Chevron Corporation shareholders will vote at the company’s AGM later this month on a climate change-related resolution based on a skeptical view of the issue, in contrast to most proposals in this area.
The resolution comes amid an uptick in recent years both of pro and anti-ESG shareholder measures. Research from Georgeson finds twice as many proposal submissions that were critical of the ESG landscape in 2022 (52) as in 2021 (26), and there does not appear to have been a downturn this year.
The proposal filed by David Bahnsen, trustee of The Bahnsen Family Trust dated July 15, 2003, asks that Chevron’s board ‘charter a new board committee on decarbonization risk to evaluate [the company’s] strategic vision and responses to calls for Chevron decarbonization on activist-established deadlines.
‘The charter should require the committee to engage in formal review and oversight of corporate strategy, above and beyond matters of legal compliance, to assess the company’s responses to demands for such decarbonization schedules, including the potential impacts on [Chevron] from flaws in activists’ climate models, the possibility that the US will not force decarbonization according to such schedules, thus obviating ‘stranded asset’ calculations, the possibility that other countries will not adopt similar targets, thus making company efforts meaningless, concerns about technological or economic infeasibility and other relevant considerations.’
In a supporting statement, Bahnsen notes that Chevron has made a commitment to reaching net-zero carbon emissions by 2050 but says it does not appear that the company has fully taken into account the risk of doing so on ‘activist schedules’.
‘Claims about the need for decarbonization at all, but especially by some activist-generated [specific date], are based on a long series of assumptions that are either counterfactual or insufficiently examined,’ the proponent writes. ‘For decades, for instance, claims have been made that action must be taken before some date or it will be too late. If those claims were right, it’s too late for decarbonization to matter now, so we should be building up economic resources to deal with climate change. If they were wrong, then the odds are high that current claims are also wrong.’
BOARD OPPOSITION: WE’VE GOT THIS
Chevron’s board has urged shareholders to vote against the proposal. It writes in the company’s 2023 proxy statement: ‘Your board believes it has the appropriate structure to effectively oversee the company’s strategy and risk management, including as it relates to climate change issues, making a new board committee unnecessary.
‘The company’s strategy to leverage its strengths to safely deliver lower-carbon energy to a growing world is covered by the full board’s existing oversight structure. Your board has the necessary diverse skills, experience and expertise to enable it to effectively oversee the company’s strategy and risks and opportunities. In addition, the board’s four standing committees assist the board in fulfilling its oversight responsibilities as they relate to climate issues within the particular remit of each committee.’
A Chevron spokesperson says the proposal ‘is addressed directly and completely in our 2023 proxy statement.’
The company’s AGM is scheduled to take place on May 31.
Almost 39 percent of votes cast at Chevron’s 2022 AGM backed a proposal seeking a look into the impact on the energy company of getting to net-zero greenhouse gas emissions.
Specifically, the proposal asked Chevron’s board to release ‘an audited report addressing how application of the assumptions of the [International Energy Agency’s] net-zero by 2050 pathway would affect the assumptions and estimates underlying its financial statements, including its long-term commodity and carbon prices, remaining asset lives, existing and future asset retirement obligations, capital expenditures and asset valuations (impairments).’
A Chevron spokesperson said in a statement following last year’s vote: ‘[Chevron’s] board appreciates the focus of our investors and stakeholders on achieving the goals of the Paris Agreement. Chevron supports the goals of the Paris Agreement and is committed to lowering our portfolio carbon intensity, on a full-cycle basis, and to being transparent about our progress. We have engaged extensively with the proponents and expect to continue to do so.
‘In response to a similar proposal last year, we tested our portfolio using [net-zero by 2050 scenario’s] demand and commodity price projections and reported on the results of this scenario test in our updated climate change resilience report in October 2021.’