ExxonMobil continues to invest in high-risk, high-carbon projects. IMAGE: Flickr/arbyreed
In a first-of-its-kind proposal, As You Sow and Arjuna Capital seek increased dividends or share buybacks from ExxonMobil given structural challenges facing the industry – historically high capital expenditures to extract riskier reserves, decreasing profitability, and global climate change. This represents the first shareholder proposal asking a company to return capital to shareholders in light of climate change risk.
ExxonMobil wrote a report in response to our last year’s shareholder proposal on the potential for stranded assets associated with climate change. Exxon ignored major risk factors projected by the International Energy Agency and Wall Street energy analysts regarding stranded carbon assets – i.e. that the company’s most-costly projects may become uneconomical in a low demand or low oil price environment.
“Exxon has taken a public position that demand for oil will continue to grow, no matter how warm the globe gets, no matter how harsh the impacts of that warming, and regardless of technology changes allowing for cheaper, cleaner renewable fuels,” said Danielle Fugere, President of As You Sow. “The recent U.S.-China accord on carbon emission reductions is just the latest indication that ExxonMobil’s view of the world does not square with reality. Our goal is to protect shareholders from the clear and inevitable changes to the global economy that mean ExxonMobil is likely to have substantial stranded carbon assets if it continues on its current path.”
Despite pressure from shareholders, the company has failed to stress test the impact of governments reacting appropriately to limit climate disruption to agreed upon international targets.
The recently announced U.S./China agreement to reduce carbon emissions stands in contrast to Exxon’s outlook and could cut demand substantially. The International Energy Agency states that, “No more than one-third of proven reserves of fossil fuels can be consumed prior to 2050 if the world is to achieve the 2° C goal” needed to avoid catastrophic climate change.
