Quantcast
Environmental News for a Healthier Planet and Life

Help Support EcoWatch

Exxon Mobil’s About-Face on Climate Disclosure: Is It Enough?

Climate
Exxon Mobil’s About-Face on Climate Disclosure: Is It Enough?

By Paul Griffin

Exxon Mobil Corp. has vowed to do a better job in disclosing the risks it faces from climate change starting "in the near future," after bucking pressure to do that for years.

Until now, shareholders and bondholders had no choice but to rely on informed guesswork by outsiders to divine how the nation's largest fossil fuel company was retooling for the future—a time when taxes, regulations and competition from renewable energy and other new technology alternatives are likely to thin consumers' demand for its products.


In other words, investors and the rest of the public had little way of knowing how much these changes will affect Exxon Mobil's bottom line.

Why did the company make this move now and who stands to benefit?

Shareholder pressure

Scores of investor-activists have sought to force Exxon—along with the entire global industry—to change its ways for nearly three decades. They welcomed the news regarding Exxon Mobil's upcoming climate change risk report.

But this change of course did not surprise all of them because it occurred three days before the deadline for shareholders to submit resolutions to be voted on at its 2018 annual meeting.

Exxon Mobil's latest move may prevent another episode like what happened in May, when some 62 percent of the company's shareholders—including the massive Vanguard mutual fund company—voted in favor of a resolution demanding that it publicly state how climate change is affecting its operations and bottom line.

Exxon Mobil itself indicated that shareholder pressure prompted its reversal, specifically from the New York State Common Retirement Fund, which manages roughly $200 billion in assets on behalf of 1 million state and local government employees and retirees and their beneficiaries.

Getting accurate information

New York Attorney General Eric T. Schneiderman has also targeted the company. A lawsuit he filed in June 2017 accuses Exxon Mobil of committing fraud and inflating its stock price by keeping two sets of books.

Schneiderman alleges that one set of books, made public, is predicated on there being little risk that climate policies would interfere with the company's future ability to profit from its investments in oil and gas projects. The other alleged set of books, kept hidden, accounts for those policies leading it to earn less money, according to court filings.

Based on my research on how climate change affects corporate accounting, I also suspect that Exxon determined that disclosing its climate-related risks would help all of its shareholders and other stakeholders such as lenders, suppliers and consumers.

Ample research, including my own on the climate-related information U.S. companies voluntarily disclose, indicates that stock prices rise when outside investors have—or anticipate getting—more accurate information about plans and strategies to manage climate change risk.

Behind the curve

On top of bowing to demands from investors, Exxon Mobil needed to catch up with its competitors.

ConocoPhillips, Shell, Total, Statoil and BP already assess and report on their climate risks, along the lines of how Exxon Mobil plans to undertake this task.

In short, Exxon Mobil's executives may have realized that not disclosing risks that its peers already acknowledge would potentially hurt its stock price more than airing the information.

Had it not bowed to pressure to start disclosing its climate risks, investors could have construed that Exxon Mobil has something to hide, whether true or not.

Mounting legal woes

Exxon Mobil also faces multiple lawsuits tied to its climate-related business practices, some of which also target other oil and gas majors.

At least two are pending in California, a class-action suit is underway in Texas and the state attorney general of Massachusetts, like her counterpart in New York, is suing the oil and gas company.

It is possible that the information Exxon Mobil now plans to make public for the first time will bolster the mounting number of lawsuits it faces by plaintiffs who allege that it has harmed them as investors by withholding information, disclosing misleading climate data or revealing those details too late.

But it is also possible that the disclosure will help resolve some of the company's legal problems.

An SEC investigation

Meanwhile, the Securities and Exchange Commission is investigating how Exxon Mobil calculates its vast oil and gas reserves in light of how climate risks are changing the industry's outlook.

The SEC apparently wants to know how the company calculates the cost of complying with climate change regulations when it evaluates the potential revenue streams from its planned and ongoing projects around the globe.

These climate-related costs could also hurt its balance sheet due to the abandonment of oil and gas projects after investing billions of dollars that never yield a dime in profits. This is already happening: Exxon Mobil wrote off a $16 billion investment in Canadian tar sands in early 2017 due to the project's high cost per barrel of oil.

However, shareholders could lose money if the company ends up revealing proprietary information that aids its competitors when it discloses its climate-related risks.

I believe Exxon Mobil has resolved to disclose more of these risks because it judges that it has more to gain by reporting on its climate plans than it stands to lose by not becoming more open.

Voluntary yet consistent

In an earlier article I wrote for The Conversation with energy and sustainability expert Amy Myers Jaffe, we urged the SEC to establish a voluntary disclosure program for major oil and gas corporations. We proposed that the SEC establish a common framework for reporting on climate change risks and that it use its moral authority and enforcement powers to encourage full compliance.

This approach would bring about a steady and predictable flow of consistent and comparable information on climate change policies and outcomes. Currently, all companies are essentially on their own to disclose whatever they please whenever they feel ready to do it.

This is not always helpful for markets. When companies disclose information that investors and analysts cannot easily compare, it is costly and unwieldy for them to cross-reference it.

In a recent paper, presented at the Journal of Corporate Finance conference on sustainability, Estelle Sun at Boston University, Thaddeus Neururer at the University of Akron and I show that when the cost of processing environmental information increases, analysts lose interest in dealing with it.

This means analysts issue fewer and less timely reports, to the detriment of outside investors and others, who are deprived of market prices reflecting the most up-to-date data and information.

In short, the public cannot rely only on the private sector to provide consistent and comparable information regarding the effects of businesses on climate change.

Even with Exxon Mobil's about-face, I still believe the SEC needs to create a voluntary disclosure program to correct the private sector's failure to establish a common standard for comparing climate change data as soon as possible.

Reposted with permission from our media associate The Conversation.

EcoWatch Daily Newsletter

California Senator Kamala Harris endorses Democratic presidential candidate Joe Biden at a campaign rally at Renaissance High School in Detroit, Michigan on March 9, 2020. JEFF KOWALSKY / AFP via Getty Images

Former Vice President Joe Biden made a historic announcement Tuesday when he named California Senator Kamala Harris as his running mate in the 2020 presidential election.

Read More Show Less
An aerial view taken on August 8, 2020 shows a large patch of leaked oil from the MV Wakashio off the coast of Mauritius. STRINGER / AFP / Getty Images

The tiny island nation of Mauritius, known for its turquoise waters, vibrant corals and diverse ecosystem, is in the midst of an environmental catastrophe after a Japanese cargo ship struck a reef off the country's coast two weeks ago. That ship, which is still intact, has since leaked more than 1,000 metric tons of oil into the Indian Ocean. Now, a greater threat looms, as a growing crack in the ship's hull might cause the ship to split in two and release the rest of the ship's oil into the water, NPR reported.

On Friday, Prime Minister Pravind Jugnauth declared a state of environmental emergency.

France has sent a military aircraft carrying pollution control equipment from the nearby island of Reunion to help mitigate the disaster. Additionally, Japan has sent a six-member team to assist as well, the BBC reported.

The teams are working to pump out the remaining oil from the ship, which was believed to be carrying 4,000 metric tons of fuel.

"We are expecting the worst," Mauritian Wildlife Foundation manager Jean Hugues Gardenne said on Monday, The Weather Channel reported. "The ship is showing really big, big cracks. We believe it will break into two at any time, at the maximum within two days. So much oil remains in the ship, so the disaster could become much worse. It's important to remove as much oil as possible. Helicopters are taking out the fuel little by little, ton by ton."

Sunil Dowarkasing, a former strategist for Greenpeace International and former member of parliament in Mauritius, told CNN that the ship contains three oil tanks. The one that ruptured has stopped leaking oil, giving disaster crews time to use a tanker and salvage teams to remove oil from the other two tanks before the ship splits.

By the end of Tuesday, the crew had removed over 1,000 metric tons of oil from the ship, NPR reported, leaving about 1,800 metric tons of oil and diesel, according to the company that owns the ship. So far the frantic efforts are paying off. Earlier today, a local police chief told BBC that there were still 700 metric tons aboard the ship.

The oil spill has already killed marine animals and turned the turquoise water black. It's also threatening the long-term viability of the country's coral reefs, lagoons and shoreline, NBC News reported.

"We are starting to see dead fish. We are starting to see animals like crabs covered in oil, we are starting to see seabirds covered in oil, including some which could not be rescued," said Vikash Tatayah, conservation director at Mauritius Wildlife Foundation, according to The Weather Channel.

While the Mauritian authorities have asked residents to leave the clean-up to officials, locals have organized to help.

"People have realized that they need to take things into their hands. We are here to protect our fauna and flora," environmental activist Ashok Subron said in an AFP story.

Reuters reported that sugar cane leaves, plastic bottles and human hair donated by locals are being sewn into makeshift booms.

Human hair absorbs oil, but not water, so scientists have long suggested it as a material to contain oil spills, Gizmodo reported. Mauritians are currently collecting as much human hair as possible to contribute to the booms, which consist of tubes and nets that float on the water to trap the oil.

A northern mockingbird on June 24, 2016. Renee Grayson / CC BY 2.0

Environmentalists and ornithologists found a friend in a federal court on Tuesday when a judge struck down a Trump administration attempt to allow polluters to kill birds without repercussions through rewriting the Migratory Treaty Bird Act (MBTA).

Read More Show Less
A spiny dogfish shark swims in the Olympic Coast National Marine Sanctuary off the coast of Washington. NOAA / Wikimedia Commons

By Elizabeth Claire Alberts

There are trillions of microplastics in the ocean — they bob on the surface, float through the water column, and accumulate in clusters on the seafloor. With plastic being so ubiquitous, it's inevitable that marine organisms, such as sharks, will ingest them.

Read More Show Less
A "vessel of opportunity" skims oil spilled after the Deepwater Horizon well blowout in the Gulf of Mexico in April 2010. NOAA / Flickr / CC by 2.0

By Loveday Wright and Stuart Braun

After a Japanese-owned oil tanker struck a reef off Mauritius on July 25, a prolonged period of inaction is threatening to become an ecological disaster.

Read More Show Less
The Mountain Valley Pipeline proposes to carry natural gas for hundreds of miles over dozens of water sources, through protected areas and crossing the Appalachian Trail. Appalachian Trail Conservancy / YouTube

It's been a bad summer for fracked natural gas pipelines in North Carolina.

Read More Show Less

Trending

Atlantic puffins courting at Maine Coastal Island National Wildlife Refuge in 2009. USFWS / Flickr

When Europeans first arrived in North America, Atlantic puffins were common on islands in the Gulf of Maine. But hunters killed many of the birds for food or for feathers to adorn ladies' hats. By the 1800s, the population in Maine had plummeted.

Read More Show Less