Big Oil’s New Shareholder Activism: Problem Or Solution?

The social megatrend of increased influence by environmentalists is now shaking the holy of holies: the boardrooms of supermajors. After six-months of proxy conflict and vote counting, environmentalist investors have claimed victory in their clash against the largest U.S. oil company – ExxonMobil

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Three seats on ExxonMobil’s twelve-member board appear to have been won by outsiders, each with a background in renewable fuels. The force behind the shakeup was Engine No. 1, an investment firm with a stated belief in generating value when Wall Street pursues Main Street goals.

The newcomers are hardly bomb throwing activists. Both Greg Goff and Kaisa Hietala are former refining executives, and Alexander Karsner served the nation as U.S. Assistant Secretary of Energy during the second Bush-43 presidency. Exxon is not being dismantled from within. Instead, Engine No. 1’s victory reflects a frustration by shareholders with what they call years of “platitudes and gaslighting” without substantial moves toward environmental responsibility.

Exxon insiders retain a supermajority, but have been given a kick in the shins to remind them that at least some shareholders desire a shift from short-term profit to long-term sustainability. The green transition is no longer a prophesied future event. Big investors — such as BlackRock

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, the world’s largest asset manager and a 6.7% owner of Exxon — feel more needs to be done, lest lack of preparation see the stock value plummet.

Just as electric vehicles may be nearing a tipping point of mass adoption, where they and their electricity power source prove as affordable and accessible as traditional cars, energy companies may be nearing their own tipping point. It is bad business to phase out all oil and natural gas E&P, but it is now equally unwise to ignore what may be a very different economy in a decade.

Exxon is not the only recalcitrant company to be dragged along in said manner. Chevron

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Corp, the second largest U.S. oil company, saw shareholders vote 61% in favor of a proposal introduced by Follow This, yet another organization of activist investors seeking to redirect the energy industry.

Some of this frustration is undoubtedly tied to declining growth in major industry players over the last decade. Exxon’s investment into the Permian Basin is just one example of major spending which activists are frustrated has not produced strong returns. Investors want profit, and some are starting to view renewable energy as not merely a public good but a historic opportunity for serious growth.

After all, other oil giants have begun taking steps which might make them the titans of the 2030s. The United Kingdom’s British Petroleum (BP) and Norway’s Equinor have partnered for an early investment into offshore wind energy generation. Applying expertise acquired through the management of offshore oil platforms is an example of how energy leaders can transfer their current skills and resources to long-term gains.

I have written before on offshore wind, which could power millions of homes and cut tens of millions of tons of CO2 emissions. These platforms, including new “vertical axis wind turbines” could present such an opportunity for offshore drilling operations looking to pivot towards the future.

Oil companies including Total, Shell, and Repsol have targeted 2050 as the date by which they expect to be net-zero emitters. Twenty-nine years may feel like a lifetime away, but energy projects often have a 30-year life span, and jockeying for leadership in a post-fossil fuel economy has already begun. Think of oil companies overtaking coal miners in the last century.

A company which moves too slow or too late is likely to struggle to reinvent itself or compete with shrewder and swifter competitors. While there is little doubt hydrocarbons will continue to play a dominant role in the global economy over the next two decades, some shareholders believe they are preventing their companies going the direction of Blockbuster or Tower Records.

Exxon and Chevron have a considerable advantage in their size and wealth. Should investors continue to push for more action, the companies have the resources and expertise to commit to long-term renewable projects – if it makes economic sense.

Young investors are influenced by prevailing values and ideology, and wish to feel that their money will be safe in three decades. The current differences of approach are generational, political, and economic. In implementing policies beneficial to the greater good: the energy company shareholders, the consumers, and the company staff all benefit over the coming decades. The free market – not arbitrary regulation and government fiat – are capable of being and should be the arena in which these struggles are settled.