An interview with McKenzie Ursch, legal advisor at climate activist Follow This.

Founded in 2014 and based in the Netherlands, Follow This is a major international player in supporting the U.S. and European oil and gas industry in preparing for the net-zero transition.

How have Follow This’ climate proposals performed this season, compared to previous years?

Results have been decidedly mixed. In Europe, we grew or maintained support, with requests for BP and Shell to set medium-term Scope 3 emissions targets remaining virtually unchanged, winning around 20% support. At TotalEnergies, we did see a large increase in support, with the same request being endorsed by 30% of votes cast, while our last proposal at that company in 2020 won 17% support.

In the U.S., sadly, support plummeted. While several of our proposals received between 30% – 40% support in 2022, this year, requests for medium-term Scope 3 emissions targets won 10.5% and 9.6% support at Exxon Mobil and Chevron, respectively. It’s a big setback. I think the TotalEnergies proposal, however, is a good indication that investors do still want to see change from oil majors, but right now there are a lot of factors that influence their capacity to support these resolutions.

This year, your proposals specifically targeted medium-term Scope 3 emissions. Why was this?

Many oil majors have set net-zero by 2050 targets, as well as Scope 1 and 2 emissions reduction goals, but these only constitute around 10% of their total emissions. When asking companies for updates on our previous proposals, which sought short-, medium-, and long-term Scope 1, 2, and 3 emission reductions, many could say, “Look, we’re doing a great deal of what you asked. We have this long-term target in place and have set Scope 1 and 2 targets.” But when pressed on Scope 3, the response was often “That’s only one part of the request, we will get around to addressing that in time.” So, we decided to focus on medium-term Scope 3 emissions to make clear these emissions are a priority.

Another consideration was that the exacerbation of the energy crisis resulting from Russia’s invasion of Ukraine has led to concerns about energy supply in the short-term. That was another reason we opted to omit short-term targets from our proposals, given the uncertainty concerning energy supplies.

In your experience, does engagement with U.S. energy companies differ to those in Europe?

Absolutely. Part of that difference in engagement stems from the difference in company strategies. European issuers are generally seen as being a bit more progressive, although no oil major globally, according to the Climate Action 100+ Net-zero Company Benchmark, has a Paris-aligned strategy.

Many of these European companies are still lacking medium-term targets, but we do seem to have more robust engagements with them, compared to their U.S. peers. Sometimes it can feel like lip service, but European oil companies do talk about how they’re doing as much as they can and how they want to transition to net-zero.

In contrast, U.S. oil companies are a bit more straightforward. They express that they want to continue producing oil and gas because that is their job. And, particularly with the likes of Chevron and Exxon Mobil, it seems as if they want to be the last man standing and they want to pull that last barrel of oil out of the ground.

What have you learnt from your campaigns this season?

After the reduction in support for climate proposals in 2022, it seems like there has been a bit more of a confidence among oil companies across the board, and this comes out in different ways. In Europe, companies have been more open about saying, “We’re doing as much as we can to reduce our climate impact,” whereas in 2020 and 2021, when oil prices were low and our proposals were receiving high levels of support, they did seem to want to accommodate us a little more.

This year, companies have basically said to go ahead and file proposals. They are not as threatened, I think, and that really came out in the results of the votes this season.

Another key takeaway is that investors have yet to decouple short-term profit from long-term risk. They do not realize that they can still have the profits from today’s oil and gas extraction while requesting the company to adopt a Paris-aligned strategy in order to limit long-term risk.

Do you think increasingly vocal anti-ESG sentiment has had any impact on support for ESG resolutions this year?

I’ve been paying attention to the rise in anti-ESG sentiment, sometimes dubious of its impact, other times understanding the threat. And I do think that this has had an effect on investors, and especially on proxy advisors.

If you look at the support our proposals have received from proxy advisors in the past, both Institutional Shareholder Services (ISS) and Glass Lewis have tended to support us both in the U.S. and Europe. This year, we only received support for our resolution at TotalEnergies from ISS, and that doesn’t really make sense. If you look at where that company is at, compared to Chevron and Exxon Mobil, you can see that Chevron and Exxon Mobil are miles behind where TotalEnergies is in mitigating their climate impact, so to advise for a proposal at TotalEnergies and against identical ones in the U.S. doesn’t make sense.

If you read through either Glass Lewis’ or ISS’ voting guidelines, the advice they give is contradictory with the recommendations they have issued on our proposals. Based on both advisors’ voting policies, it should pretty clearly indicate that these oil majors, which produce a significant amount of carbon emissions, need to be setting targets to reduce those emissions, but the advisors didn’t support the proposals. In the long-term, I don’t think that their recommendations are acting in the best interests of investors.

You also see the impact of anti-ESG in BlackRock’s communications. The fund manager’s CEO, Larry Fink, has typically always sent out two annual letters, one to businesses and one to his clients or investors. This year, Fink wrote just one letter and the tone of it is so different. In spite of BlackRock’s many shortcomings, the asset manager has really focused on climate risk as investment risk. But now, it’s not like Fink’s annual letter necessarily contradicted previous statements, but Fink suggests there are other concerns.

It seems to me a pretty objective fact that any other concerns are going to be dwarfed by the threats of climate change. Yes, of course we are worried about the economy and energy prices right now, but I don’t think that we can sacrifice our climate goals for that, which is what seems to be happening among investors and proxy advisors.