A proposal to limit HSBC bank climate risk exposure by ending coal financing, a resolution to cut Chevron’s supply chain emissions, a move in support of a climate risk lawsuit against Polish energy company Enea SA. From repeated calls for a fossil fuel “phase out” to campaigns to regulate the oil and gas industry, pressure against Big Oil is stronger than ever and isn’t only coming from outside. Inside companies, shareholders are taking action and putting forward proposals to steer management toward addressing climate risk and minimizing harm.

In May 2021, Chevron shareholders voted 61 percent in favor of a resolution by Follow This, a green shareholder group, calling for cuts in the company’s “Scope 3” emissions, to disclose and reduce emissions from the company’s supply chains and the products they sell.

Shareholder activism can take many forms, but generally refers to efforts by shareholders of a company to influence its policies, management, or strategic direction, from voting during annual general meetings to submitting shareholder resolutions, and, in certain instances, even resorting to litigation, Paul Benson, senior lawyer at ClientEarth, an environmental law organization, said in an email to DeSmog. 

In the context of oil and gas companies, shareholder activism takes on “added significance” and has a “unique role” in driving real climate action by Big Oil, Benson said. This is “due to the sector’s role in driving global warming, and the seismic risks that climate change and the energy transition present to the industry,” he explained.  

The shareholders’ “voting power alone could bring about a major shift in corporate behavior if it was consistently being used to support proper climate risk management and action, rather than push against it,” Benson added. However, a recent study shows that international oil companies are successfully using obstructionist communication strategies to tamp down internal drives on climate action.

Oil and Gas Playbook vs. Shareholder Activism

In the face of increasing shareholder activism, fossil fuel companies are resistant. In fact, shareholders are getting a taste of the oil and gas obstruction playbook, too. 

“​​Fossil fuel companies have been fighting shareholder proposals tooth and nail,” Benson explained. “It’s common for management to table counter proposals and lobby shareholders to vote for their own resolutions, rather than the more progressive ones filed by activist investors.” The company resolutions can be dressed as positive climate action, but too often just seek to reinforce the status quo, Benson noted. 

The September 2023 study, “Deactivating Climate Activism? The Seven Strategies Oil and Gas Majors Use to Counter Rising Shareholder Action,” explores how international oil companies behave toward increasing shareholder activism. Researchers identified seven different strategic communication themes  companies used against shareholder proposals. ExxonMobil, Chevron, and BP used these strategies in opposition to shareholder climate and transition-related proposals between 2006 and 2022 to successfully minimize the impact of climate-related and environmental shareholder activism. Most of the proposals proved unsuccessful in the face of these strategies. Even successful ones had limited impact on company performance, the study stated. 

According to the study, the seven strategic communication themes are:

1. Promoting the role fossil fuels play in “encouraging development and alleviating poverty.”

2. Prioritizing technological solutions such as carbon capture and storage.

3. Transferring responsibility and emphasizing that the “onus of energy transition” is shared across multiple actors. 

4. “Devaluing” disclosure metrics proposed by shareholders and identifying them as “insufficient and inapplicable” to the company’s business model, to prioritize the status quo.

5. Emphasizing financial performance as the guiding business strategy.

6. Claiming that shareholders’ requests for  disclosure  is unnecessary.

7. “Mirroring” or the communications strategy of having resolution responses align the company with “the concerns of shareholders, government, and the public,” the report says. 

The strategies look eerily similar to public relations tactics the industry uses in other contexts, such as lobbying and advertising. Not surprisingly, the strategic themes overlap with some industry core narratives of so-called “fossil fuel saviourism,” pushing for false solutions to maintain oil and gas production and keep polluting, deflecting responsibility, and promoting the perception of collaboration based on greenwashing arguments. 

“There’s specific communicative strategies that the fossil fuel industry uses and repeats, and the same arguments keep coming up over and over again,” said Krista Halttunen, co-author of the study and research fellow at the University of Oxford, whose work is largely focused on how to drive change within the fossil fuel sector. COP28 coverage showed fossil fuel companies were using the same repetitive techniques, she said, such as, “‘It’s not our fault, it’s someone else’s, [it’s] someone else’s job, we’re just doing what we need to do’” 

“It’s so clear that we need change and we need to phase out fossil fuels,” Halttunen told DeSmog, “and at the same time, we’re up against this hugely powerful industry with so much political power and economic power. So how do you go against that?” 

‘Deactivating’ Fossil Fuel Propaganda  

The idea behind the study was “to start looking at practical strategies within the oil and gas industry, and unpack what might be possible in terms of accelerating the transition,” said Raphael Slade, co-author of the study, and head of science for the Intergovernmental Panel on Climate Change, Working Group III Technical Support Unit, and a senior research fellow at the Imperial College London Centre for Energy Policy and Technology.  

Halttunen and Slade agree that knowing what the company strategies toward shareholders are lets climate advocates, communications experts, and other actors pushing for action to not only recognize the strategies but to “deactivate” them. Clearly, all involved need to keep in mind that the study focuses on three international oil companies, and further research would be necessary to assess whether company strategies toward shareholders are widespread throughout the sector or not.  

“One of the ways you can use the themes that we identified for the strategies is essentially you’re forearmed and forewarned. If you can approach a company and say, ‘you need to do more,’ and you can anticipate that their reaction is going to be an argument about financial stability or an argument saying, ‘it’s not us,’ then you can almost prepare your follow up message in advance,” said Slade. 

Halttunen echoed Slade:. “I think it’s really easy to get lost in arguments that sound like they’re very objective and technical when actually we’re ignoring really big elephants in the room. So the idea behind laying out these specific arguments that these companies use is to then show that when you’re having these conversations with [the industry], you can say, ‘okay, this is argument one, shifting route of responsibility,’” she said. 

The study also underscores an often overlooked but obvious imperative: that what drives oil companies’ business decisions is profit. “As IOCs [International Oil Companies] are profit-seeking entities, financial considerations are of paramount importance to strategic decisions,” the report says. 

“I think the first point is to just accept the facts. Companies exist to make profit. I think what then follows is that it’s a little bit weird to assume that oil companies will then somehow drive the transition [voluntarily],” said Halttunen. 

‘A Tool in the Arsenal’ 

Put simply, if fossil fuel companies won’t drive the transition themselves, someone has to force them to do it. But is shareholder activism enough? According to Benson with ClientEarth, shareholder activism has had an impact but more needs to be done. 

“We haven’t seen anywhere near enough progress to date,” Benson said. Investor pressure is mounting, he continued, with a high proportion of fossil fuel majors, including Shell, BP, Exxon, and Chevron, facing climate resolutions and increasing shareholder revolt. “But most large asset managers are still voting against progressive climate-related resolutions and effectively stalling climate action in the industry,” he explained. 

However, some areas exist where shareholder activism has had an increase in “sophistication,” said Slade, and ultimately proved to work. This is true particularly in terms of adopting science-based targets.

Another area where shareholder activism has an impact is support for litigation against oil and gas firms or other polluting companies. Benson noted there are several ways that shareholders can bring an action before a court, while other strategies have failed to bring the change they want to see.

For example, in a February case against Shell’s board of directors, a group of institutional investors with more than 12 million shares in the company, including pension funds, supported ClientEarth’s claim alleging the board mismanaged its climate risks, breaching company law. 

“We submitted their statements of support to the court as evidence that the lawsuit was in their best interests as shareholders,” Benson pointed out. “They supported the claim because this is ultimately about the medium to long-term value of their portfolios.”  

The reverse is also true: litigation brought by outside organizations against oil and gas companies can influence shareholders and, in turn, increase pressure. 

“We know that litigation can influence investor dialogue with companies and increase pressure,” Benson noted. “It is a huge business risk for companies after all, particularly in terms of the reputational damage and the potential financial implications. If and when a tort claim is successful against a high-emitting company, their potential exposure in terms of damages is astronomical.” 

Despite these wins, Benson added, oil majors continue to double down on fossil fuels and placate reluctant investors chasing short-term gains. “While there are a group of responsible investors pulling in the right direction, the force of those committed to business as usual is still, at the moment, holding them back,” he said.  

In the study, the researchers emphasized that in these cases, legislation is, often, the most effective way to push oil companies towards transitioning out of fossil fuels. 

“You can ask for more disclosure, which can increase transparency, which works, and it has an effect, but it’s by no means the ‘be all and end all’ in terms of putting pressure on these companies,” Slade concluded, adding, “So if you’re a climate [advocate], I think [shareholder activism] is one tool in the arsenal. It’s by no means the magic bullet.”