OXY Occidental Petroleum Corporation

NOTE: this exempt solicitation has been updated since its previous filing on April 12, 2021

The physical and financial risks posed by climate change to long-term investors are systemic, portfolio-wide, unhedgeable and undiversifiable. Therefore, the actions of companies that fail to align to limiting warming to 1.5°C pose risks to the financial system as a whole, and to investors’ entire portfolios, in addition to specific risks to those companies. See Appendix A for more information regarding Majority Action’s Proxy Voting for a 1.5°C World initiative and the transformation required in key industries.

Occidental Petroleum is one of the largest onshore oil producers in the U.S. and a major off-shore producer in the Gulf of Mexico.¹ It is among the 167 target companies named by Climate Action 100+ as one of the largest global emitters, companies that are “key to driving the global net-zero emissions transition.”²

Petroleum and fossil gas products, including those used in transportation, buildings, industrial processes, and electricity production, account for nearly 79% of carbon emissions from the U.S. energy system.³ In recent years, the U.S. has overtaken Saudi Arabia and Russia to become the largest petroleum and fossil gas producer in the world.⁴ Failure to set ambitious decarbonization targets in line with 1.5°C pathways, and align companies’ business plans and policy influence to those targets is a failure of strategy and corporate governance, for which long-term investors should hold directors accountable.

Occidental recently set a target to reach net-zero emissions from its operations (Scopes 1 and 2) by 2040, and an “ambition” to reach net-zero emissions associated with total emissions inventory, including Scope 3 emissions, by 2050.⁵ However, Occidental’s ambition to reduce its Scope 3 emissions from its customers’ use of products it sells appears to rely heavily on carbon capture, use and storage (CCUS) and direct air removal technologies.⁶ The company notes that the development of CCUS technologies is a “focal point” of its net-zero strategy,⁷ rather than the phasing out of exploration and production of fossil fuels.⁸

Update: A prior version of this exempt solicitation stated: “The company does not indicate that it plans to monitor or disclose Scope 3 emissions, only Scope 1 and 2 emissions,⁹ and makes only limited disclosures of emissions resulting from the processing and use of its products.¹⁰”

In its Climate Report 2020: Pathways to Net-Zero document, in which Occidental details its “ambition to achieve net-zero for Scope 1, 2, and 3 emissions,” Occidental commits to monitor and disclose Scope 1 and 2 greenhouse gas emissions, Scope 1 carbon dioxide equivalent intensity, and methane intensity from produced oil and gas.¹¹ The report indicates these disclosures are available at oxy.com/sustainability/performance. It also commits to “[d]evelop and disclose a metric to account for net-zero.” In describing progress toward that commitment, Occidental notes that it has “announced [its] net-zero aspiration for reported Scope 1, 2 and 3 emissions, and Total Carbon Impact.”¹² In the summary of GHG emissions metrics and trends included in the report, Scope 3 emissions data from the Use/Processing of Sold Products are not included. ¹³

Occidental does disclose Scope 3 emissions from the Use/Processing of Sold Products in its CDP (formerly Carbon Disclosure Project) Report.¹⁴ It estimates Scope 3 emissions from the Use/Processing of Sold Products to be 103 million metric tons of carbon dioxide equivalent in 2019. It describes its estimate as “limited to the combustion of hydrocarbon products produced by Occidental’s Oil and Gas business segment.” The company further notes that this Scope 3 emissions assessment was conducted “solely for the purpose of CDP reporting, as the greenhouse gas (GHG) emissions associated with our end-use products are outside of our control and reporting boundary.” Finally, the company states, “Occidental expressly disclaims any responsibility for the emissions caused by other parties using products that may have been derived from the hydrocarbons produced by Occidental.”

Capital allocation and investment plans not aligned with 1.5°C pathways

According to Rainforest Action Network, Occidental is among the world’s largest fossil fuel expansion companies in the world, and is projected to produce 5,798 million metric tons of carbon dioxide between 2021-2050.¹⁵ According to Carbon Tracker, 80-90% of Occidental’s potential capital expenditures in unsanctioned projects between 2020-2030 exceed the carbon budget for the IEA’s “Beyond 2°C” scenario and therefore fall well outside the 1.5ºC carbon budget.¹⁶ According to Climate Action 100+, Occidental does not meet the criteria for capital allocation alignment, and $1.0bn of its 2019 upstream oil and gas capex is inconsistent with the IEA’s “Beyond 2°C” Scenario, let alone a 1.5ºC scenario.¹⁷

Misalignment of policy influence activities with net-zero commitment and 1.5°C pathways

The company sends conflicting signals on climate issues but “appears to be broadly negatively engaged,” according to InfluenceMap.¹⁸ The CEO called the Trump Administration’s withdrawal from the Paris Climate Agreement “the right thing for the country,”¹⁹ but since President Biden took office has expressed support for some Paris goals.²⁰ It does not support a U.S. carbon tax and “appears to have supported” Trump administration efforts to loosen GHG standards.²¹ According to Climate Action 100+, Occidental Petroleum does not meet most of the criteria for climate policy engagement alignment.²²

Conclusion: Occidental has failed to set adequate net-zero targets, align its capital investments with limiting warming to 1.5°C, or ensure its policy influence activities would support doing so. Therefore, we recommend that shareholders vote AGAINST Chair Stephen I. Chazen (Item 1.a) at the company’s annual meeting on May 7, 2021.

Appendix A: Proxy Voting for a 1.5°C World

The world is currently on track to disastrous levels of warming, driving massive harm and threatening the lives and livelihoods of millions. Corporate leaders in the industries responsible for this crisis have failed to take up the leadership required to change course.

“Climate risk” is a systemic, escalating, and irreversible crisis––for which corporate boards urgently need to take responsibility. The UN Intergovernmental Panel on Climate Change (IPCC) in 2018 made clear that in order to have at least a 50% chance of limiting warming to 1.5°C and avoiding the most catastrophic effects of the climate crisis, we must bring global, economy-wide carbon emissions down to net-zero by 2050 at the latest.²³ That means that corporate directors must ensure that companies set ambitious decarbonization targets in line with 1.5°C pathways, and align companies’ business plans, executive pay, and policy influence to those targets.

The physical and financial risks posed by climate change to long-term investors are systemic, portfolio-wide, unhedgeable and undiversifiable. Therefore, the actions of companies that directly or indirectly impact climate outcomes pose risks to the financial system as a whole, and to investors’ entire portfolios. In order to manage this systemic portfolio risk, investors must move beyond disclosure and company-specific climate risk management frameworks, and focus on holding accountable the relatively small number of large companies whose actions are a significant driver of climate change.

When directors fail to transform corporate business practices in line with 1.5°C pathways, responsible investors must use their most powerful tool –– their proxy voting power––to vote against directors. Bold and unprecedented action by investors is a prerequisite to averting further global economic and financial catastrophe. While past shareholder efforts at standard setting, disclosure and engagement have laid important groundwork, company commitments won have been far too incremental, far too hard fought, and collectively insufficient to the scale of the crisis.

In particular, major asset managers like BlackRock and Vanguard, who hold outsized voting power at the majority of S&P 500 companies, must use their power to oppose directors on boards who have failed to take up this leadership.

Action this year is critical, and momentum is growing to oust the directors who are ill-equipped to lead companies to rapid decarbonization. In 2020, a coalition successfully pushed for Lee Raymond, the chief architect of ExxonMobil’s climate denial strategy, to lose his position leading the JPMorgan Chase board of directors.

Business-as-usual proxy voting will not suffice to address the seriousness of the crisis at hand. We urge investors to vote against these directors at companies failing to implement plans consistent with limiting global warming to 1.5ºC.

Four Key Sectors Are Critical To Curbing the Climate Crisis

The electric power, finance, transportation, and oil and gas sectors must all make dramatic transformations to curb the worst of catastrophic climate change and protect long-term investors.

Substantial votes against board members at these companies could help realign business and investment plans to the goals of the Paris Agreement, hold companies accountable for dark money used to influence critical climate policies, and align executive compensation to key decarbonization goals.

While each industry and company will need to chart its own path in pursuing decarbonization consistent with limiting warming to 1.5ºC, setting a target to reach net-zero emissions by no later than 2050 is a critical first step. In the absence of such a target, investors can have no confidence that the company will be able to transform its business consistent with limiting warming to 1.5ºC.

Voting Guide: Oil & Gas

Petroleum and fossil gas products, including those used in transportation, buildings, industrial processes, and electricity production, account for nearly 80% of carbon emissions from the U.S. energy system.²⁴ In recent years, the U.S. has overtaken Saudi Arabia and Russia to become the largest petroleum and fossil gas producer in the world.²⁵ As a result of the COVID-19 pandemic, global demand for oil experienced its largest ever annual decline, falling 8.6% in 2020.²⁶ While the near-term outlook for oil remains highly uncertain, according to Carbon Tracker, all of the largest oil companies have projects available for approval in 2020-2022 that would exceed the carbon budget for a 1.5°C future.²⁷

Target setting

In order to be aligned with limiting warming to 1.5°C, oil and gas companies must set net-zero by 2050 targets that contemplate absolute greenhouse gas emissions reductions rather than carbon intensity reductions and include all corporate emissions, including emissions from the use of the products they sell (Scope 3 emissions).²⁸

Net-zero commitments should also incorporate interim targets and milestones that allow accelerated emissions reduction between now and 2030 rather than delaying the hard task of emissions reduction until after that date. Net-zero commitments must cover projects on a full equity share basis, such that all joint ventures and subsidiaries are covered by the company-wide target. Finally, robust net-zero targets should not rely on substantial use of offsets, negative emissions, or technologies that are not yet developed or commercialized to avoid short-term greenhouse gas emissions reductions. Any use of such offsets or negative emissions should be clearly disclosed to allow investors to assess the quality and credibility of oil and gas company plans.

Key data sources:

Capital allocation and investment

Given that oil supplies currently in production already exceed the carbon budget for limiting warming to 1.5°C, oil and gas companies must immediately cease approving investment in new projects that fall outside the carbon budget. According to Carbon Tracker, the 15 largest projects sanctioned in 2019 that exceed the carbon budget to limit warming to 1.65-1.8°C accounted for $60bn in new capital expenditures from oil and gas companies.³⁴ At minimum, Arctic and oil sands projects are inconsistent with limiting warming to 1.5°C, economically unviable due to elevated production costs, and fraught with additional environmental and human rights risks.³⁵

Key data sources:

Policy influence

Oil and gas companies must fully align their policy influence activities, including political spending and lobbying activities, with the policy settings required to accelerate sector-wide emissions on a timeline necessary to limit warming to 1.5°C. Oil and gas companies must provide full disclosure of all political and lobbying spending in all jurisdictions to allow investors to assess this alignment. Finally, companies must ensure the alignment of the policy influence activities with 1.5°C outcomes of any trade associations or similar entities of which they are members or to which they contribute, or cease membership of such organizations.

Key data sources:

¹ https://www.oxy.com/investors/Profile/Pages/default.aspx

² https://www.climateaction100.org/whos-involved/companies/

³ https://www.eia.gov/totalenergy/data/browser/index.php?tbl=T11.01#/?f=A&start=1973&end=2019&charted=0-1-13

⁴ https://www.eia.gov/todayinenergy/detail.php?id=40973

⁵ https://www.reuters.com/article/us-occidental-results/occidental-petroleum-announces-net-zero-target-for-greenhouse-gas-emissions-idUSKBN27Q2NU; https://insideclimatenews.org/news/12112020/two-us-oil-companies-join-their-european-counterparts-making-net-zero-pledges/; https://www.oxy.com/Sustainability/overview/Documents/ClimateReport2020.pdf, at 4

⁶ https://insideclimatenews.org/news/12112020/two-us-oil-companies-join-their-european-counterparts-making-net-zero-pledges/; https://www.oxy.com/Sustainability/overview/Documents/ClimateReport2020.pdf at 8

⁷ https://www.oxy.com/Sustainability/overview/Documents/ClimateReport2020.pdf at 8

⁸ https://www.argusmedia.com/en/news/2192137-reduce-carbon-not-fossil-fuels-exxon-oxy-ceos

⁹ Occidental Petroleum Climate Report 2020, https://www.oxy.com/Sustainability/overview/Documents/ClimateReport2020.pdf at 17

¹⁰ Occidental’s CDP 2020 report, available at https://www.cdp.net/en/formatted_responses/responses?campaign_id=70692136&discloser_id=856136&locale=en&organization_name=Occidental+Petroleum+Corporation&organization_number=13649&program=Investor&project_year=2020&redirect=https%3A%2F%2Fcdp.credit360.com%2Fsurveys%2F6sc15v4h%2F89617&survey_id=68887525, Section C6.5

¹¹ https://www.oxy.com/Sustainability/overview/Documents/ClimateReport2020.pdf at 17

¹² https://www.oxy.com/Sustainability/overview/Documents/ClimateReport2020.pdf at 17

¹³ https://www.oxy.com/Sustainability/overview/Documents/ClimateReport2020.pdf at 18 and 32

¹⁴ https://www.oxy.com/Sustainability/overview/SiteAssets/Pages/Social-Responsibility-at-Oxy/Assets/Occidental-CDP_Climate_Change_Questionnaire_2020.pdf at 63-64

¹⁵ https://www.ran.org/wp-content/uploads/2021/03/Banking-on-Climate-Chaos-2021.pdf at 126

¹⁶ https://carbontracker.org/reports/fault-lines-stranded-asset/, at 35

¹⁷ https://www.climateaction100.org/company/occidental-petroleum-corporation/, at Indicator 6 and Capital Allocation Supplement 1

¹⁸ https://influencemap.org/company/Occidental-Petroleum

¹⁹ https://www.reuters.com/article/us-occidental-ceo-climatechange/u-s-oil-ceo-says-corporations-should-work-to-stem-climate-change-idUSKCN1MK2W8

²⁰ https://www.argusmedia.com/en/news/2169963-bp-shell-and-total-agree-energy-transition-principles

²¹ https://influencemap.org/company/Occidental-Petroleum/projectlink/Occidental-Petroleum-In-Climate-Change

²² https://www.climateaction100.org/company/occidental-petroleum-corporation/ , at Indicator 7

²³ Intergovernmental Panel on Climate Change. Special Report on Global Warming of 1.5 Celsius, https://www.ipcc.ch/sr15/

²⁴ https://www.eia.gov/totalenergy/data/browser/index.php?tbl=T11.01#/?f=A&start=1973&end=2019&charted=0-1-13

²⁵ https://www.eia.gov/todayinenergy/detail.php?id=40973

²⁶ https://www.iea.org/articles/global-energy-review-co2-emissions-in-2020

²⁷ https://carbontracker.org/reports/fault-lines-stranded-asset/ ; Carbon Tracker defines a carbon budget as, “the cumulative amount of carbon dioxide (CO2) emissions permitted over a period of time to keep within a certain temperature threshold.” https://carbontracker.org/carbon-budgets-explained/

²⁸ https://carbontracker.org/reports/absolute-impact/

²⁹ https://www.climateaction100.org/whos-involved/companies/?

³⁰ https://sciencebasedtargets.org/companies-taking-action

³¹ https://sciencebasedtargets.org/sectors

³² https://www.cdp.net/en/responses?utf8=%E2%9C%93&queries%5Bname%5D=

³³ http://priceofoil.org/2020/09/23/big-oil-reality-check/

³⁴ https://carbontracker.org/reports/fault-lines-stranded-asset/

³⁵ https://carbontransfer.wpengine.com/wp-content/uploads/2019/09/Capex-report-2019_Infographic.pdf ; https://www.ran.org/funding_tar_sands/

³⁶ https://www.climateaction100.org/whos-involved/companies/?

³⁷ https://carbontracker.org/company-profiles/

³⁸ https://www.climateaction100.org/whos-involved/companies/?

³⁹ https://influencemap.org/filter/List-of-Companies-and-Influencers#