Home | About Us | Publications & Media | Newsletter | Search   
As You Sow Planting Seeds For Social Change
 

Carbon Bubble

Landmark Agreement: ExxonMobil will Disclose Climate Risk

Withdrawal of As You Sow and Arjuna Capital Shareholder Proposal Seeking Disclosure on Stranded Carbon Assets Leads to Agreement with Largest U.S. Oil and Gas Producer

ExxonMobil, the largest U.S. energy company, has agreed for the first time ever to publish a Carbon Asset Risk report describing how it assesses the risk of stranded assets from climate change. The agreement comes in response to a shareholder resolution filed by As You Sow and Arjuna Capital, which has been withdrawn on the basis of Exxon's commitment to publish the report.

This is the first successful withdrawal with an oil and gas producer on the carbon asset risk issue this proxy season. As You Sow has filed similar resolutions with Chevron, Anadarko, Hess, and CONSOL Energy.

Read our press release>>>

Exxon's report will address:

  • How Exxon assesses the risk of a low carbon scenario, other than placing a price on carbon.
  • Why the Company, in assessing the economic viability of proved undeveloped and undeveloped reserves, fails to conduce a scenario analysis based on a scenario consistent with reducing GHG emissions 80% by 2050 to achieve the 2 degree goal. How the Company stress tests its capital investment opportunities.
  • How Exxon's base case scenario tracks with the IPCC.
  • How Exxon plans for scenarios that diverge from the “Energy Outlook”. Whether or not the Company includes a factor of safety and how that factor is determined.
  • How the Company incorporates a low carbon assessment into capital allocation plans and the implications for capital expenditure plans.
  • Why the Company believes current investments in new reserves are not particularly exposed to the risk of stranded assets. How current capital expenditure is affected by any considerations the Company makes with regards to future short-to-long term risk of stranded assets. The probability/likelihood assigned to that risk.
  • Information for investors to analyze assets at risk in a low carbon scenario. A) The breakdown of the resource base by resource type and location, i.e. oil, gas, heavy oil, bitumen, conventional, deep-water, acid/sour gas, etc. B) Unit profitability by type of production.
  • How the Company assesses capital projects versus alternative uses such as buybacks and dividends.
  • The relative carbon intensity of owned assets using third party information on relative carbon intensities of sources.
  • The company's production forecast based upon prices remaining flat and the CAPEX outlook for the next several years.

Background

Consol's operations in Shoemaker Mine, West Virginia

Stranded fossil fuel reserves pose significant financial risks to energy companies and their investors.

Image: Casey Junkins/The Intelligencer

Coal, oil, and gas reserves that are claimed as assets on the balance sheets of the top 100 coal, oil, and gas companies contain over three times the total amount of carbon that scientists believe can be released without climate catastrophe. In the 2012 World Energy Outlook, the International Energy Agency states that "[n]o more than one-third of proven reserves of fossil fuels can be consumed prior to 2050 if the world is to achieve the 2 degree Celsius goal," generally recognized as the level beyond which global warming will have dire ramifications.

If laws and regulations are adjusted to recognize this limitation, the vast majority of fossil fuel companies will be left with stranded assets in the form of unburnable reserves and underused infrastructure. Importantly for shareholders, the majority of such companies will be overvalued, presenting the risk of a "carbon bubble." The valuation of these companies are the core of the Dow Jones and many other international financial indexes, so the impact of these stranded assets could ripple through national and international financial markets, just as the overvaluation of housin—or the housing bubble—did, with disastrous consequences.

As You Sow is working to promote transparency and reporting on this issue by filing shareholder resolutions with key fossil fuel companies. Our resolution asks companies to report plans to address global concerns regarding fossil fuels and their contribution to climate change, including an analysis of long- and short-term financial and operational risks to the company and society.

Further, the resolution asks companies to perform an analysis of various scenarios the company deems likely, or reasonably possible, in which a portion of its reserves or infrastructure become stranded due to carbon regulation, and to discuss the impact those scenarios would have on the company's plans to invest resources in continuing to explore or further develop new coal or gas reserves.

This information will enable investors to analyze how companies are positioned to address climate change and carbon restrictions, providing valuable information for investors to make reasonable judgments about the benefits or risks associated with investing in these companies. After the credit and financial crises of 2008, it critical that investors are more attuned to the catastrophic effects of mispriced assets in the financial market.

Consol

CONSOL

Our 2013 shareholder proposal asks for a report on the company's goals and plans to address global concerns regarding fossil fuels and their contribution to climate change, including analysis of long and short term financial and operational risks to the company and society.

Investors holding $1.2 billion in CONSOL Energy, or 19.7% of voting shares, supported our resolution. This level of shareholder support is rare for a resolution on a new issue and demonstrates concern from large institutional investors.

Read our press release on the vote results>>

Read our statement supporting the resolution >>

 

 



Donate | About Us | Publications & Media | Newsletter | Search
©2014 As You Sow Foundation