Breaking News
0
Ad-Free Version. Upgrade your Investing.com experience. Save up to 40% More details

Large Exxon Shareholder Starts Divesting Over Climate Change

Stock MarketsJun 21, 2019 07:00AM ET
Saved. See Saved Items.
This article has already been saved in your Saved Items
 
© Reuters. Large Exxon Shareholder Starts Divesting Over Climate Change

(Bloomberg) -- One of Exxon Mobil Corp (NYSE:XOM).‘s largest shareholders, Legal & General Group (LON:LGEN) Plc, has divested 19 of its funds from the company and will ask its clients if it can withdraw more money, saying the oil and gas producer isn’t adequately addressing climate change.

Exxon is the only oil major Legal & General is divesting, as competitors including Chevron Corp. (NYSE:CVX) and Royal Dutch Shell (LON:RDSa) Plc meet or exceed the insurer’s basic standards on climate change action. It would also use its remaining shareholding in the company to vote next year against the reappointment of the chairman, a role currently held by Chief Executive Officer Darren Woods.

Big Oil investors have engaged with companies about their response to climate change for years, but major shareholders have rarely escalated those discussions this far. The divestment affects a small portion of the Exxon’s equity -- Legal & General owns about 0.6% of the company, and the divesting funds hold just a fraction of that -- but intensifies pressure on the Irving, Texas-based firm.

It’s also a blow to the wider oil industry, which was already losing its luster compared to hotter sectors like tech. If more investors were to follow suit Exxon could see its share price, which has fallen about 5% in the past year, weaken further.

Divestment is a way to “hold Exxon accountable for something that’s really material for their future,” said Meryam Omi, head of sustainability at Legal & General Investment Management, which oversees more than $1 trillion. “People in the street who have their own pension that’s going to mature in 30 years time don’t get a chance to talk to Exxon themselves.”

Exxon is the largest of 11 companies that Legal & General said it will exclude from its “Future World” funds because of climate change risk. Others include MetLife Inc (NYSE:MET)., Subaru Corp., Hormel Foods Corp (NYSE:HRL)., Sysco Corp (NYSE:SYY). and Rosneft PJSC. Two companies it withdrew capital from last year for the same reason, Occidental Petroleum Corp (NYSE:OXY). and Dominion Energy Inc., will be added back to the funds because they addressed concerns raised by the insurer.

While standards differ by sector, Legal & General said it expects oil and gas companies to set targets to cut pollution in their own operations as a bare minimum. It also wants the company to disclose the volume of greenhouse gas emissions its operations and customers are responsible for each year.

“We’re on track to meet greenhouse gas reduction measures we announced last year which are expected to help significantly to improve emissions performance,” Exxon spokesman Scott Silvestri said in an email. “They include a 15% decrease in methane emissions and a 25% reduction in flaring by 2020.”

Exxon already publishes an annual tally of emissions from its operations and is “providing solutions to consumers to help them reduce their emissions,” Silvestri wrote.

Several other companies are “on the cusp” of divestment when it comes to climate action, according to Sacha Sadan, the director of corporate governance at the insurer’s investment unit, without saying which ones. And even those that were named as particularly strong on sustainability compared to their peers, such as Equinor ASA and French bank BNP Paribas (PA:BNPP) SA, will be expected to continuously move their businesses away from polluting activities or risk being divested.

“This engagement is not about picking up the laggards, it’s about pushing up the whole industry,” said Omi. “We need to keep the pressure on.”

Returns at Legal & General’s Future World funds will suffer very little as a result of the divestments, Omi said. The difference between what the funds would return without divesting and what they will return otherwise, which she called a “tracking error,” will be less than 0.3%.

The insurer is hoping to convince all clients to follow its advice around companies lagging in climate action, partly by demonstrating it doesn’t sacrifice returns. That could lead to further capital outflows.

Still, veering away from companies that are performing well is a major departure from its peers and Legal & General’s own past. The insurer has held Exxon stock for about 20 years, and it’s the asset manager’s seventh-largest equity holding overall, worth about $2 billion at the end of March. Since the day it started its investment in Exxon, the shares have returned 200% in total, according to data compiled by Bloomberg.

Large Exxon Shareholder Starts Divesting Over Climate Change
 

Related Articles

Add a Comment

Comment Guidelines

We encourage you to use comments to engage with other users, share your perspective and ask questions of authors and each other. However, in order to maintain the high level of discourse we’ve all come to value and expect, please keep the following criteria in mind:  

  •            Enrich the conversation, don’t trash it.

  •           Stay focused and on track. Only post material that’s relevant to the topic being discussed. 

  •           Be respectful. Even negative opinions can be framed positively and diplomatically. Avoid profanity, slander or personal attacks directed at an author or another user. Racism, sexism and other forms of discrimination will not be tolerated.

  • Use standard writing style. Include punctuation and upper and lower cases. Comments that are written in all caps and contain excessive use of symbols will be removed.
  • NOTE: Spam and/or promotional messages and comments containing links will be removed. Phone numbers, email addresses, links to personal or business websites, Skype/Telegram/WhatsApp etc. addresses (including links to groups) will also be removed; self-promotional material or business-related solicitations or PR (ie, contact me for signals/advice etc.), and/or any other comment that contains personal contact specifcs or advertising will be removed as well. In addition, any of the above-mentioned violations may result in suspension of your account.
  • Doxxing. We do not allow any sharing of private or personal contact or other information about any individual or organization. This will result in immediate suspension of the commentor and his or her account.
  • Don’t monopolize the conversation. We appreciate passion and conviction, but we also strongly believe in giving everyone a chance to air their point of view. Therefore, in addition to civil interaction, we expect commenters to offer their opinions succinctly and thoughtfully, but not so repeatedly that others are annoyed or offended. If we receive complaints about individuals who take over a thread or forum, we reserve the right to ban them from the site, without recourse.
  • Only English comments will be allowed.

Perpetrators of spam or abuse will be deleted from the site and prohibited from future registration at Investing.com’s discretion.

Write your thoughts here
 
Are you sure you want to delete this chart?
 
Post
Post also to:
 
Replace the attached chart with a new chart ?
1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Thanks for your comment. Please note that all comments are pending until approved by our moderators. It may therefore take some time before it appears on our website.
Comments (2)
Rob Mac
Rob Mac Jun 21, 2019 10:01AM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
Divest all you want. Exxon still makes the best premium fuel for luxury automobiles.
Fred Smith
Fred Smith Jun 21, 2019 9:01AM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
So ... Exxon should take MY profits and give away free electric cars. Maybe Starbucks should use its profits to give away free orange juice - because all science agrees caffine is also destroying the planet?
 
Are you sure you want to delete this chart?
 
Post
 
Replace the attached chart with a new chart ?
1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Add Chart to Comment
Confirm Block

Are you sure you want to block %USER_NAME%?

By doing so, you and %USER_NAME% will not be able to see any of each other's Investing.com's posts.

%USER_NAME% was successfully added to your Block List

Since you’ve just unblocked this person, you must wait 48 hours before renewing the block.

Report this comment

I feel that this comment is:

Comment flagged

Thank You!

Your report has been sent to our moderators for review
Disclaimer: Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. All CFDs (stocks, indexes, futures) and Forex prices are not provided by exchanges but rather by market makers, and so prices may not be accurate and may differ from the actual market price, meaning prices are indicative and not appropriate for trading purposes. Therefore Fusion Media doesn`t bear any responsibility for any trading losses you might incur as a result of using this data.

Fusion Media or anyone involved with Fusion Media will not accept any liability for loss or damage as a result of reliance on the information including data, quotes, charts and buy/sell signals contained within this website. Please be fully informed regarding the risks and costs associated with trading the financial markets, it is one of the riskiest investment forms possible.
Continue with Google
or
Sign up with Email