Since Joe Biden entered the US presidential office back in January, the global climate war has gained new momentum, and the global business sphere, and especially big oil companies that have been involved in some drastic, unprecedented cases.

Back in 2019, the Guardian posted a list of 20 companies that contributed to 35% of all energy-related carbon dioxide and methane worldwide, totalling 480bn tonnes of carbon dioxide equivalent (GtCO2e) since 1965, and they are ALL oil companies. Chevron topped the list of the eight investor-owned corporations, followed closely by Exxon, BP and Shell. Together these four global businesses are behind more than 10% of the world’s carbon emissions since 1965.

Biden set the tone on big oil on his first day in office, pulling a Trump administration permit for TC Energy Corp’s controversial Keystone XL oil pipeline, which would have carried crude from the Alberta oil fields to Gulf of Mexico refineries. And the US is not the only battling ground for big oil, as two separate, extremely interesting, and highly controversial events that took place last week are seemingly setting a new global tone, one that could change big oil forever.

An engine for change

Back in December 2020 a new hedge fund, Engine No. 1, was formed. The fund’s managers stated that a company’s performance is greatly enhanced by the investments it makes in workers, communities, and the environment, and they chose to focus on these issues to create long-term value for their investors, and the first item on their agenda was ExxonMobil.

The iconic Exxon, an American multinational oil and gas corporation, is one of the biggest oil companies in the world, but in the past two years its performance has been slowly deteriorating, as the industrial giant overspent on projects, and saw its debt rise to $50 billion as its stock plummeted. Enter Engine No. 1 that purchased 1% of the company's stocks in early 2021, swiftly initiating a proxy war with the goal of inserting some sustainability measures to the company’s far-from-green operations. 

The fund blamed Exxon’s poor performance on its failure to transition to a "decarbonizing world”. In only 5 months’ time, other shareholders followed the train, and on May 26, they approved two new board members nominated by Engine No. 1, dealing a major blow to the oil company. more of the hedge fund’s nominees may also soon be appointed, as the vote remains ongoing.

In addition to the vast impact these new board members could have in the future, the reasons behind Engine No.1’s push are what makes this story interesting. With its main focus being shareholder value, Engine No. 1 founders stand behind the notion that sustainable, cleaner operations are a prerequisite for future financial success, not even mentioning climate-related remifications. They emphasize the connection between sustainability and long-term profits, making a strong case that the reason Exxon’s financial position has been deteriorating is because of its failure to invest in low-carbon technologies. Many major investors, including the three largest U.S. pension funds and BlackRock, the world’s biggest investment manager with $7.4 trillion in assets under management, joined Engine No. 1’s agenda, showing the winds of change are blowing in a renewable direction.

This perspective establishes a new reality for investors worldwide, meaning, you don’t have to be an "impact investor” to set sustainability as one of your key targets. It also sets the tone for other companies in the oil sector, pushing them towards a greener agenda that needs to be implemented as soon as possible.

A Shell case

May 26th was a big day for the global oil industry, and on the other side of the pond, a Dutch court sided with green campaigners and found Royal Dutch Shell responsible for global climate change, representing a turning point in history with the first time a judge has ordered a large polluting corporation to comply with the Paris climate agreement.

The case, known as the "People versus Shell”, was filed in 2019 by the Friends of the Earth, an environmental organization, with support from six environmental and human rights organisations, and 17,000 Dutch citizens that signed a petition seeking action against RDS on the grounds that it violated human rights and its legal duty of care. The court, in an unprecedented ruling, found that the oil giant’s sustainability policy was found to be insufficiently "concrete”, and ordered the company to cut its carbon emissions by 45% by 2030 from 2019 levels, a far more established strategy as Shell currently aims to lower emissions by 20% in 2030 and 45% in 2035 from 2016 levels. "The interest served with the reduction obligation outweighs the Shell group’s commercial interests,” said Judge Larisa Alwin.

This presents a new global standard that puts climate change as part of the interpretation of human rights, and any government, business or organisation can be held accountable by potential victims of climate-sensitive actions. It was claimed that Shell was breaching article 6:162 of the Dutch civil code and violating articles 2 and 8 of the European convention on human rights – the right to life and the right to family life – by causing a danger to others when alternative measures could be taken.

Shell, which said it would appeal the judgment, was the ninth biggest polluter in the world in 1988-2015, according to the Carbon Majors database, and is responsible for about 1% of global emissions every year.

The company declared in early 2021 it would accelerate the transition of its business to net-zero emissions, with targets to reduce the carbon intensity of energy products by 6-8% by 2023, 20% by 2030, 45% by 2035 and 100% by 2050. But lawyers for the plaintiffs successfully argued that the company had been aware for decades of the dangerous consequences of its actions, and that its targets remained insufficiently robust, presenting another major blow for big oil greenwashing.

May 26th, 2021 was a big day for climatection, and one that was probably dreaded by big oil directors. It is now time for these influential people to take climate change into their own hands, and set the tone on future actions. There is no better time than today.