ExxonMobil refinery. Photo: commons.wikimedia.com
In response to As You Sow and Arjuna Capital’s shareholder resolution, ExxonMobil agreed for the first time ever to publish a Carbon Asset Risk report describing how it assesses the risk of stranded assets from climate change. This commitment was heralded in over 350 news stories and marked the first recognition by an oil company of the potential for stranded reserve assets due to increasingly stringent global warming regulations, reduced demand for oil, fuel switching, and competition from renewables.
World governments agree that if catastrophic warming over 2°C is to be avoided, 80% of proven fossil fuel reserves must remain unburned. These reserves, currently on the balance sheets of the 200 largest coal, oil, and gas companies, are valued at $20 trillion.
Shareholders asked whether Exxon is adequately preparing for a changing energy market. When Exxon issued the requested report, many investors expressed disappointment that Exxon is continuing business as usual in the face of global warming. The company stated that demand will continue to grow, and that major restrictions on the burning of carbon-based fuels are not likely.
Despite its business-as-usual response, the fact that the largest American oil and gas company is the first to acknowledge the issue of stranded assets sends a signal to Wall Street that there is more risk than was previously disclosed. Energy companies must acknowledge that preparing for a low-carbon future is a necessity, not a choice. Pouring capital into development of fossil fuel reserves in the face of increasingly destructive climate change is a damaging investment, placing shareowner capital at risk.
This was the first successful withdrawal with an oil and gas producer on the carbon asset risk issue this proxy season. As You Sow filed similar resolutions with Chevron, Anadarko, Hess, and CONSOL Energy.
Read more about our work on stranded carbon assets on our Carbon Bubble page.
