Exxon Investigation Development: Reaching A Tipping Point On Climate Change Risk
ClientEarth has responded to reports that a possible investigation of Exxon by the US Securities and Exchange Commission (SEC) will occur into how it has accounted for assets during the oil price slump and regarding its estimates of climate change risk.
Alice Garton, lawyer at ClientEarth said:
“This is a hugely significant development and it has implications much further afield than just Exxon, because the SEC is also reported to have sought information and documents from Exxon’s auditor, PricewaterhouseCoopers.
“This may also signal the opening of a new front in climate-related regulation and enforcement at the SEC, against fossil fuel companies and other carbon intensive sectors.
“If true, it has liability risk implications for auditors who sign off on annual reports without adequately considering the business risks associated with climate change.
Fossil fuel companies and their professional advisors should take this development very seriously.
“We’ve reached a tipping point on litigation risk associated with climate change. Corporate decision-making and reporting of those risks to the market are required under existing laws. Companies and advisors must take climate risks into account, or risk being hauled before regulators – or the court.
“This development is a signal that US regulators are taking climate risk seriously and other regulators around the world should follow suit. In the UK this means the Financial Reporting Council needs to get tough on corporate reporting on climate risk.”
Last month, ClientEarth alerted the FRC, UK financial regulator, to reporting breaches by two oil and gas companies. The law group believes both companies have failed to adequately disclose climate change risks to their businesses.
In detailed legal letters to the Financial Reporting Council (FRC) ClientEarth requested intervention to correct defective reporting by SOCO International Plc and Cairn Energy PLC.
Both make scant reference to climate-related risks to their business in their annual reports. This means investors are not fully informed of risks to the business.
In the UK, the Companies Act 2006 sets out a legal framework for companies to report material risks to the business. The FRC is the regulator responsible for monitoring compliance with relevant reporting requirements.
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