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ExxonMobil, the world’s largest listed oil and gas group, will start publishing reports on the possible impact of climate policies on its business, bowing to investor demands for improved disclosure of the risks it faces.
The decision is the biggest success so far for investors who have been pushing companies to do more to acknowledge the threat they face from climate change and from policies that curb greenhouse gas emissions.
In a regulatory filing on Monday evening, Exxon said it would introduce “enhancements” to its reporting, including analysis of the impact of policies designed to limit the increase in global temperatures to 2C, which is an internationally agreed objective.
At Exxon’s annual meeting in May, investors controlling about 62 per cent of the shares backed a proposal filed by a group of shareholders led by the New York state employees’ retirement fund calling for an annual assessment of the impact of technological change and climate policy on the company’s operations.
Supporters of the proposal argued that the disclosures would help shareholders assess the long-term resilience of Exxon’s operations in a world where governments delivered on their pledges to tackle global warming.
The company’s board had opposed the proposal, arguing that, while directors agreed with the need for scenario planning and risk analysis, they were already “confident that the company’s robust planning and investment processes adequately contemplate and address climate-related risks and are sufficient to ensure delivery of long-term shareholder value”.
In Monday’s filing, the company said that the board had “reconsidered the proposal . . . [and] sought input from a number of parties, such as the proponents and major shareholders” before deciding to accede to improved reporting on climate policy risk.
Under Lee Raymond, who led Exxon during 1993-2005, the company stressed the “gaps” in climate science, and was vehemently opposed to international attempts to address the threat under the 1997 Kyoto protocol.
However, under its previous chief executive Rex Tillerson, who led the company during 2006-16 and is now US secretary of state, Exxon acknowledged the need to address the threat of climate change, and supported the Paris agreement, which set a goal of limiting the rise in global temperatures since pre-industrial times to “well below” 2C.
Darren Woods, the new chief executive who took over at the start of the year, has gone further, launching a programme to cut leaks of methane, a potent greenhouse gas, from the company’s operations, and signing up to initiatives to reduce emissions launched by large international oil groups and by the American Petroleum Institute, the industry group.
Its new disclosure policies could mean Exxon will have to discuss more radical changes. Among the issues that the company has said it will assess in its new disclosures are the sensitivity of energy demand to policy changes, and “positioning for a low-carbon future”.
Several oil companies, particularly in Europe, have seen an opportunity in climate policy, arguing that more should be done to shift power generation away from coal and towards natural gas, which emits less carbon dioxide for an equivalent amount of electricity.