower Emissions
Samik notes that the recent events kicked off when a Dutch court ordered Royal Dutch Shell to reduce its CO2 emissions (and its suppliers and customers’ emissions) by 45% by the end of 2030. According to Samik Mukherjee, the lawsuit was filed by Friends of the Earth Netherlands and over 17,000 citizen co-plaintiffs- claiming that the company’s emissions were an unlawful danger to the climate. While Shell had claimed that it would cut carbon intensity of its offerings by as much as 20% by 2030, the Dutch court criticized the initiative and mentioned that they were not contingent enough on the company’s responsibility for reducing CO2 output. To Samik Mukherjee, the lawsuit is notable because it is an instance of the court ruling that a company will need to make a concerted effort to change while making several financial sacrifices to do so.
Exxon Mobil Shareholder Battle
In one of the most publicized events, investor group Engine No. 1 convinced shareholders at Exxon to place at least two of its nominees onto the company’s board of directors. This is seen as a win for activist investors, however, experts remain doubtful of the impact that a minority will have on the company’s board of directors. Still, it is notable for Engine No.1, as they will have the ability to form alliances and may end up being integral to decisions where the other members are split. Because Exxon shareholders decided to vote out two of its original board members for failing to take the transition to low-carbon energy seriously, this series of events emphasizes that the company is looking to make a concerted effort to reduce emissions. This comes after Engine No.1 made the argument that Exxon was endangering profits with its strategy and is monumental because the world’s largest asset manager- BlackRock- helped solidify the shift by backing Engine No.1 candidates.
Shareholder Resolution at Chevron
Another big recent event in the oil and gas industry is that 61% of investors at Chevron voted in favor of a resolution to reduce emissions. The resolution- from Dutch campaign group Follow This- will force the company to reduce its scope 3 emissions. These include the result of activities from assets that are not owned or controlled by the company, meaning that it will impact greenhouse gases released using gas, oil, and its other products sold by Chevron. Experts believe that the resolution at Chevron in addition to other recent decisions are showing the power of shareholders as they fight for changes that will have a positive impact on our environment.