Exxon commits to climate disclosure
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December 19, 2017
Exxon commits to climate disclosure

This week saw several significant developments in the corporate approach to climate change disclosures and how investors will request those disclosures. The first development was a new commitment by ExxonMobil to inform its investors about how a changing climate will impact the company’s bottom line. The second is the launch of an initiative called Climate Action 100+, which involves groups of major investors who pledged to “engage” the world’s largest greenhouse gas (GHG) emitters to both reduce their emissions and keep their own investors informed about the intersection of their businesses and climate change.

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ExxonMobil

For several years, ExxonMobil has been disputing charges that it has long been aware of the effects climate change is having on its business prospects and has been deliberately withholding this information from its shareholders. But in a new filing with U.S. security regulators, the company said its Board agreed to provide investors with information on “energy demand sensitivities, implications of two degree Celsius [2°C] scenarios, and positioning for a lower-carbon future.”

ExxonMobil’s action responds to requests from shareholders who asked the company to analyze how the Paris Climate Agreement's goal of restricting global temperatures to no more than 2°C above preindustrial levels will affect its business and to assess the financial risks associated with that 2°C scenario.

The action also follows other demands that it disclose climate-related information. For example, in 2016, the attorneys general of New York and Massachusetts subpoenaed ExxonMobil for climate change research documents developed over 40 years.

“While Exxon has previously recognized that changing regulations could reduce demand for its products and impact or delay its projects, it has not yet provided meaningful analysis of how the globally agreed upon 2-degree target will affect its position in the marketplace,” said the office of Thomas P. DiNapoli, New York State’s controller. “Investors have a right to know how the company might be affected by, and respond to, a lower demand for fossil fuels due to changing regulations and restrictions.”

“We will continue to monitor Exxon’s response to climate change as we urge the company and others in the energy sector to find ways that they can adapt to the growing lower carbon economy,” added DiNapoli.

ExxonMobil has not indicated when it would provide shareholders with information on climate-related risks to the company.

Climate Action 100+

Introduced to the public on December 12, 2017, Climate Action 100+ comprises “225 of the most influential global institutional investors with more than USD $26.3 trillion in assets under management today.” The intent of the collaboration is to “engage with the world’s largest corporate greenhouse gas [GHG] emitters so these companies step up their actions on climate change.”

The initial list of companies, which includes but is not limited to those within the oil and gas, electric power, and transportation sectors, has been developed using CDP (formerly the Carbon Disclosure Project) data on the companies’ combined direct and indirect emissions, including emissions associated with the use of their products.

Specifically, as part of their collaborative engagement, investors from around the world agreed to ask companies to:

  • Implement a strong governance framework that clearly articulates the Board’s accountability and oversight of climate change risk.
  • Take action to reduce GHG emissions across their value chain, consistent with the Paris Agreement’s goal of limiting the global average temperature increase to well below 2°C above preindustrial levels.
  • Provide enhanced corporate disclosure in line with the final recommendations of the Task Force on Climate-related Financial Disclosures (https://www.fsb-tcfd.org) and sector-specific GIC Investor Expectations on Climate Change (https://igcc.org.au/portfolio/investor-expectations-oil-gas-companies-gic-nov-2016) to enable investors to assess the robustness of companies’ business plans against a range of climate scenarios, including well below 2°C, to improve investment decision making.

Investors that have signed up with the program include the California Public Employees’ Retirement System, the largest U.S. public pension fund. The full list of investor signatories to Climate Action 100+ is available here.

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