House Judiciary report alleges a ‘collusive climate cartel’ tried to force Exxon to go 'net zero'

The House Judiciary Committee Friday released a report detailing an investigation into a successful effort to replace three members of the board of ExxonMobil with activist shareholders, Alexander Karsner, Kaisa Hietala, and Gregory Goff. 

According to the report, a “climate cartel” consisting of various climate coalitions, including Ceres and its Climate Action 100+ initiative, coordinated a “pressure campaign” against ExxonMobil. The company had become the target of this cartel, according to the report, when it refused to adopt policies that would reduce its emissions, which would effectively require it to reduce production of oil and gas. 

Targeting ExxonMobil

The climate groups demanded that ExxonMobil make immaterial climate disclosures with speculative, climate-related guesswork, and it launched campaigns calling for the company to reach emission-reduction targets, the report alleges. When the company refused to acquiesce to these demands, these groups colluded to go alter the composition of its board of directors. 

“In 2021, after repeated attempts to force ExxonMobil to adopt ‘net-zero’ climate goals, the climate cartel conspired to ‘refresh’ the ExxonMobil board by removing and replacing its Directors,” the report alleges. 

In 2020, according to the report, Climate Action 100+ received $4.7 million from "climate cartel affiliates" to launch a campaign to get new people added to Exxon’s board. This coalition positioned activist fund Engine No. 1 as the public face of the campaign, allegedly to maintain credibility and mask its net-zero agenda. The fund held 0.02% of Exxon’s shares. At that time, the value was $54.2 million. 

These groups also, the report claims, threatened investment firms BlackRock and State Street to join Climate Action 100+, even after both companies expressed concerns that the coalition actions may violate federal antitrust laws against collusion. 

In May 2021, the climate cartel successfully removed and replaced three of ExxonMobil’s board members. The report alleges that this was the result of an “elaborate and collusive scheme” to “gut ExxonMobil’s board” and secure commitments from the company to address climate change. 

After engaging with the coalition, the report claims, BlackRock, State Street and Vanguard voted to support the move to replace the board members. The coalition also engaged proxy firms ISS and Glass Lewis to support the vote, and both firms recommended the coalition’s favored board candidates. 

“In the end, the climate cartel secured ‘three climate activists’ on the ExxonMobil board of directors. In the year following the campaign, ExxonMobil made a series of ‘net-zero’ commitments for the first time,” the report states. 

Will Hild, executive director of Consumers’ Research, a consumer advocacy nonprofit, told Just the News that the report does a good job of “articulating many of the collusive aspects” of environmental, social and governance (ESG) efforts. He said the report also shows that these coalitions are more replicative than they appear to be. 

“Ceres has played itself as sort of representing a broad swath of America, when really it's a very insular group of powerful players that are trying to pass themselves off as some sort of grassroots, or at least broad movement,” Hild said. 

Consumers’ Research last year published a report on how Ceres mobilizes investment managers to advance expensive and financially unsound climate agendas, which ultimately raise costs to consumers. 

“At the end of the day, you don’t have to understand the intricacies of the asset managing space or the banking space. ESG is very simple. It's higher prices at the gas pump and the grocery store and everywhere in between. Anything that hurts ESG is good for consumers,” Hild said.

New day

While the company lost against the 2021 campaign, it recently took a more aggressive stance against shareholder proposals aimed at getting Exxon to reduce its production of oil and gas. The company filed a lawsuit in January against a group of activist investors and refused to withdraw the lawsuit when the investors agreed to withdraw their proposals. Because Exxon refused to withdraw the lawsuit, another campaign was launched this year to oust the company’s board members, which ultimately failed. A federal judge, however, tossed out Exxon’s lawsuit this summer. 

Steve Milloy, senior legal fellow with the Energy and Environmental Legal Institute and publisher of “JunkScience.com,” told Just the News that Exxon has been trying to appease activists for a long time. 

In 2008, at the Exxon annual shareholder meeting, Milloy presented a shareholder proposal on behalf of The Free Enterprise Action Fund. The proposal would have amended the company’s bylaws to “no longer accept shareholder and nuisance shareholder proposals.”

“Our proposal will stop the annual meeting from being a circus-like forum for the anti-Exxon campaign. We call on Exxon's bonafide shareholders and management to band together to fight the predatory Exxon haters,” Milloy said at the meeting.

While the proposal wasn’t adopted, Milloy said he got a standing ovation. “These people are communists, and they have been trying to subvert corporations for a long time,” Milloy told Just the News Friday. 

For its part in the 2021 campaign, Engine No. 1 contends it’s not anti-fossil fuel. A spokesperson for the fund told Just the News in June that it’s “an investment firm that focuses on bottlenecks in the energy transition and is not ‘anti-fossil fuel.’” 

The spokesperson said the three nominees who Engine No. 1 supported in 2021 to be on Exxon’s board have decades of experience in oil and gas. The spokesperson also directed Just the News to a 2022 op-ed in The Wall Street Journal, in which Engine No. 1 founder & CIO Chris James argued that shale oil and gas is needed in order to foster the global energy transition. 

Further investigations

Friday’s House Judiciary report was not the first report looking into the 2021 events leading to the replacement of three Exxon board members. In June, the committee released a report and held a hearing, grilling witnesses, including Mindy Lubber, CEO of Ceres, about their activities to advance climate policies through shareholder proposals. 

Friday’s report notes that following the committee’s investigations, at least 70 investors have withdrawn from Climate Action 100+, for reasons including concerns about antitrust laws and competition laws. 

“Nevertheless, the climate cartel remains committed to advancing its ‘net-zero’ agenda, supporting U.S. companies that it deems to be ‘on the right side of climate history’ and, as it did in 2021 at ExxonMobil, waging a climate crusade against those who are not,” the report states, adding that the committee would continue investigations to inform possible legislative reforms. 

Hild, with Consumers’ Research, said that companies are leaving these climate coalitions because these investigations and the incoming Trump administration suggest that ESG activities will be facing more scrutiny. 

“For some of them, it's not going to be worth it. I would hope that it wouldn't be worth breaking the law for any of these people to continue this cartel,” Hild said. 

Ceres did not respond to requests for comment.