MN has said that Exxon could make it back into its portfolio in the future if it steps up its approach to climate change, after the fund announced it had exited the US oil major last week.
The manager for €87bn Dutch metalworker pension fund PMT decided to dump shares in Exxon, which has a longstanding reputation as a laggard on climate issues, despite the company having recently bowed to investor pressure and published its Scope 3 emissions data, relating to the carbon footprint of Exxon customers.
Karlijn van Lierop, MN’s Head of Responsible Investment told RI: “We [PMT and MN] are definitely open to welcoming the company back into our portfolio once it makes progress towards Paris alignment, so we will continue to monitor progress and remain in contact with other investors who are engaging with the company.”
According to MN, a request to publish Scope 3 data was also among a list of demands sent to Exxon last November as PMT was in the final stages of deciding to exit their stake. MN had also asked the oil major to disclose emissions reduction goals in the medium to long term, and a strategy to align itself with the Paris Agreement.
However, Tim Balemans, a member of MN’s responsible investment team, said that Exxon’s response to the fund’s other requests was insufficient and “not convincing”, which eventually resulted in the decision to exit the company.
The move by MN comes two years after PME – the sister fund of PMT which also serves the metal industry – divested Exxon. Balemans said that PMT had decided to continue to hold Exxon at the time after the company published its first climate risk report in 2018 which the fund saw as a promising first step.
Van Lierop emphasised that the fund would continue to be committed to engagement efforts, and would only divest “as a last resort”.
“We really feel that it's our responsibility to change companies and to really make sure that their strategies are sustainable and are in line with our principles. Specifically for the oil and gas sector, alignment with the Paris agreement is key because these companies are potential game changers in driving the transition to renewables. However, it is a balancing act between supporting the sector in the transition and also protecting our portfolio from risk exposure.
“In many of the oil companies that we speak to we do see progress but this has not been the case with this specific company. While we can be patient for a long time, talking endlessly to a company which is obviously not willing to change is something that we cannot accept on behalf of our clients, so we had to act.”
MN, which is a member of shareholder engagement platform Climate Action 100+ (CA100+), said that the divestment decision had been undertaken unilaterally and not in consultation with other CA100+ members, as CA100+ prohibits coordinated divestment for legal reasons.
In a statement to RI, CA100+ founding member the California Public Employees’ Retirement System (CalPERS) said that it would continue to back engagement over divestment at Exxon, pointing to the company’s u-turn on Scope 3 emissions data as an example of what engagement by investors could accomplish.
“When an investor divests, they lose their seat at the table, and hence their ability to influence and drive change. As a universal owner and cross-generational investor, we believe in using corporate engagements and proxy voting to ensure sustainable business models at our portfolio companies,” explained Simiso Nzima, CalPERS’ Investment Director & Head of Corporate Governance for Global Equity.
Compared to Europe-based oil producers such as BP, ENI and Repsol, which have announced wide-ranging climate pledges over the past year, American producers like Exxon are considered by many investors to be laggards in the space. On the back of the oil slump last year, Exxon’s share price plunged by more than 40%.
In the upcoming proxy season, Exxon is the target of shareholder resolutions from CA100+ members CalPERS and BNP Paribas, which seek improved disclosure on the company’s emissions and lobbying activities. Exxon is petitioning regulators to block both proposals from going to a vote.