Shell and Exxon lose landmark decisions on the same day, demonstrating growing threats to fossil-fuel companies from activists and investors.
Exxon Mobil Corp. and Royal Dutch Shell PLC suffered significant defeats Wednesday as environmental groups and activist investors step up pressure on the oil industry to reform itself and address mounting concerns about climate change.
In a first-of-its-kind ruling that could hit other firms, a Dutch court found that Shell is partially responsible for climate change, and ordered the company to sharply reduce its carbon emissions.
Hours later in the U.S., an activist investor won at least two seats on Exxon’s board, a historic defeat for the oil giant that will likely require it to alter its fossil-fuel focused strategy.
The back-to-back, watershed decisions will have reverberations across the world, especially in oil dependent economies like Nigeria.
The developments demonstrated how dramatically the landscape is shifting against global oil-and-gas companies as they face increasing pressure from environmentalists, investors, lenders, politicians and regulators to transition to cleaner forms of energy. Shell announced last week it will putting up oil assets for sale in Nigeria as it begins the move away from onshore operations that have largely brought upon it the image of a polluter.
“The events of today show definitively that many leaders in the oil-and-gas industry have a tin ear and do not understand that society’s views and the legal and political environment in which they operate are changing radically,” said Amy Myers Jaffe, a professor at Tufts University’s Fletcher School who has advised energy companies.
Many oil companies have begun adopting comprehensive plans to reduce emissions, and some, especially in Europe, have diversified into renewable energy.
However, it is proving challenging to reduce emissions and preserve returns in a troubled industry which McKinsey & co says has lately been witnessing declines in profitability.
Many of the oil firms are also facing growing skepticism about the sustainability of their carbon emission reduction strategies.
It is not just the oil firms that are facing rising backlash. Major banks have also come for sharp criticism for writing out the cheques to fund fossil asset acquisition since the Paris climate declarations.
In Nigeria, some of the winners of the marginal oil blocks put up for sale recently by the government are finding it increasingly more difficult to raise capital to fund the acquisition.
