Exxon Shareholders Pressure Company on Climate Risks -- Update

Exxon Mobil Corp. shareholders delivered a major rebuke to the oil giant Wednesday, calling for the company to share more information about how climate change and regulations could impact its operations.

The climate proposal won the support of 62% of shareholders who cast ballots, a powerful symbol that big investors see climate change as a major risk that warrants greater transparency from oil and gas companies.

Vanguard Group and BlackRock Inc. -- Exxon's two largest shareholders -- supported the climate-related shareholder proposal, people familiar with the votes said. Vanguard, BlackRock and other asset managers last week signaled they were likely to vote for a shareholder proposal at the company's annual meeting Wednesday.

The Exxon vote came amid reports that President Donald Trump was leaning toward pulling out of the 2015 Paris accord to address climate change. The president said on Twitter Wednesday morning he would make his determination "over the next few days."

Exxon has stepped up its climate disclosures in recent years, stated its commitment to the Paris climate agreement, named an environmental expert to its board and worked to reduce emissions in its operations.

At Exxon's annual meeting, an estimated 32% of investors also voted against the company's pay practices. Proxy-advisory firm Institutional Shareholder Services said the company's goals and targets are not specific enough and grants to executives lack performance criteria. The vote tallies were preliminary.

Both votes are nonbinding, but reflect frustration among the company's major investors over the Exxon board policy that doesn't allow shareholders to meet with non-employee directors. Shareholders can communicate with board members by emailing them through the company's Web site. Last year, BlackRock withheld its support for two Exxon directors over the matter.

Sarah Krouse contributed to this article.

Write to Bradley Olson at Bradley.Olson@wsj.com

DALLAS -- Exxon Mobil Corp. shareholders delivered a major rebuke to the oil giant Wednesday, calling for the company to share more information about how climate change and regulations could impact its operations.

The climate proposal won the support of 62% of shareholders who cast ballots at Exxon's annual meeting, a powerful symbol that big investors see climate change as a major risk that warrants greater transparency from oil and gas companies.

Vanguard Group and BlackRock Inc., Exxon's two largest shareholders, supported the measure, people familiar with the votes said. The proposal pushes Exxon to conduct a climate "stress test" to measure how regulations to reduce greenhouse gases and new energy technologies could impact the value of its oil assets.

The Exxon vote came amid reports that President Donald Trump was leaning toward pulling out of the 2015 Paris accord to restrict carbon emissions and hold back rising temperature. The president said on Twitter Wednesday morning he would make his determination "over the next few days."

Exxon has stepped up its climate disclosures in recent years, stated its commitment to the Paris climate agreement, named an environmental expert to its board and worked to reduce emissions in its operations.

The company, which recommended shareholders vote against the proposal, met with about 25% of its shareholders prior to the meeting to discuss their concerns, which included climate vulnerabilities.

"We're confident in the commercial viability of our portfolio," Exxon Chairman and Chief Executive Darren Woods said Wednesday.

Mr. Woods said the company would "step back and reflect on the vote" and how it could better express its position. The board would also continue to discuss the question of allowing investor meetings with non-employee directors, he said.

"This is a turning point," said Anne Simpson, the investment director for sustainability at the California Public Employees' Retirement System, the nation's largest pension fund, which supported the proposal. The vote "demonstrates that investors are seeking strong reporting and scenario analysis to better understand the risks and opportunities of climate change."

At the annual meeting, an estimated 68% of investors also voted for the company's pay practices, a decline from about 90% in previous years. Proxy-advisory firm Institutional Shareholder Services said the company's goals and targets are not specific enough and grants to executives lack performance criteria. The vote tallies were preliminary.

Both votes are nonbinding, but they reflect frustration among the company's major investors over the Exxon policy that doesn't allow shareholders to meet with non-employee directors. Shareholders can communicate with board members by emailing them through the company's Web site. Last year, BlackRock withheld its support for two Exxon directors over the matter.

Such meetings were central to discussions over the past year between Chevron Corp., the second-largest U.S. oil company, and certain investors over executive pay and climate-change issues. Chevron revised its pay practices in response and produced a report on climate-change impacts, prompting shareholders backing a resolution similar to Exxon's to withdraw it in advance of the company's annual meeting.

In 2014, Exxon produced a climate-related report saying that none of its assets were at risk of being stranded, or left untapped, due to climate change. The company has consistently said that energy demand will rise through 2040 as people around the world, particularly in emerging nations, join the middle class.

Many oil and gas companies have come up with climate disclosures that reach conclusions similar to Exxon. Activists and disclosure advocates have said the fact that many companies are reaching the same conclusion -- that they are well-positioned to withstand climate impacts and regulations -- points to flaws in their analyses.

"Investor sentiment can change a lot more quickly than the trajectory for global oil demand," said Jim Krane, an energy fellow at Rice University's Baker Institute in Houston. "For a public company beholden to fossil fuels, that might be where the biggest risk lies."

Sarah Krouse contributed to this article.

Write to Bradley Olson at Bradley.Olson@wsj.com

(END) Dow Jones Newswires

May 31, 2017 14:10 ET (18:10 GMT)