Exxon Mobil’s About-Face on Climate Disclosure: Is It Enough?
By Paul Griffin
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?
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.
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.
Exxon's recent announcement that it will report on #climaterisk shows the impact of collaborative investor engageme… https://t.co/eNMtNXP6uo— Ceres (@Ceres)1513193834.0
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.
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.
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EcoWatch Daily Newsletter
By Naomi Larsson
For centuries, the delicate silver dove has been a symbol of love and fidelity.
Biodiversity and Habitat Loss<p>Their near extinction is a symbol of the <a href="https://www.dw.com/en/global-biodiversity-outlook-targets-extinction-summit-new-york-pledge/a-54932895" target="_blank">biodiversity crisis</a> in the UK, largely driven by habitat destruction. Britain is now one of the countries with the most <a href="https://www.wwf.org.uk/future-of-UK-nature#:~:text=The%20UK%20is%20one%20of,than%20half%20are%20in%20decline" target="_blank">depleted nature</a> in the world according to the World Wildlife Fund. Half its plant and animal species are in decline and more than <a href="https://www.rspb.org.uk/about-the-rspb/about-us/media-centre/press-releases/let-nature-sing-wales/#:~:text=a%20natural%20tragedy.-,Over%2040%20million%20birds%20have%20vanished%20from%20UK%20skies%20in,unaware%20of%20the%20impending%20danger" target="_blank">40 million birds</a> have vanished in just half a century.</p><p>"[Turtle doves] are the canary in the [coal] mine because there are all these other species before it and after it," said Tree. "It's an umbrella for all the other species that are heading that way."</p><p>Turtle doves migrate south through Europe to sub-Saharan Africa between July and September, ending up in dry woodland and farmland areas of countries like Mali and Senegal for winter. </p><p>Droughts in West Africa and the Sahel region are believed to have contributed to the fall in turtle dove species recorded in northern Europe, with low rainfall reducing supplies of the seeds and insects the birds rely on for energy for the long journey home.</p>
Conservation and Farming<p><a href="https://www.operationturtledove.org/" target="_blank" rel="noopener noreferrer">Operation Turtle Dove,</a> a partnership project of charities including the Essex Wildlife trust, works with landowners and farmers to actively build turtle dove habitat.</p><p>Outten works with <a href="https://www.ebws.org.uk/birdsites/blue-house-farm-ewt-north-fambridge" target="_blank">Blue House Farm</a>, a 660-acre nature reserve in the UK county of Essex, where they have replicated weedy fallow plots. </p><p>"We work on it every year to make sure it's in the condition it needs to be with plants such as clovers and black medic," Outten said. "These plants are native to the landscape and produce the seed the birds feed on." </p><p>The birds eat a wide range of seeds from various plants that would have been abundant 50 or 100 years ago, added Guy Anderson, program manager for species recovery with The Royal Society for the Protection of Birds (RSPB). </p><p>"But it's simply true that with the gradual process of <a href="https://www.dw.com/en/farming-without-pesticides-how-can-we-make-agriculture-greener/a-52216796" target="_blank" rel="noopener noreferrer">intensifying our agricultural production</a>, the availability of those seeds has dropped and dropped," said Anderson.</p><p>Part of the project includes supplementary feeding — providing sources of food in the form of seed or grain. Under the Countryside Stewardship Scheme in England, farmers can receive financial support to create a turtle dove habitat. </p><p>Though they haven't recorded an increase in doves across the sites in the four years of working on the project, Outten said they are seeing improvements in how landowners and farmers manage habitat for the birds. </p>
A Turtle Dove Haven<p>The 3,500-acre Knepp Estate in West Sussex is another project taking a different approach and one of the few places where turtle dove numbers are increasing.</p><p>Isabella Tree and her husband Charlie Burrell converted their intensively farmed land into a rewilding project almost 20 years ago. They have let the land return to nature.</p><p>Just one year after they'd finished <a href="https://www.dw.com/en/uks-most-talented-architects-are-not-human/a-35952128" target="_blank">rewilding</a> the southern part of their property, they heard turtle doves for the first time. It's now a breeding hotspot for the birds with an estimated 19 pairs. Knepp is also home to <a href="https://www.rewildingbritain.org.uk/rewilding/rewilding-projects/knepp-estate" target="_blank" rel="noopener noreferrer">2% of the UK's population</a> of nightingales. </p><p>Tree is critical of supplementary feeding schemes that, in her view, are short term. She questions the chances of turtle doves getting to feed on scattered seeds before other mammals eat them first.</p>
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By Jessica Corbett
Green groups applauded Sen. Jeff Merkley on Wednesday for introducing a pioneering pair of bills that aim to "protect the long-term health and well-being of the American people and their economy from the catastrophic effects of climate chaos" by preventing banks and international financial institutions from financing fossil fuels.