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.
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.
EcoWatch Daily Newsletter
World Environment Day: A Time to Consider the Planet We’ll Return To, and Decide How to Care For It Going Forward
It's a different kind of World Environment Day this year. In prior years, it might have been enough to plant a tree, spend some extra time in the garden, or teach kids the importance of recycling. This year we have heavier tasks at hand. It's been months since we've been able to spend sufficient time outside, and as we lustfully watch the beauty of a new spring through our kitchen's glass windows, we have to decide how we'll interact with the natural world on our release, and how we can prevent, or be equipped to handle, future threats against our wellbeing.
Scuba divers around the world are holding their metaphorical breath to see if a coronavirus infection affects the ability to dive.
DAN medical experts explained the difference between normal lungs, on the left, and "very serious lungs caused by COVID-19," on the right. Matias Nochetto / Divers Alert Network (DAN)
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President Trump's claim that the U.S. has the cleanest air and water in the world has been widely refuted by statistics showing harmful levels of pollution. Now, a new biannual ranking released by researchers at Yale and Columbia finds that the U.S. is nowhere near the top in environmental performance, according to The Guardian.
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New Jersey has invested in the future health of the planet by making sure the next generation of adults knows how human activity has had a deleterious effect on the planet. The state will be the first in the nation to make the climate crisis as part of its curriculum for all students, from kindergarten all the way to 12th grade, as NorthJersey.com reported.
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By Lindsey Schneider, Joshua Sbicca and Stephanie Malin
The SARS-CoV-2 virus is novel, but pandemic threats to indigenous peoples are anything but new. Diseases like measles, smallpox and the Spanish flu have decimated Native American communities ever since the arrival of the first European colonizers.
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History Reverberates on Native Lands<p>Native communities in North America have been disrupted and displaced for centuries. Many face long-standing food and water <a href="http://www.nativepartnership.org/site/DocServer/2017-PWNA-NPRA-Food-Insecurity-Project-Grow.pdf?docID=7106" target="_blank">inequities</a> that are further complicated by this pandemic.</p><p>On the Navajo reservation, which covers more than 27,000 square miles in Arizona, Utah and New Mexico, 76% of households already <a href="https://www.researchgate.net/publication/235390130_High_levels_of_household_food_insecurity_on_the_Navajo_Nation" target="_blank">have trouble affording enough healthy food</a>, and the nearest grocery store is often hours away. COVID-related restrictions have further curtailed access to food supplies.</p><p>Clean water for basic sanitary measures like hand-washing is also scarce. Native Americans are <a href="http://uswateralliance.org/sites/uswateralliance.org/files/Closing%20the%20Water%20Access%20Gap%20in%20the%20United%20States_DIGITAL.pdf" target="_blank">19 times more likely</a> to lack indoor plumbing than whites in the U.S. Nearly one-third of Navajo households <a href="https://www.nbcnews.com/news/us-news/coronavirus-hits-indian-country-hard-exposing-infrastructure-disparities-n1186976" target="_blank">lack access to running water</a>.</p><p>Many <a href="https://www.cdc.gov/mmwr/volumes/69/wr/mm6915e3.htm" target="_blank">health issues</a> that can increase COVID-19 mortality rates occur at high levels among Native Americans. These <a href="http://www.ncai.org/news/articles/2020/03/18/the-national-congress-of-american-indians-calls-for-more-attention-to-covid-19-impacts-to-indian-country" target="_blank">underlying</a> and <a href="https://doi.org/10.1016/S0140-6736(20)30893-X" target="_blank">preexisting</a> conditions – things like hypertension, diabetes, obesity and cardiovascular disease – are <a href="https://www.cdc.gov/mmwr/volumes/69/wr/mm6913e2.htm" target="_blank">linked to diet</a> and stem from <a href="https://www.oupress.com/books/15107980/indigenous-food-sovereignty-in-the-united-sta" target="_blank">disruption and replacement</a> of Indigenous food systems.</p>
High Exposure Rates<p>These factors have clear health impacts. On the Navajo reservation, for instance, through May 27, 2020, <a href="https://www.navajo-nsn.gov/News%20Releases/OPVP/2020/May/FOR%20IMMEDIATE%20RELEASE%20-%201620%20recoveries_102%20new%20cases%20of%20COVID-19_and%20one%20more%20death%20reported.pdf" target="_blank">4,944 people</a> out of a population of 173,000 had tested positive for COVID-19, and 159 had died.</p><p>This infection rate per capita exceeds those in hot spots such as <a href="https://www.forbes.com/sites/alexandrasternlicht/2020/05/19/navajo-nation-has-most-coronavirus-infections-per-capita-in-us-beating-new-york-new-jersey/#11a4fac08b10" target="_blank">New York and New Jersey</a>. Importantly, however, it may also reflect a much <a href="https://www.sltrib.com/news/2020/04/19/navajo-nation-has-higher/" target="_blank">more proactive approach to testing</a> on reservations than in many other jurisdictions.</p><p>The fact that elderly people are especially vulnerable to COVID-19 could worsen the pandemic's effects in Indian Country. Elders are the <a href="https://ais.washington.edu/research/publications/spirits-our-whaling-ancestors" target="_blank">keepers of traditional knowledge, tribal languages and culture</a> – legacies whose loss already threatens the persistence of indigenous communities.</p><p>Elders also play key roles in preserving traditional plant and medicine knowledge. In the absence of COVID-19 interventions from Western medicine, many elders have been called on to perform healing practices, which increases their exposure risk.</p>
Little Help From Federal and State Governments<p>Many tribal members rely on the federal government's <a href="https://www.ihs.gov/" target="_blank">Indian Health Service</a> for health care. But <a href="https://theconversation.com/tribal-leaders-face-great-need-and-dont-have-enough-resources-to-respond-to-the-coronavirus-pandemic-134372" target="_blank">lack of capacity</a> at the agency has hampered its response. Budget shortfalls, <a href="https://indiancountrytoday.com/news/report-grossly-inaccurate-data-used-to-divvy-up-relief-funds-for-tribes-9qkkHmeXj0uhRC42mXYqCA" target="_blank">inaccurate data</a>, the challenges of providing <a href="https://indiancountrytoday.com/news/coronavirus-risk-is-compounded-by-the-rural-DC-rMTUzzE6WDGee8jbENQ" target="_blank">rural health care</a> and ongoing personnel shortages in IHS clinics are compounded by staff being <a href="https://navajotimes.com/reznews/dikos-ntsaaigii-doodaa-nation-musters-defense-against-covid-19/" target="_blank">pulled away</a> to fight the virus in large cities.</p><p>And while many states have raised frustrations with the Trump administration's unwillingness to distribute protective supplies from the <a href="https://www.vox.com/recode/2020/4/3/21206170/us-emergency-stockpile-jared-kushner-almost-empty-coronavirus-medical-supplies-ventilators" target="_blank">dwindling national stockpile</a>, IHS and tribal health care authorities <a href="https://www.azpm.org/p/home-articles-news/2020/3/17/167874-bill-calls-for-more-tribal-community-access-to-federal-stockpile-of-medical-supplies/" target="_blank">never had access</a> to the stockpile at all.</p><p>Although the federal government has begun <a href="https://www.hhs.gov/about/news/2020/05/22/hhs-announces-500-million-distribution-to-tribal-hospitals-clinics-and-urban-health-centers.html" target="_blank">distributing relief funds</a> to IHS agencies, there have been serious problems with the accompanying supplies. The Navajo Nation has received <a href="https://www.indianz.com/News/2020/05/22/propublica-former-trump-aide-provided-fa.asp" target="_blank">faulty masks</a>, and a Seattle Native health center asked for tests but <a href="https://www.nbcnews.com/news/us-news/native-american-health-center-asked-covid-19-supplies-they-got-n1200246" target="_blank">received body bags instead</a>.</p><p>Meanwhile, federally imposed limits on tribal sovereignty have obstructed tribal governments' efforts to deal with the pandemic themselves. Federal and state governments are <a href="https://www.seattletimes.com/seattle-news/makah-tribe-fights-coronavirus-with-self-reliance-and-extreme-isolation/" target="_blank">challenging tribes' jurisdictional authority</a> to <a href="https://www.azfamily.com/news/mayor-of-page-accused-of-racist-social-media-comment-toward-navajo-nation-president/article_e2e6efd6-8db4-11ea-a8a2-7f6976d702f6.html" target="_blank">close borders to tourists</a> who may carry the virus. South Dakota's governor has <a href="https://www.theguardian.com/us-news/2020/may/14/sioux-coronavirus-roadblocks-south-dakota-governor" target="_blank">threatened legal action</a> against two tribes who set up checkpoints to monitor incoming traffic on their reservations.</p>
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Environmental Injustices on Native Land<p>Energy development and resource extraction have had <a href="https://www.haymarketbooks.org/books/898-all-our-relations" target="_blank">disproportionate impacts</a> on tribes for many years. Today, many Native American leaders worry that ongoing energy production – <a href="https://www.ncsl.org/research/labor-and-employment/covid-19-essential-workers-in-the-states.aspx" target="_blank">an "essential" activity under federal guidelines</a> will bring outsiders into close contact with reservation communities, worsening COVID risks.</p><p>The owners of the Keystone XL oil pipeline have announced that they intend to continue construction, which will bring an influx of workers along the proposed route through Montana, South Dakota and Nebraska. The Rosebud Sioux Tribe in South Dakota and Fort Belknap Indian community in Montana have filed for a <a href="https://www.narf.org/keystone-xl/" target="_blank">temporary restraining order</a>, and a key permit for the pipeline was <a href="https://www.democracynow.org/2020/4/16/headlines/us_judge_revokes_crucial_permit_for_keystone_xl_pipeline" target="_blank">revoked in April 2020</a>, but work continues at the U.S.-Canada border.</p><p>Construction is accelerating on the <a href="https://www.azcentral.com/story/news/politics/border-issues/2020/03/17/border-patrol-waives-laws-border-wall-construction-southern-arizona/5063618002/" target="_blank">southern border wall</a>, which bisects the <a href="http://www.tonation-nsn.gov/" target="_blank">Tohono O'odham reservation</a> in Arizona and Mexico. The Trump administration has <a href="https://www.thenation.com/article/politics/border-coronavirus-military-immigration/" target="_blank">increased patrols at the border</a>, despite the tribe's concern that the patrols' presence is <a href="https://www.usatoday.com/story/news/nation/2020/04/06/coronavirus-cbp-160-cases-covid-19-officers-agents/2958736001/" target="_blank">spreading coronavirus</a> on the reservation.</p><p>And in Bristol Bay, Alaska, a salmon fishing season that brings in thousands of temporary workers is <a href="https://indiancountrytoday.com/news/it-s-hard-when-you-love-something-xlS49l2N20KZjqumwfzZfQ" target="_blank">set to open in June</a> because the federal government has also deemed commercial fishing "<a href="https://www.cisa.gov/sites/default/files/publications/CISA-Guidance-on-Essential-Critical-Infrastructure-Workers-1-20-508c.pdf" target="_blank">essential critical infrastructure</a>." Many local Native villages depend on the fishery for income, but have nonetheless pleaded with state regulators to <a href="https://indiancountrytoday.com/news/urgent-calls-to-close-the-massive-bristol-bay-fishery-8lYsGkUeDUyCBW7FMwpSfA?fbclid=IwAR1710u4rQnriq_MgH2ueQxOFtfGiGiH8I2ZdJRCZS9f28Zl-JNkPLpnzZo" target="_blank">cancel the season</a>. The regional hospital has just four beds for possible COVID-19 patients.</p>
Bold Action in Native Communities<p>Native communities are taking decisive action to reduce the spread of COVID-19. They're imposing aggressive <a href="https://www.nytimes.com/2020/04/09/us/coronavirus-navajo-nation.html" target="_blank">quarantine</a> measures like lockdowns, curfews and border closures. Communities are <a href="https://www.theguardian.com/us-news/2020/mar/18/covidcoronavirus-native-american-lummi-nation-trailblazing-steps" target="_blank">ramping up health care capacity</a> and elder support services, and banishing nontribal members who <a href="https://rapidcityjournal.com/news/local/oglala-sioux-council-banishes-non-member-with-covid-19-from-reservation/article_60b665c3-9d1b-5d48-a576-51774e4fb41a.html" target="_blank">violate travel restrictions</a>.</p><p>Other strategies include helping hunters <a href="https://indiancountrytoday.com/news/ammo-fuel-for-hunters-to-feed-others-Ki3zK6du-ky-UogoB9-aNQ" target="_blank">provide traditional foods</a> to their communities, <a href="https://ndncollective.org/indigenizing-and-decolonizing-community-care-in-response-to-covid-19/" target="_blank">mobilizing to support tribal health care workers</a>, and <a href="https://www.ehn.org/coronavirus-native-americans-2645923635.html" target="_blank">linking the pandemic and the climate crisis</a>. Looking ahead to a post-COVID future, we believe one priority should be attending to <a href="http://www.beacon.org/As-Long-as-Grass-Grows-P1445.aspx" target="_blank">front-line environmental justice struggles</a> that center tribes' sovereignty to act on their own behalf at all times, not just during national crises.</p>
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By Kaya Bulbul
The ocean is our lifeline - we rely on it for the food we eat, the air we breathe, as well as for millions for jobs worldwide.
As we continue to grapple with the issues of overfishing, plastic pollution, and climate change, there exists an opportunity to address these existential threats with new innovations, many of which unidentified or insufficiently supported.
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