Activist shareholders and environmental campaigners notched a string of high-profile victories over oil and gas majors in May, illustrating how climate-change pressure on the companies is rising in both Europe and the U.S.

At Exxon Mobil Corp., activist hedge fund Engine No. 1 added three of its own nominees to the company's board after a contentious campaign. On the same day, Chevron Corp. investors defied management to vote in favor of stringent targets to cut emissions from the company's products, known as Scope 3 emissions, for the first time. And in the Netherlands, Royal Dutch Shell PLC lost a landmark court case that means it will have to cut its emissions much more steeply than planned.

Although the proxy battle at Exxon was only in part about managing climate risk, the victories were hailed as a significant step forward for the environmental, social and governance investors who have sought to tie Big Oil to higher climate targets.

But some campaigners caution that getting companies to set goals, like at Chevron, is only the first step. Holding them accountable over the longer term and making sure they raise their low-carbon ambitions will be much harder tasks.

The votes "just mark the beginning of this process, not the end," Andrew Logan, senior director for oil and gas at Ceres, a nonprofit investor network, said in an interview. "For the next couple of years, it's going to be a slow pivot."

The limits of shareholder pressure

The increasing complexity of pushing for climate action through shareholder votes was on display last month at annual general meetings held by Shell and TotalEnergies SE, which have among the most wide-reaching decarbonization targets in the sector.

Both companies asked investors to approve management's climate strategies, and both proposals passed despite vocal opposition from activist shareholders like Dutch group Follow This. However, a record number of Shell investors — just over 30% — also backed a Follow This resolution calling for stricter emissions cuts.

At Total, support for the company's strategy was even higher, with only about 8% of shareholders voting against it — a result that led to harsh criticism from climate groups. Lucie Pinson, director of Reclaim Finance, said the investors backing the company had "made a mockery of their own climate commitments."

European investors who have pledged carbon neutrality "seem to care more about the appearance of climate action than the reality of it," Pinson said in an interview.

In light of investors' approval of the two companies' strategies, which activists say do not go far enough, Reclaim Finance will increasingly focus on financial institutions, on the basis that oil and gas exclusion policies by banks and insurers will equally create pressure, Pinson said.

Logan also sees a risk that investor focus is now slackening, since shareholders are more likely to vote for an initial set of targets than to monitor and assess companies' progress each year. The broader campaign for oil company climate targets "is likely to fizzle out or at least change into something different," the senior director said.

'Coming up the learning curve'

Still, the latest results show that investors are increasingly convinced that a well-managed energy transition is both inevitable for oil companies and critical to their survival.

"Across all of these votes, we're seeing that investor expectations have been raised significantly," Logan said, pointing specifically to Chevron shareholders' demand for Scope 3 emissions, which make up the bulk of oil companies' carbon footprint, to be included in the company's targets.

"It's a big deal," Logan said. "For a long time, U.S. companies didn't even want to talk about Scope 3, and the investors didn't either."

Analysts also point to support from investment giants like BlackRock Inc. and Vanguard Group Inc., both of which backed some of Engine No. 1's board candidates at Exxon. BlackRock also voted for shareholder climate resolutions at BP PLC and Equinor ASA, although it approved Shell's climate plan.

U.S. institutional shareholders have lagged a few years behind Europeans in focusing on climate action, but the votes at Exxon and Chevron show that they are increasingly moving in the same direction, said Andrew Grant, head of climate, energy and industry research at think tank Carbon Tracker. The Chevron vote came after ConocoPhillips and Phillips 66 saw similar measures approved by 58% and 80% of shareholders, respectively.

"Support for climate issues now is really broad-based," Grant said in an interview. "Everyone is coming up the learning curve."

Grant also thinks that shareholders will increasingly "find something they're satisfied with" as more oil companies yield to pressure and set targets. But the executive pointed to rising support for the Follow This resolution at Shell as evidence that companies setting insufficient goals will continue to face pressure nonetheless.

"When Shell set targets in 2017, they were leaders. Since then, it's just been heel-dragging," Grant said. "You're not hearing this sort of grief at [Italian oil major] Eni SpA because they've done it properly."

Activists emphasize that many of the companies' net-zero targets are insufficient because they are not backed up by near-term targets to cut absolute emissions. Shell's targets, for example, allow the company to continue growing its fossil fuel business while using investments in renewables to lower its overall carbon intensity by 2030. Exxon and Chevron's existing climate goals stop short of even that and, for now, only cover upstream operational emissions.

Last week's Dutch court ruling requires Shell to cut its net absolute emissions by 45% by 2030, which would likely entail a much steeper reduction in oil output than the company is targeting. Shell has said it will appeal the ruling, which could take years, but Mark van Baal, founder of Follow This, said the judgment will lend fuel to his group's campaign in the meantime.

"Next year, when our resolution will come to a vote again, it will be quite difficult to vote against it anymore because you would basically say, 'The judge is not right,'" van Baal said in an interview.

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'The end of the beginning'

Campaigners say the court victory also carries symbolic value and could inspire more legal action against other companies. Similarly, they hope that Engine No. 1's successful push at Exxon could push other companies to act in order to get ahead of similar campaigns.

The California State Teachers' Retirement System, which backed the Engine No. 1 directors, described the vote at Exxon's AGM as "a tipping point" and predicted that similar shake-ups will follow at other fossil fuel companies.

Peter McNally, global sector lead for industrials, materials and energy at Third Bridge, a research firm, said the true test of change at the U.S. majors will be if and how they shift their investment strategies. The European majors are ramping up their spending on renewable energy and other clean ventures, although those are still dwarfed by their oil investments in most cases. U.S. companies have mostly focused on carbon-capture technology.

"I think the capital allocation will change on the margin," McNally said in an interview. "The issue for all these companies is the amount of capital and the time that they're committing to this."

Ceres' Logan said the Exxon campaign also showed that investors do not need to own a large stake to force change, which could embolden more activists. But the mission has only become harder now that companies can point to their climate ambitions — whether they are backed up by concrete, near-term action or not.

"It's the end of the beginning," Logan said. "There's no guarantee that we've turned the tide with this sector."

Trucost is part of S&P Global Market Intelligence.