After enduring years of criticism from climate activists, ExxonMobil is finally snapping back with a lawsuit against activist shareholders who want the company to forgo profits in the name of environmental, social, and governance — or ESG — management. The targets of the lawsuit, along with some of the nation’s most powerful pension funds, will attempt to make their case to the company’s shareholders at a meeting Wednesday. 

The nation’s largest public pension fund, the California Public Employees’ Retirement System, says it will vote to replace all 12 members of ExxonMobil’s board of directors and its chief executive officer. Another of the nation’s most powerful pension funds, the New York State Common Retirement Fund, also plans to oppose most of the Exxon board members to protest the oil giant’s climate policies.

The showdown comes after two activist groups, Arjuna Capital and Follow This, submitted a resolution aimed at getting Exxon to accelerate reducing its emissions. Exxon sued the groups in January, claiming that the proposal process had become “ripe for abuse” and that the resolution was designed to put them out of business. 

“Most shareholders invest in companies to help the companies grow and see a return on their investment,” the lawsuit states. “But Arjuna and Follow This are not like most shareholders. Driven by an extreme agenda, they pursue what Follow This calls a ‘Goldilocks Trojan Horse’ strategy: They (or their clients) become shareholders solely to campaign for change through shareholder proposals that are calculated to diminish the company’s existing business.” 

Those groups describe their mission to “pressure the oil industry” and promote an anti-fossil fuel “green” agenda.“We buy shares in order to work on our mission to stop climate change, not to make a financial profit,” Follow This says on its website. “Similarly, Follow This should not function as an investment broker for our members, and we are not here to make a profit for our members.”

A federal district judge ruled last week that the case could proceed against Arjuna Capital since it is based in America, but said that Follow This — based in the Netherlands — was outside of the court’s jurisdiction, Reuters reported. 

“For almost four decades, CalPERS has used its investments in major corporations to hold shareholder-elected directors and top officials accountable,” Calpers wrote in a statement. “Now, decades of shareholder rights are under threat from a lawsuit filed by the leaders of a powerful U.S. corporation, designed to punish two small groups that dared to speak truth to power. If successful, the legal action could diminish the role—and the rights—of every investor in improving a company’s bottom line.”

The blue-state pension funds and other activists are facing pushback ahead of the vote for opposing Exxon’s board for “no reason other than to score political points toward their climate agenda.”

“The line between proposals from genuinely concerned long-term investors and those from agenda-driven activists has been blurred, running counter to the original intent behind shareholder governance,” a law professor at George Mason University, J.W. Verret, wrote for Pensions and Investments. 

Others say it is “hardly surprising” to see Calpers “rush to the defense of political activists working to advance a radical ESG agenda.”

“These activists have hijacked the shareholder proposal process by buying shares with the express purpose of strong-arming companies like ExxonMobil to adhere to their radical Net Zero agenda,” the State Financial Officers Foundation wrote in a statement. 

“Instead of doing the right thing and demanding companies uphold their fiduciary duty to their shareholders, blue state politicians are throwing their lot in with the international climate cartel,” he said. “In so doing, they have thrown their own voters and pensioners under the bus.”