Investors See Growing Risk in Big Oil’s Big Bet on Plastics
FOR IMMEDIATE RELEASE
MEDIA CONTACT: Stefanie Spear, [email protected], 216-387-1609
BERKELEY, CA—APRIL 8, 2020—Shareholder representative As You Sow today released a report, “Plastics: The Last Straw for Big Oil?”, addressing the financial and environmental, social, and governance (ESG) risks of overinvestment in petrochemical infrastructure.
“The Last Straw for Big Oil?” raises critical questions about the potential for a significant shift toward plastic and petrochemical development, and analyzes what is at stake in terms of environmental, social, and financial impacts if such investments are locked into place.
As the world transitions to cleaner sources of energy in response to the climate crisis, the energy sector is facing significant demand reduction for fossil fuel products. To hedge against shrinking demand from the power and transportation sectors, oil and gas companies are allocating significant resources to boost petrochemical operations. Proposed investments in expanded petrochemical infrastructure, however, require enhanced scrutiny by investors as the potential for competitive, ESG, and stranded asset risk grows.
“In the face of crises like climate change and global plastic pollution, shareholders must scrutinize whether investments in the production of plastics and other petrochemicals will live up to inflated expectations,” said Lila Holzman, report coauthor and senior energy program manager at As You Sow. “Investors are likely to find that companies’ reliance on plastics to recoup lost demand for fossil-based energy is problematic.”
This timely report reveals how the proliferation of petrochemical infrastructure contributes to distinct risks that threaten shareholder value. The report examines the growing risks facing the energy sector’s bet on petrochemicals (especially plastics) — including stranded assets, climate change impacts, plastic pollution of land and oceans, greenwashing of “circular” solutions, community health impacts, and a loss of social license to operate, as well as the oversupply of plastic production capacity.
“Plastic waste flowing into oceans is a global environmental crisis,” said Conrad MacKerron, senior vice president of As You Sow. “Major users of single-use plastic realize their use of plastic must decline substantially; some large consumer goods companies like Unilever and Procter & Gamble have already agreed to reduce use of virgin plastic by hundreds of thousands of tons. This report highlights how pressure to reduce the use of virgin plastics may deflate overly optimistic demand growth assumptions for the sector.”
For the first time this year, shareholder group As You Sow filed a resolution with ExxonMobil requesting clear and targeted reporting on if and how it intends to reduce the risk of stranded assets related to its petrochemical investments like plastics, especially in consideration of the public, market, and governmental responses to plastic pollution, community health, and climate change. Unfortunately, the U.S. Securities and Exchange Commission allowed Exxon to omit the resolution from its proxy this year, a decision at odds with investor concern and requests for transparent disclosure on this issue.
“Given the multitude of ESG issues associated with plastics highlighted in this report, investors must be vigilant in seeking information about the viability of further investment in plastic production,” said Holzman. “As You Sow’s report provides an overview of key concerns for investors to consider moving forward.”
Prior resolutions focusing specifically on public health impacts from physical climate risks to petrochemical operations in the Gulf Coast garnered a majority vote at Phillips 66 and strong votes at Chevron and Exxon. Chevron Phillips Chemical Company (a joint venture of Phillips 66 and Chevron) responded to the resolutions by publishing enhanced information about physical climate risk management, but still lacks meaningful discussion of community health impacts seen during severe weather.
“New solutions are required from energy companies that seek to be well-positioned in a net-zero, circular economy. Increasing fossil-plastic production is not one of them,” said Joshua Romo, report coauthor and energy and plastics fellow at As You Sow. “Companies that fail to innovate and continue to invest in new plastic production face a landscape of growing risks and opposition.”
To learn more about As You Sow’s work on climate change, click here.
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As You Sow is a nonprofit organization that promotes environmental and social corporate responsibility through shareholder advocacy, coalition building, and innovative legal strategies. See our resolutions here.