ExxonMobil, America’s largest oil firm, lost two (2) board seats to Engine No. 1’s nominated directors, an activist investor. The hedge fund intended to remove four directors from the board of directors at the company’s annual shareholder meeting, but only two were elected, with the other two seats too close to call.

The vote’s result is a severe setback for the oil firm, but it is a watershed moment in the climate fight since it is the first proxy campaign at a major US corporation in which the message of a move away from fossil fuels is ‘majestically’ carried.

ExxonMobil’s refusal to diversify into renewable energy has been a source of criticism for Engine No. 1. According to Exxon, two shareholder resolutions that obtained majority shareholder approval will be reconsidered by the company’s board. Item 9, which requests a report on lobbying, and Item 10, which requests a report on climate lobbying, are the two proposals.

Reacting to the situation, the Chairman and Chief Executive Officer of ExxonMobil, Darren Woods, said: “We’ve been actively engaging with shareholders and received positive feedback and support, particularly for our announcements relating to low-carbon solutions and progress in efforts to reduce costs and improve earnings. We heard from shareholders today about their desire to further these efforts, and we are well positioned to respond.”

Exxon stated in a letter to shareholders on Monday that it is working to cut emissions and is investing in carbon capture and storage as well as hydrogen, with carbon capture alone predicted to be a $2 trillion market by 2040. In the letter, Woods and Exxon Lead Director Ken Frazier wrote: “We believe success in developing these technologies will be critical to both advancing society’s ambitions for a lower-carbon future and in delivering long-term shareholder value.”

In reaction to the letter, Engine No. 1, in a statement, urged shareholders not be deceived by the company’s “cynical, last minute manoeuvring.” The statement read: “This is the same company that for years has refused to take even gradual material steps towards being better positioned for the long-term in a decarbonizing world.”

Exxon’s shares are held by Engine No. 1 at 0.02%, but the New York Common Retirement Fund, the Church of England, the California Public Employees’ Retirement System (CalPERS), and the California State Teachers’ Retirement System (CalSTRS) are among the hedge fund’s main institutional investors.

Exxon was the most valuable firm in the world as recently as 2013, but its market capitalization has plummeted by about $200 billion since then. According to Engine No. 1, the company’s overall return declined by 17.5% in the five years leading up to the pandemic, with Exxon being the worst performer among the five largest oil firms during that time. Exxon has recovered in 2021, with the share price up 41%, nearly quadrupling the S&P 500’s gain, but it is still far from the record highs set in mid-2014.