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Chevron (CVX) & Exxon's Shareholders Reject Climate Proposals

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Chevron Corporation (CVX - Free Report) and Exxon Mobil Corporation (XOM - Free Report) , two major U.S. oil companies, experienced shareholder pushback at their annual meetings as climate change proposals were rejected.

While the call for emissions reduction received little backing, the incident shed light on the contrasting perspectives of shareholders in Europe and the United States.

Diverging Shareholder Support

With only 11% of Exxon and less than 10% of Chevron shareholders in favor, the climate change proposals failed to gain substantial traction. This stands in contrast to the recent outcomes at European oil companies such as Shell and BP, where similar proposals garnered significant support from shareholders.

The resistance to emissions reduction proposals stems from concerns about reducing oil and natural gas production, a move that the U.S. oil majors have been reluctant to make.

U.S. Investor Sentiment

The decline in investor support for climate action in the United States can be attributed to a variety of factors. Last year, the Paris alignment shareholder proposals received significant support at Chevron and Exxon. However, this year's results indicate a shift in public perceptions, driven by the Russia-Ukraine conflict that raised fuel prices and renewed focus on energy security alongside climate protection.

Shareholder Proposals

During the annual meetings, Chevron and Exxon received several shareholder proposals related to carbon emissions and climate change. Among these, only one received more than 20% support, which is typically considered a strong sign of investor dissent. Approximately 36% of shareholders supported a petition urging Exxon to disclose more information about its methane emissions. Additionally, a quarter of Exxon shareholders backed a petition seeking information regarding the potential impact of slowing plastics demand on the company's financials.

Company Response and Outlook

In a response to the criticisms raised by Mark van Baal, founder of Follow This, Exxon asserted that his shareholder proposal is like a "Trojan horse" that can compel companies to exit oil and natural gas investments.

The rejection of climate change proposals highlights the ongoing tension between shareholders and oil majors regarding the urgency of emissions reduction and transition to cleaner energy sources. As the contention surrounding climate change continues to evolve, Chevron, Exxon and other oil majors face intense pressure to address their environmental impact while ensuring long-term profitability.

Conclusion

The recent annual meetings of Chevron and Exxon showcased a notable discrepancy in shareholder support for climate change proposals. As the global discourse on climate change intensifies, the energy sector faces the challenge of ensuring sustainability as well as production.

Zacks Rank and Key Picks

Both CVX and XOM currently carry a Zacks Rank #3 (Hold).

A couple of better-ranked stocks for investors interested in the energy sector are Evolution Petroleum (EPM - Free Report) and Murphy USA (MUSA - Free Report) , both sporting a Zacks Rank #1 (Strong Buy) at present. You can see the complete list of today’s Zacks #1 Rank stocks here.

Evolution Petroleum: EPM is worth approximately $265.82 million. EPM currently pays a dividend of 48 cents per share, or 6.01% on an annual basis.

The company currently has a forward P/E ratio of 7.23. In comparison, its industry has an average forward P/E of 18.10, which means EPM is trading at a discount to the group.

Murphy USA: MUSA is valued at around $6.13 billion. In the past year, its shares have risen 11.3%.

MUSA currently pays dividends of $1.52 per share, or 0.54% on an annual basis. MUSA's payout ratio sits at 6% of earnings.

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