Exxon Sues Two ESG Investors

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Exxon Mobil is suing two sustainable investment firms in a bid to block them from putting forward a shareholder proposal that would commit the oil company to further curb its greenhouse-gas emissions and target its customers’ emissions.

In a federal lawsuit filed in Texas on Sunday, the Houston-based oil giant said investment firms Arjuna Capital and Follow This became Exxon shareholders only to put forward proposals that would “diminish the company’s existing business.”

Arjuna submitted a proposal in December asking shareholders to pass resolutions committing Exxon “to go beyond current plans, further accelerating the pace of emission reductions in the medium-term.” Follow This joined the proposal the following day, Exxon said. In a departure from Exxon’s current policy, they advise the oil company to target the emissions of its suppliers and customers in addition to its own.


“Defendants are asking Exxon Mobil to change its day-to-day business by altering the mix of—or even eliminating—certain of the products that it sells,” the oil company said in the lawsuit. Their goal, it alleged, is “to force Exxon Mobil to change the nature of its ordinary business or to go out of business entirely.”

Arjuna Capital and Follow This have put forward investor proposals for more than a decade at Exxon and other oil-and-gas companies.

“With this remarkable step, ExxonMobil clearly wants to prevent shareholders using their rights,” said Mark van Baal, founder of Follow This. “Apparently, the board fears shareholders will vote in favor of emissions reductions targets.”

Natasha Lamb, a managing partner of Arjuna Capital, said investors face economywide risks from climate change.

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The lawsuit comes amid mounting political opposition to some investors’ recent emphasis on environmental, social and governance—or ESG—issues at public companies. Republican presidential candidates including Vivek Ramaswamy took shots at ESG investing on the campaign trail.

A growing number of business leaders are refraining from using the ESG acronym altogether in their public statements. On Wall Street, some firms are closing once-popular ESG funds as interest fades.

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Last year, efforts by investors to push Exxon and Chevron on climate change fizzled out as shareholders struck down numerous proposals to cut greenhouse-gas emissions and report on climate benchmarks, among other initiatives. Almost all failed to garner more than 25% of the shareholder votes, and some received far less support than similar ones had the year before.

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In 2021, Exxon lost a historic proxy fight against investment firm Engine No. 1, which urged the company to prepare for the energy transition and successfully placed three directors on Exxon’s board. In recent years, Exxon has launched a business to invest $20 billion through 2027 in carbon capture, lithium and other low-carbon technologies.

The new lawsuit highlights companies’ increasing use of courts—particularly in the conservative appeals circuit that includes Texas—to question federal regulators. Last month, the U.S. Chamber of Commerce won a ruling from the U.S. Court of Appeals for the Fifth Circuit that struck down a recent SEC rule affecting stock buybacks. The Chamber sued alongside two Texas business groups to obtain standing in the jurisdiction.

Under normal circumstances, companies that want to exclude shareholder proposals from their proxy statements submit a request to the SEC. Exxon’s move is an unusual attempt to bypass that process as the SEC during the Biden administration has become less inclined to let companies block proposals.

In the lawsuit, Exxon said the shareholder proposal and proxy voting process has become “ripe for abuse by activists.”

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