ExxonMobil in landmark agreement to report climate risk after investor resolution

Oil giant ExxonMobil has responded to a shareholder resolution by deciding to report on the financial risks posed by climate change, particularly the ‘stranding’ of fossil fuel assets, in an effort to be more transparent for investors.

For the first time, the company will assess how its business model will be affected by ‘unburnable’ carbon – fossil fuel resources that research says will need to stay in the ground in order to prevent runaway climate change – and how it will address such challenges.

Sustainable wealth management platform Arjuna Capital and environmental corporate responsibility charity As You Sow have accepted the company’s measures and withdrew their shareholder resolutions as a result.

Natasha Lamb, director of equity research and shareholder engagement at Arjuna Capital, said, “We’re gratified that ExxonMobil has agreed to drop their opposition to our proposal and address this very real risk.

“More and more unconventional ‘frontier’ assets are being booked on the balance sheet, such as deep-water and tar sands. These reserves are not only the most carbon intensive, risky, and expensive to extract, but the most vulnerable to devaluation.  As investors, we want to ensure our companies’ capital will yield strong returns, and we are not throwing good money after bad.”

Danielle Fugere, president of As You Sow, commented, “That the largest American oil and gas company is the first to come to the table on this issue says a lot about the direction that energy markets are taking.

“Companies need to acknowledge that preparing for a low-carbon future is a necessity, not a choice.”

Campaigners hope that other fossil fuels firms will follow suit, but British oil giant BP already stated that “the unburnable carbon approach to assessing the impact of potential climate regulation on a company’s value oversimplifies the complexity of the issue and overstates the potential financial impact”.

MPs on the environmental audit committee in the UK recently warned of the financial risks associated with investing in fossil fuels, saying such investment could fuel a so-called “carbon bubble”.

Further reading:

Investors warn of ‘carbon bubble’ as Shell predicts climate regulation will hit profits

‘Carbon bubble’ risk reinforces the case for fossil fuel divestment

MPs issue stark ‘carbon bubble’ warning to investors and finance world

Majority of Britons unaware of ‘carbon bubble’ investment risks

Report says investing in fossil fuels is a ‘very risky decision’