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The future of Big Oil could look very different following a critical shareholder meeting in the United States and a legal decision in Europe.
What’s happening: On Wednesday, ExxonMobil (XOM) will face off against an activist investor looking to overhaul its strategy on sustainability. Meanwhile, a Dutch court is due to rule on a landmark case against Royal Dutch Shell (RDSA) as activists try to compel the company to move faster to cut emissions.
That could make for a pivotal day for the oil industry.
“We’ve finally reached the point where climate inaction can cost a board member their job,” Andrew Logan, senior director of oil and gas at Ceres, a sustainability nonprofit, recently tweeted.
Engine No. 1 holds just 0.02% of Exxon’s shares, but it poses a credible challenge to the company, which was once the most valuable in the world. Upset with Exxon’s financial performance and its foot-dragging on the climate, the hedge fund is seeking to oust four directors at the firm’s annual meeting.
If successful, the campaign could pressure Exxon to dramatically shift its strategy by diversifying into renewable energy and pulling back on oil production.
Reading the tea leaves: There’s a real chance of victory. The powerful Institutional Shareholder Services has advised stockholders to vote in favor of three of Engine No. 1’s candidates. Citing Exxon’s “questionable strategy” for the future and “diminishing returns,” Glass Lewis, another top advisory firm, urged shareholders to back two of the four candidates.
“We believe Engine No. 1 has presented a compelling case that, without a more concerted response and well-developed strategy … related to the global energy transition, Exxon’s returns, cash flow and dividend, and thus its shareholder value, are increasingly at threat,” Glass Lewis wrote in its report.
Reuters reports that asset manager BlackRock (BLK), which is Exxon’s third largest shareholder, is voting to support three of the four candidates.
Shell has gone much further on climate than Exxon, announcing that it aims to achieve net zero emissions by 2050 — a target that includes emissions from its own operations and from the energy products it sells.
But a win for Friends of the Earth Netherlands, the environmental campaign group suing Shell, could push even greater changes.
This is the first time that a court will rule on whether a company needs to reduce its emissions in line with global climate goals, according to the group.
While Shell claims that its carbon intensity targets are aligned with the Paris Agreement, which aims to limit global temperature increases to 1.5 degrees Celsius, Friends of the Earth Netherlands argues that the company’s ongoing investments into oil and gas extraction show it doesn’t take climate change seriously.
The verdict will only be legally binding in the Netherlands. But it could open the door for similar cases in other countries.
Watch this space: The courts are becoming a popular venue for fights on climate. According to a database from Columbia Law School and Arnold & Porter, there are currently more than 1,800 cases working their way through global legal venues.
Big picture: The action comes just a week after the influential International Energy Agency told oil companies they need to stop drilling for oil and gas right now to prevent a climate catastrophe.
“This is a really big deal,” Tracey Cameron, senior manager of corporate climate engagement at Ceres, said in a statement. “The IEA is what governments and companies all look to when they’re developing their strategies, so to say that new investment in oil and gas needs to stop really turns the page for this industry.”
Taken together, these moves are a stark sign of how quickly public attitudes are changing — and could generate concrete results.
The antitrust lawsuits have come for Amazon
First, states filed antitrust lawsuits against Google (GOOGL) and Facebook (FB). Now, attorneys general are turning their attention to Amazon (AMZN).
The latest: The District of Columbia sued Amazon on Tuesday, alleging the tech giant has abused its market dominance in e-commerce to harm competition and keep retail prices artificially high across the internet.
DC Attorney General Karl Racine’s suit zeroes in on the tech company’s relationships with third-party sellers, alleging that Amazon’s contracts prohibit them from offering their products at a lower price on other websites.
That means that the fees Amazon demands from its sellers are also baked into the prices shoppers see on Walmart’s website, for example, Racine told reporters on a conference call. In some cases, Racine said, Amazon sellers are charged fees amounting to 40% of the total product price on Amazon.
“These restrictions allow Amazon to build and maintain monopoly power in violation of District law,” Racine said.
The suit calls for a court order prohibiting Amazon from engaging in anticompetitive behavior and any other necessary measures — including a corporate breakup, if deemed necessary.
In a statement, an Amazon spokesperson said Racine “has it exactly backwards.”
“Sellers set their own prices for the products they offer in our store,” the statement said. “Amazon takes pride in the fact that we offer low prices across the broadest selection, and like any store we reserve the right not to highlight offers to customers that are not priced competitively.”
Big picture: Court cases against Big Tech companies could weigh on the sector, even if they’re expected to drag on for years.
In the meantime, their clout is only growing. Amazon, whose stock is holding steady, is reportedly in talks to buy MGM, the vaunted film studio that was a staple of Hollywood’s Golden Age. A tie-up would give the tech firm a big brand to wield as competition in streaming grows fiercer.
The CEO of the biggest bank to fail is worried again
The banking world nearly caved in 13 years ago. The former CEO of Washington Mutual is worried that another bubble is brewing, my CNN Business colleague Paul R. La Monica reports.
Kerry Killinger was named CEO of WaMu in 1990 and was fired in September 2008 — just weeks before the bank collapsed as a growing number of mortgage loans went bad. With more than $300 billion in assets, it still ranks as the biggest-ever bank failure.
Killinger thinks JPMorgan Chase and other “too big to fail banks” are in much better shape now thanks to post-crisis reforms like Dodd-Frank.
“The health of the industry is great, earnings are good and oversight is strong. I’m not too concerned there,” he said.
But Killinger is nervous about the fact that rock-bottom interest rates and big bond purchases by the Federal Reserve have sparked a broader mania in other assets, including cryptocurrencies and meme stocks.
“The bubbles today are broader and deeper in a variety of categories, not just housing,” Killinger said. “The Fed’s policy of low rates and massive asset purchases worked well to get out of the downturn, but when you keep extending it you can cause unintended consequences.”
Up next
Abercrombie & Fitch (ANF) and Dick’s Sporting Goods (DKS) report results before US markets open. American Eagle (AEO), Nvidia (NVDA), Snowflake and Williams-Sonoma (WSM) follow after the close.
Also today: Wall Street CEOs testify before the Senate Banking Committee, including JPMorgan Chase’s Jamie Dimon, Citi’s Jane Fraser, Goldman Sachs’ David Solomon, and Bank of America’s Brian Moynihan.
Coming tomorrow: The House Financial Services Committee gets its turn grilling Wall Street’s top brass.
