Shareholders: ExxonMobil Takes Crucial Step Of Acknowledging Carbon Asset Risk
… But More Is Needed
Shareholder Advocates Seek Scenario Planning for a Low Carbon Economy
BOSTON and SAN FRANCISCO, March 31, 2014
BOSTON and SAN FRANCISCO, March 31, 2014 /PRNewswire-USNewswire/ -- In a
much-anticipated report to shareholders today on stranded carbon asset risk,
ExxonMobil expressed the view that there is limited basis for concern.
Shareholder advocates Arjuna Capital and As You Sow– which withdrew a
shareholder resolution when ExxonMobil agreed to release the report --
expressed disappointment with aspects of the response, but noted that it is a
historic first step forward, providing greater insight into how Exxon is
approaching climate change risk and representing an end to the company's
previous refusal to acknowledge climate change issues.
The report makes clear that shareholders and ExxonMobil do agree on some
fundamental points with regard to climate change. First, "ExxonMobil takes the
risk of climate change seriously," as do shareholders. Second, ExxonMobil
"continues to take meaningful steps to help address the risk" including
"improving energy efficiency and reducing emissions at our operations," being
"on the forefront of technologies to lower greenhouse gas emissions" and a
host of other actions to reduce climate change impacts. Third, with regard to
global policy to address climate change, most shareholders and ExxonMobil
would tend to align:
"ExxonMobil advocates an approach that ensures a uniform and predictable cost
of carbon; allows market prices to drive solutions; maximizes transparency to
stakeholders; reduces administrative complexity; promotes global
participation; and is easily adjusted to future developments in climate
science and policy impacts."
Nonetheless, shareholders were disappointed in the level of disclosure in the
report and will continue to work with Exxon and other fossil fuel companies to
increase transparency in key areas. Importantly, shareholders asked ExxonMobil
to issue a report on how it stress tests capital investment opportunities and
risk in a scenario where global temperature rise is limited to 2 degrees
Celsius, in essence requiring that 2/3 of current fossil fuel reserves remain
in the ground through 2050. Such a scenario means that some fossil fuel
companies will not be able to sell some or all of their reserves, thereby
stranding those assets and causing the value of the company to decline. Rather
than providing information as to whether its reserves would be stranded, Exxon
ignored the question. In its response, the company said it believed that any
future capping of carbon-based fuels to the levels of a "low carbon scenario"
is highly unlikely due to pressing social needs for energy.
Shareholder advocates from Arjuna Capital and As You Sow, who pursued the
report from ExxonMobil through a shareholder resolution, reacted with
disappointment to Exxon's quick dismissal of risk factors associated with
stranded carbon assets.
Natasha Lamb, director of equity research and shareholder engagement at Arjuna
"Investors now know that ExxonMobil is not considering a low-carbon scenario
in its planning, which places shareowner capital at risk. We believe the
company should protect shareholder value by divesting assets at greatest risk
of stranding, diversifying investments into low-carbon alternatives, and
returning money to shareholders that might otherwise fund future 'at risk'
assets. While Exxon asserts that we will face social upheaval if carbon-based
fuels are limited, we believe the greatest social disruption will come from
climate change itself in the form of physical displacement and food
scarcity—as outlined in today's release of the IPCC report."
"We appreciate that Exxon provided this report at a time when other companies
have been unwilling to bring their assumptions into the open," said Danielle
Fugere, president of As You Sow. "However, shareholders need more in-depth
information about how Exxon is positioned to withstand climate risk. We will
continue working with Exxon and other fossil fuel companies to increase
disclosures about these critical issues including how companies analyze value
of capital investments across a range of scenarios, including the worst case
"Exxon's report proves that the debate is less about whether the world will
take action to curb climate change and more about how quickly it will happen,"
said Andrew Logan, director of the Oil & Gas Program at Ceres, which
coordinates the Carbon Asset Risk Initiative. "Exxon has acknowledged the
significant risks climate change poses to its business, the likelihood of a
price on carbon, and growing momentum to address climate change – yet still
calls a low-carbon scenario unlikely. Investors disagree, and will continue to
push Exxon to align their planning with this reality."
Arjuna Capital and As You Sow continue to call for the integration of carbon
asset risk into Exxon's scenario planning. In a low-carbon economy,
additional questions that the proponents wish to see addressed include: "What
percent of company assets are most at risk of stranding?; What would be the
decline in company value?; What would losses be?; How would Exxon stack up
against its competitors?" The report today does nothing to address these
Exxon's position today stands in stark contrast to President Obama's goal to
reduce greenhouse gases by 80 percent by 2050 and acknowledgement by world
governments that we cannot burn more than one-third of current proven carbon
reserves if we are to prevent a greater than 2 degree rise in global
Based on facts as we know them, the $20 trillion in reserves currently on the
balance sheets of the 200 largest coal, oil, and gas companies are at risk of
devaluation and stranding.
ABOUT ARJUNA CAPITAL and AS YOU SOW
Arjuna Capital is the sustainable wealth management platform of Baldwin
Brothers Inc., an SEC-registered independent financial advisory firm
established in 1974. For more information visit www.arjuna-capital.com.
As You Sow is a nonprofit organization that promotes environmental and social
corporate responsibility through shareholder advocacy, coalition building, and
innovative legal strategies. For more information visit www.asyousow.org.
SOURCE As You So, San Francisco and Arjuna Capital, Boston
Contact: Patrick Mitchell, (703) 276-3266 or firstname.lastname@example.org;
Natasha Lamb, (978) 578-4123 or email@example.com ; and Danielle
Fugere, (510) 735-8141 or firstname.lastname@example.org
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