This is the first time Exxon is seeking to exclude a shareholder proposal by filing a complaint in court. The case was assigned to a judge with a track record of ruling in favor of conservative causes.
Exxon says the investors are "driven by an extreme agenda" and that their repeated proposals do not serve investors' interests or promote long-term shareholder value.
Investors led by U.S. activist investment firm Arjuna Capital and shareholder activist group Follow This are asking Exxon and other oil majors to adopt tighter climate targets.
They want Exxon to set so-called Scope 3 targets to reduce emissions produced by users of its products. Exxon is the only of the five Western oil majors which does not have such targets.
Follow This in the past two years made similar proposals in shareholder meetings of different oil majors. It received a 28% approval from Exxon's shareholders in a 2022 voting, and 10% last year.
Exxon shareholders have already rejected scope 3 targets so it wants to exclude the proposal from its proxy statement. The activists pursued a strategy to "become shareholders solely to campaign" for changes "calculated to diminish the company's existing business," it said.
Follow This said shareholders should have a right to vote on whether Exxon should align emissions reductions targets with the Paris Climate Agreement, with any strategy of its choosing.
Such goals would create long-term value for shareholders by preventing risks of losing access to capital markets, of facing policy interventions, and incurring losses associated with stranded assets, Follow This founder Mark Van Baal said.
"The resolution leaves the strategy how to achieve emissions reductions entirely up to the board," he said.
Arjuna has a fundamental right to voice concern over climate risk and its impacts on the global economy and shareholder value, Chief Investment Officer Natasha Lamb said.
JURISDICTION
Exxon is asking a U.S. District court in Fort Worth to exclude the proposal from its proxy statement.
The case on Monday was assigned to U.S. Judge Mark Pittman, an appointee of former President Donald Trump. Pittman's notable rulings include 2022 decisions declaring President Joe Biden's student debt relief plan to be unlawful and that Texas' ban on 18- to 20-year olds from carrying handguns was unconstitutional.
The case had been first assigned to U.S. Judge Reed O'Connor, an appointee of Republican former President George W. Bush with a track record of ruling in favor of conservative litigants challenging laws and regulations governing guns, LGBTQ rights and healthcare.
O'Connor recused himself from the case on Monday. He did not provide a reason, but his most recent publicly available financial disclosure report showed he held Exxon stock and his spouse had non-investment income from the company.
Exxon challenged U.S. Securities and Exchange Commission guidance on application of the rule that outlines the conditions under which shareholders can have proposals accepted. The guidance "can be at odds with the rule itself," it wrote.
Exxon is seeking a ruling by March 19. Its proxy statement needs to be filed by April 11, in time for its annual shareholder meeting in May.
