Abstract Transitioning away from fossil fuels is in the best interest for long-term stakeholders of oil firms to mitigate risk from climate policy. Yet firms have an informational and positional advantage over strategies to mitigate climate-related risks, such that there is little incentive to decarbonize. Building on theories of firm behavior and the three faces of political power, we argue that investor pressure will be unlikely to change the climate strategy of fossil fuel firms. To measure climate strategy, we develop a novel technique using natural language processing tools to parse annual filings of all publicly-listed oil firms in the US. Using a difference-in-differences design exploiting an exogenous shock to shareholder power from a Securities and Exchange Commission regulatory amendment, we find no effects of shareholder pressure on deep reforms to climate strategies and weak effects on incremental pro-climate behavior. Through a case study of ExxonMobil, we show that climate-motivated investors are unable to overcome internal stakeholder resistance, despite shareholder pressure through direct communication, filed resolutions, and media campaigns. Our findings illustrate that polluting firms remain resistant to financial pressure for decarbonization, suggesting an important role for policy.
Lomov et al. (2026) studied this question.