Exxon’s Corporate Coup

Climate change isn’t just a set of apocalyptic conditions that will be heaped on future generations—it’s a gradual disaster we are already experiencing. In the American West and Southwest, where the duration and frequency of heat waves has increased every decade since the 1960s, June brought record-setting temperatures in Phoenix (117 degrees) and unprecedented triple-digit heat to Oregon and Montana. Lake Mead, which supplies water to 25 million people in three states and parts of Mexico, is at its lowest level since it was created with the Hoover Dam in 1935, and the federal government is planning to declare an official water shortage there in August. The extreme drought, along with early wildfires, suggests that we will face yet another deadly fire season this year. These are not temporary aberrations. They are the normal and foreseeable effects of excessive carbon emissions. 

Of the major players responsible for keeping the world addicted to oil, ExxonMobil is perhaps the most notorious. Despite receiving internal confirmation of the dangerous warming effects of carbon dioxide as early as 1978, the company spent decades funding think tanks and organizations like the now-disbanded Global Climate Coalition to sow doubt about climate change; paying “independent” scientists to publish contrarian research; and successfully convincing the Bush administration to abandon the 1998 Kyoto Protocol. Exxon’s January 2021 Energy & Carbon Summary previewed its plans to expand its drilling presence and boost its fossil-fuel production over the coming decades (including in Texas, where extreme temperatures have already caused major electrical outages this year and where energy companies are currently begging residents to reduce their electricity use). Despite recent PR efforts to “green” the company’s image, it’s clear that, even among global oil companies, Exxon has demonstrated a particularly stubborn refusal to take steps toward decarbonization.

But now the company may be facing pressure from a new source: its own board. Thanks to the recent campaign of a small activist investment firm called Engine No. 1, Exxon’s twelve-person board counts three new climate-focused members. Engine No. 1 was founded last year by activist investors Chris James and Charlie Penner to select corporate-board candidates with energy experience and a willingness to address environmental harm. It is not a major shareholder in Exxon, but it didn’t need to be to pull off such an audacious project; it only had to convince the major shareholders to support the candidates it put forward. For investors like the state pension fund in California, where the effects of continued fossil-fuel consumption are so pronounced, nudging Exxon toward alternative energy was a welcome development. Three of Exxon’s largest shareholders—Vanguard, BlackRock, and State Street—also expressed support.

James and Penner frame their strategy as a sensible business choice, not a noble sacrifice. They point to Exxon’s historic losses in the past decade and argue that the company needs “directors with track records of looking profitably around corners in energy.” That didn’t stop Exxon from spending $35 million to fight the campaign. (Engine No. 1 spent almost as much). But despite the best efforts of CEO Darren Woods, Exxon’s board now includes three proponents of decarbonization: Gregory Goff, a former oil executive; Kaisa Hietala, former vice president for renewable energy at a Finnish petroleum company; and Alexander Karsner, an energy entrepreneur. While they still face nine board members entrenched in the status quo, their upset election demonstrates that even the most recalcitrant fossil-fuel companies can be pushed toward a low-carbon business model. The question is how long it will take them to get there. With so much of the world already ablaze, there’s little time to lose.