Opinion: A watershed moment?

Victories for activist investors and environmentalists over ExxonMobil and Shell have the look of a watershed moment for the green lobby's campaign against the world's major oil companies. But it is important — not least for the green movement itself — to understand the limits of these successes.

In the Netherlands, a court ruled that Shell must reduce its net carbon emissions by 45pc by 2030, marking a triumph for the environmental groups that brought the action in the belief that Shell was doing too little too slowly to address its carbon footprint. An even more striking success was delivered a few hours later at ExxonMobil's virtual annual shareholder meeting, where the major lost a vote on accepting nominees to its board from activist investor group Engine No 1, which wants the company to address more urgently the need to develop a low-carbon energy transition strategy "to create value in a decarbonising world".

There is no doubt that oil giants like ExxonMobil and Shell represent a big prize for environmental campaigners — in particular ExxonMobil, given its history of climate change scepticism and dogged adherence to the traditional oil and gas business mantra. There is no doubt also, as last week's developments underline, that the intensity and acceleration of the public debate around climate change and the energy transition has not abated in the face of Covid-19 in the way some oil and gas executives might have expected or even hoped.

But it is important to see these events for what they are. ExxonMobil and Shell are big, but also easy targets — western-domiciled businesses accountable to investors through meetings open to anyone who can afford shares, pursuable through robust legal systems, and sensitive to the PR pressure and reputational damage that can be caused by both physical and social-media protests.

Successfully pressing such firms to move faster and further in addressing the climate impact of their operations is not inconsequential — although the jury remains out, of course, on how much change these decisions will actually generate at either company. But there are many state-run firms, such as Saudi Aramco, Abu Dhabi's Adnoc, Russia's Rosneft and Brazil's Petrobras, that are responsible for a lot more oil production and are a lot less susceptible to such pressure.

Winning the argument with these companies, and with their predominantly state shareholders, will be much more challenging. None of them will be blind to the pressures the majors are under — the likes of ExxonMobil, Shell, BP and TotalEnergies, formerly known as Total, are their trading partners, their joint-venture allies, in some cases their strategic shareholders — or to the broader global trend towards decarbonisation and energy transition. But they are working to very different agendas, dictated by states whose stewardship of domestic oil and gas resources will often prioritise economic development, job creation, energy security and geopolitical concerns ahead of the environment, and who themselves in many cases have little need to worry about public opinion.

Getting oil-producer states on board to tackle climate change is of course a matter that falls more obviously to other politicians, other governments and international bodies such as the UN. And so far it has proved a hard sell. Progress on that front — perhaps at the Cop 26 UN climate conference in Glasgow this year — would represent a genuine watershed in the fight against climate change.