Three leading Analysts Including Carbon Tracker say XOM Defied Majority Shareholder Vote
The recent ExxonMobil climate risk report, 2018 Energy and Carbon Summary, provided to shareholders in response to a 62% majority vote, has been assessed by experts to be “defective,” “unsatisfactory,” and “inadequate.” Shareholders, led by proponents New York State Common Retirement Fund and the Church of England, asked the company to disclose risks to its business from “technological advances and global climate change policies” including specifically the Paris Agreements’ goal to maintain global warming well below 2°C.
The Carbon Tracker Initiative recently published a report on Exxon’s disclosure. The report’s introduction states: “In the context of the information requested by Exxon’s shareholders in 2017, we consider Exxon’s disclosure to be inadequate.” It concludes: “Ultimately, this means that Exxon’s report is fundamentally lacking the kind of information investors need to understand how Exxon is positioned for a low carbon outcome that shareholders requested in the 2017 resolution.”
This is the second inadequate report by Exxon in the past four years. The first report was released in 2014 on a Stranded Assets proposal from proponents As You Sow and Arjuna Capital.
According to Andrew Behar, CEO of As You Sow, a non-profit shareholder advocacy group that has been engaging with Exxon on climate-related issues since 2012, “Exxon’s consistent failure to address shareholder’s proposals demonstrates a systemic governance lapse by management and the Board.” Investors are now considering what actions to take in response to this failure to address their climate-related disclosure requests.
Another analysis of the Exxon report was done by the Institute for Energy Economics and Financial Analysis (IEEFA) and opens with, “ExxonMobil shareholders have waited for over 25 years for the company to articulate climate-change financial risks to its business. . . The 2018 Energy and Carbon Summary, which was released in February 2018 and is the subject of this memo, is defective and unresponsive to the shareholder resolution that prompted it. Shareholders should react with “no” votes on one or all of the company’s proposed board of directors.”
A third respected analyst, Greg Rogers, Specialist in Environmental and Climate-Related Financial Disclosure, concludes that the Exxon report is “unsatisfactory.” He states, “When evaluated for its effectiveness in achieving key objectives based on the criteria set forth above, we believe Exxon’s report objectively merits an overall score of “U” for unsatisfactory.”
These are just three examples of experts in the field concluding that Exxon has failed to provide the material information requested by a majority of shareholders’. Investors must now ask difficult questions including: how does this systemic structural governance lapse continue to occur? What can be done to cure this fiduciary breach? Why does Exxon not have a climate risk committee? What responsibility does the board have in this failure? And what does a majority vote mean if the company ignores its owner’s wishes.
Although the resolution was withdrawn in December after Exxon announced it would deliver a report, investors have time in the lead up to the May annual meeting to unify and make appropriate demands of the Exxon Board.