NOTICE OF EXEMPT SOLICITATION (VOLUNTARY SUBMISSION)
NAME OF REGISTRANT: Phillips 66
NAME OF PERSON RELYING ON EXEMPTION: Majority Action
ADDRESS OF PERSON RELYING ON EXEMPTION: PO Box 4831, Silver
Spring, MD 20914
Written materials are submitted pursuant to Rule 14a-6(g)(1)
promulgated under the Securities Exchange Act of 1934. Submission is not required of this filer under the terms of the Rule but
is made voluntarily.
Phillips 66 [NYSE:PSX]: Due to the Company’s Failure
to Set Net-Zero by 2050 Target, Realign Investment Plans to Limit Global Warming to 1.5°C, and Ensure Alignment of Policy
Influence Activities:
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Vote AGAINST Director and member of the Public Policy and Sustainability Committee Julie L. Bushman (Item 1a), and
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Vote AGAINST Director and member of the Public Policy and Sustainability Committee Lisa A. Davis (Item 1b)
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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.
Phillips 66 is a U.S.-based energy multinational created
when ConocoPhillips spun off its downstream and midstream assets.1 It is one
of the largest refiners of petroleum products in the United States.2 It is among
the 167 target companies named by Climate Action 100+ as one of the largest global emitters and, “key to driving the global
net-zero emissions transition.”3
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.4
In recent years, the U.S. has overtaken Saudi Arabia and Russia to become the largest petroleum and fossil gas producer in the
world.5 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.
Failure to set net-zero targets
Net-zero by 2050 commitment that covers all relevant emissions sources, in particular Scope 3 emissions from the burning of products sold, and on a full equity share basis
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Phillips 66 has no published carbon emissions reduction target,6
and the company resists company-wide targets, instead focusing on project-specific emissions reductions.7
Phillips 66 has recommended an ‘against’ vote for an upcoming shareholder resolution to set and publish emissions reductions
targets (item 5).8 According to Climate Action 100+, Phillips 66 meets none of
the criteria for net-zero and greenhouse gas reduction target setting, and has not set targets that cover the most relevant Scope
3 emissions categories for its sector.9 The company’s latest sustainability
report, published in June 2020, fails to report Scope 3 emissions.10
Capital allocation and investment plans not aligned with
1.5°C pathways
Plan to realign capital expenditures to meet a net-zero decarbonization commitment
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According to Rainforest Action Network, Phillips 66 is one of
the 15 key oil and gas midstream companies supporting fossil fuel expansion globally.11
The company’s $1.7 billion 2021 capex budget includes pipeline and fossil fuel plant construction projects.12
According to Climate Action 100+, Phillips 66 does not meet the criteria for capital allocation alignment.13
Misalignment of policy influence activities with net-zero
commitment and 1.5°C pathways
Alignment of policy influence activities with net-zero target and limiting warming to 1.5°C
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According to InfluenceMap, Phillips 66 “appears to be
largely opposed to progressive climate change policy, albeit with limited engagement on specific policy measures.”14
Despite some evidence suggesting support for ambitious action to curb emissions, the company has not expressed a clear position
on the Paris Agreement or the need to limit temperature rise below a certain threshold.15
Phillips 66 does not appear to support the transition of the energy mix in line with IPCC advice, holding the view that for the
next “two and three decades we still see that fossil fuels are going to be a majority part of the energy mix.”16
According to Climate Action 100+, Phillips 66 does not meet any of the criteria for climate policy engagement alignment, except
its disclosure of trade association memberships.17
Additional governance concerns
Phillips 66 currently has a classified board, so Chairman Greg
C. Garland and Lead Director Glenn F. Tilton are not up for election this year. The two directors who are up for election this
year, Julie L. Bushman and Lisa A. Davis, are both members of the Public Policy and Sustainability Committee.
Conclusion: Phillips 66 has failed to set 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 Julie L. Bushman (Item 1a) and Lisa A. Davis (Item 1b) at the
company’s annual meeting on May 12, 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.18 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.19
In recent years, the U.S. has overtaken Saudi Arabia and Russia to become the largest petroleum and fossil gas producer in the
world.20 As a result of the COVID-19 pandemic, global demand for oil experienced
its largest ever annual decline, falling 8.6% in 2020.21 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.22
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).23
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:
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Climate Action 100+ (CA100+), Disclosure
Indicators 1-424
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Science-Based Targets Initiative
(SBTI), Companies list25
and Sector Guidance26
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Carbon Disclosure Project
(CDP), search company survey responses27
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Oil Change International,
Big Oil Reality Check report28
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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.29
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.30
Key data sources:
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Climate Action 100+ (CA100+), Disclosure
Indicator 631
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Carbon Tracker,
Company Profiles: Oil & Gas Companies32
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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:
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Climate Action 100+ Disclosure
Indicator 733
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Influence Map,
List of companies and influencers34
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1 https://www.dividend.com/how-to-invest/where-are-conocophillips-and-phillips-66-now-cop-psx/
2 https://www.sec.gov/ix?doc=/Archives/edgar/data/1534701/000153470121000074/psx-20201231.htm
page 20
3 https://www.climateaction100.org/whos-involved/companies/
4 https://www.eia.gov/totalenergy/data/browser/index.php?tbl=T11.01#/?f=A&start=1973&end=2019&charted=0-1-13
5 https://www.eia.gov/todayinenergy/detail.php?id=40973
6 https://phillips66.widen.net/s/kltplqhksf/20-0019-sustainability-report.print
7 https://www.spglobal.com/platts/en/market-insights/latest-news/oil/010721-phillips-66-adds-dedicated-low-carbon-unit-amid-evolving-energy-landscape
8 https://www.sec.gov/Archives/edgar/data/0001534701/000114036121008475/nc10021503x1_pre14a.htm#a_047
page 67
9 https://www.climateaction100.org/company/phillips-66/,
at Indicators 1-4
10 https://phillips66.widen.net/s/kltplqhksf/20-0019-sustainability-report.print
11 https://www.ran.org/wp-content/uploads/2021/03/Banking-on-Climate-Chaos-2021.pdf
page128
12 https://investor.phillips66.com/financial-information/news-releases/news-release-details/2020/Phillips-66-Announces-2021-Capital-Program/default.aspx
13 https://www.climateaction100.org/company/phillips-66,
at Indicator 6
14 https://influencemap.org/company/Phillips-66/projectlink/Phillips-66-In-Climate-Change
15 https://influencemap.org/company/Phillips-66/projectlink/Phillips-66-In-Climate-Change
16 https://influencemap.org/company/Phillips-66/projectlink/Phillips-66-In-Climate-Change
17 https://www.climateaction100.org/company/phillips-66,
at Indicator 7
18 Intergovernmental Panel on Climate Change.
Special Report on Global Warming of 1.5 Celsius, https://www.ipcc.ch/sr15/
19 https://www.eia.gov/totalenergy/data/browser/index.php?tbl=T11.01#/?f=A&start=1973&end=2019&charted=0-1-13
20 https://www.eia.gov/todayinenergy/detail.php?id=40973
21 https://www.iea.org/articles/global-energy-review-co2-emissions-in-2020
22 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/
23 https://carbontracker.org/reports/absolute-impact/
24 https://www.climateaction100.org/whos-involved/companies/?
25 https://sciencebasedtargets.org/companies-taking-action
26 https://sciencebasedtargets.org/sectors
27 https://www.cdp.net/en/responses?utf8=%E2%9C%93&queries%5Bname%5D=
28 http://priceofoil.org/2020/09/23/big-oil-reality-check/
29 https://carbontracker.org/reports/fault-lines-stranded-asset/
30 https://carbontransfer.wpengine.com/wp-content/uploads/2019/09/Capex-report-2019_Infographic.pdf
; https://www.ran.org/funding_tar_sands/
31 https://www.climateaction100.org/whos-involved/companies/?
32 https://carbontracker.org/company-profiles/
33 https://www.climateaction100.org/whos-involved/companies/?
34 https://influencemap.org/filter/List-of-Companies-and-Influencers#
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