US ExxonMobil bows to shareholders, will publish carbon risk report

20 March 2014 23:03 Source:ICIS News

HOUSTON (ICIS)--ExxonMobil has agreed to publish a carbon-asset risk report on its website, describing how it assesses the risk of stranded assets from climate change, as requested by a shareholder resolution seeking to address the company's exposure in a low-carbon future, shareholders announced on Thursday.

The resolution, put forward by Arjuna Capital and As You Sow, was proposed as part of a shareholder initiative coordinated by charity Ceres, according to a statement released by the shareholders.

As part of the initiative, investors sent resolutions to 10 energy companies, including ExxonMobil, Chevron, Southern Co, Hess, Anadarko, Devon, Kinder Morgan, Peabody Energy, FirstEnergy and CONSOL Energy, requesting analysis of risks as global concerns over climate change could drive down values for energy reserves below what is currently on balance sheets.

ExxonMobil was the first to agree to release the information, according to the statement. In return, the shareholders withdrew the resolution.

Under the resolution, ExxonMobil would release a report by September on the company's stranded assets and how it would address them.

Stranded asset is one that has become obsolete or non-performing but must be recorded on the balance sheet as a loss.

Although the resolution did not name specific regulations, some regional ones already are making it more expensive for companies like ExxonMobil to do business in products that result in carbon emissions.

Under California carbon regulations, ExxonMobil must buy California carbon allowances (CCA) for every tonne of carbon dioxide (CO2) emissions inside of the state by its stationary facilities. The company's exposure could be $100m/year or more for 2013  an amount which would increase dramatically in 2015 as the state expands its cap-and-trade programme to include fuel.

In its annual report on 31 January, ExxonMobil said climate change and greenhouse gas restrictions, including cap-and-trade programmes, could make their products “more expensive, lengthen project implementation times and reduce demand for hydrocarbons”.

“Investors are the canary in the coal mine and will move their money to avoid material risk,” said Natasha Lamb, director of equity research and shareholder engagement at Arjuna Capital. “Forward thinking companies need to re-assess how they allocate shareholder capital and act strategically to shift their business models. If Big Oil can’t redirect capital to low carbon energy alternatives, investors will."

ExxonMobil declined to comment.

Additional reporting by Dan McGraw

By Jessie Waldheim