Exxon Mobil faces 'change or die' moment on climate

Oil giant Exxon Mobil is facing unprecedented shareholder pressure on climate change

A significant group of shareholders are seeking to force Exxon Mobil to acknowledge the growing threat from climate change at the company's AGM on Wednesday.

These investors want the world's biggest publicly traded oil company to support the goal of a 2C global temperature limit.

Exxon Mobil is also being investigated for potential fraud by withholding information on the role of fossil fuels in driving up temperatures.

The company says that the shareholder resolutions are unnecessary, while the investigations by several states are "politically motivated."

Broad coalition

For around a quarter of a century, a varied collection of climate activists and institutions concerned about rising temperatures have attempted to get Exxon Mobil to move forward on the issue of climate change.

This year, they believe the coalition attempting to force change on the issue, is the strongest ever assembled. Investors with at least $8tn under management have indicated they will support greater recognition of the climate change issue.

At the AGM here in Dallas, the company faces resolutions including one to appoint a board member who has a high degree of climate expertise.

One motion asks the company to support the goal of limiting warming to below 2 degrees in line with the Paris climate agreement. Another asks Exxon to disclose how resilient its investments would be if policy measures to restrict warming to 2 degrees were implemented.

This motion has a number of supporters including the Norwegian government's pension fund, the world's largest.

It's being co-sponsored by the Church Commissioners, who manage the Church of England's investment fund.

Their head of responsible investment says the board of Exxon Mobil should now recognise the new realities.

"It's a moment where Exxon really has to recognise that the world is changing," Edward Mason told BBC News.

"Climate change is real, the transition to a low carbon economy is real, and they need to get on board with this."

The shareholders' hopes of success have been boosted by a number of factors, including a growing number of institutional investors Schroders, AXA and Legal and General which have supported the proposal. They are also backed by the largest pension fund in the US, CalPERS.

The world's leading advisers to proxy voters, ISS and Glass Lewis, have also come out in favour of the resolution on climate risk disclosure. A group of 1,000 academics from leading institutions have written to support the resolutions.

Protestors have been making their feelings known outside the Exxon AGM for many years

Shareholder pressure has also been successful at other large oil companies, with BP and Shell both accepting resolutions to routinely report on their asset portfolio's resilience to climate change.

The board of Exxon Mobil are resolutely opposed to the motions on increased cognisance of climate change issues.

While the climate resolutions are non-binding on the company, many believe that if they are supported by a majority of shareholders, Exxon Mobil will have to make significant changes.

"I think they will have to change or die because you are going to get nation states demanding that they change," said Capuchin priest Fr Michael Crosby who has been attempting to get Exxon Mobil to change on this issue for 19 years.

Key Facts

Exxon can trace its origins back to 1870 when John D Rockefeller created the Standard Oil Company .

Exxon and Mobil merged in 1999 in a deal valued around $80bn. The combined value of the company in 2015 was $353bn, making it the world's most valuable, publicly traded oil company.

The company employs around 75,000 around the world.

The oil spill from the Exxon Valdez tanker in Alaska in 1989 was the biggest in US history until Deepwater Horizon in 2010.

In 2016, the Rockefeller foundation said it would eliminate its holdings in Exxon, saying the company had misled the public over climate change.

"The countries where they operate are going to say you can't do what you're doing and will tax them out of existence or what ever."

Exxon says that climate change is a "very real" issue for the company but believes the shareholders' resolutions are unnecessary. They say that since 2007 they have included a proxy price for carbon in all their forecasts, which essentially means they have been factoring in a likely cost of more restrictive CO2 policies.

"I think the 'change or die' comments are a little dramatic, Exxon Mobil spokesman Alan Jeffers told BBC News.

"The issue is an important one, climate change presents very real risks that need to be managed but so do energy requirements of the modern economy. So we see that as a dual challenge to continue to provide that energy that all of us depend on while also managing the risks of climate change."

Whiff of big tobacco?

As well as dealing with shareholder activism on the issue of climate change, Exxon is also facing a number of legal challenges on the same issue.

Over the last year though, a number of journalistic investigations have raised questions about when Exxon's researchers first knew about climate change and how much information they passed on to shareholders and the general public.

Attorneys General from New York, Massachusetts, California and the US Virgin Islands have launched investigations into Exxon to determine if they acted fraudulently.

The Virgin Islands investigation has particularly irked the company as it seeks to uncover links between Exxon and private organisations that may have been used to spread doubt about climate science, including the Competitive Enterprise Institute.

"If a company knew that climate posed serious risks but nonetheless sought to convince large numbers of consumers and investors that those risks were overstated, I think that is a serious matter for investigation," Carroll Muffett from the Centre for International Environmental Law.

"The reality facing the oil industry is that their situation is looking increasingly like the situation of the tobacco companies - and as much as they like to claim there are no parallels, there is more and more information coming to light that says there are parallels and they are real."

Exxon Mobil and their supporters have come out fighting on this question, decrying the investigations as an attack on freedom of speech.

"There is a pretty defined strategy to go back and try to paint us as some sort of big tobacco and we categorically reject that and it does not stand up to independent scrutiny," said Alan Jeffers, from Exxon.

The Texas Attorney General Ken Paxton said that the Virgin Islands investigation was "ridiculous", and said it was an "effort to punish Exxon for daring to hold an opinion on climate change that differs from that of radical environmentalists".

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