ExxonMobil remains convinced that the world needs fossil fuels – despite climate risks

Oil giant ExxonMobil has argued in a shareholder report that all sources of energy, including fossil fuels, are necessary and that it intends to burn all its hydrocarbon reserves. This comes just a day after a stark warning by a UN report that climate change will have devastating effects in the coming decades.

The company promised in March to prepare a document on the financial risks for investors related to the ‘unburnable’ fossil fuel reserves, given the current climate situation.

But William Colton, ExxonMobil’s vice-president of corporate strategic planning, said, “Our analysis and those of independent agencies confirms our long-standing view that all viable energy sources will be essential to meet increasing demand growth that accompanies expanding economies and rising living standards.”

ExxonMobil said it recognises that “the risk of climate change is clear and the risk warrants action.”

However, it added that investing in energy efficiency and low-carbon technologies was the answer, and not reducing fossil fuel consumption, which the firm believes will keep growing.

“ExxonMobil is taking action by reducing greenhouse gas emissions in its operations, helping consumers reduce their emissions, supporting research that leads to technology breakthroughs and participating in constructive dialogue on policy options”, Colton said.

“All of ExxonMobil’s current hydrocarbon reserves will be needed, along with substantial future industry investments, to address global energy needs.”

Natasha Lamb, director of equity research and shareholder engagement at Arjuna Capital, which was among the shareholders calling for Exxon to reassess its future, said, “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.”

The latest report from the UN Intergovernmental Panel on Climate Change, published on Monday, warned in no uncertain terms of the effects that climate change will have on the environment, societies and the economy.

Leading sustainable investors said that the report demands urgent action by the investment community.

UPDATE: Anthony Hobley, CEO of the Carbon Tracker Initiative, said, “Exxon saying there is no risk does not constitute prudent management of shareholder funds – it’s like King Canute assuming he can hold back the tide, but investors can see that a shift in energy is already coming in.

“Exxon has come clean that it is betting on 6C of warming – but investors have no way of managing the risks associated with that trajectory and need to act to get the oil sector’s capital expenditure in line.”

Further reading:

ExxonMobil in landmark agreement to report climate risk after investor resolution

The IPCC’s stark warning: no nation will be untouched by climate change

IPCC’s latest climate change report: the reaction

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

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