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May 15, 2003
Report Asks When ExxonMobil Will Wake Up to Climate-Related Risks
    by William Baue

For the second year in a row, a report tells ExxonMobil shareowners to beware of the significant risks the company faces in terms of how the oil giant addresses climate change.


The lead-up to this year's Annual General Meeting (AGM) at ExxonMobil (ticker: XOM) may seem like deja vu to some investors, save for a few significant changes. As with last year's AGM, the oil company again faces a host of shareowner resolutions. The number has jumped from 12 to a whopping 23 resolutions, one of which asks for a report on climate change risk. And again Campaign ExxonMobil and Coalition for Environmentally Responsible Economies (CERES) commissioned a report that identifies how ExxonMobil continues to lag its peers in addressing climate-related risks.

"ExxonMobil is alone among its peers in continuing to deny the risks posed by climate change," said Claros Consulting's Mark Mansley, author of the report. The document, entitled Sleeping Tiger, Hidden Liabilities, follows up on last year's study, Risking Shareholder Value? ExxonMobil and Climate Change.

The report admits that ExxonMobil has taken a few tentative steps toward addressing climate change risks. However, the report states that climate change risks have "significantly increased" this year, such that ExxonMobil's actions fail to keep pace with the other three "supermajor" oil companies, BP (BP) , ChevronTexaco (CVX), and Shell (RD).

The primary contention of the report is that ExxonMobil has no clearly articulated, centralized plan for addressing and mitigating climate-related risks, a void that prevents investors from assessing how these risks may reduce shareowner value.

"[I]t's ridiculous to suggest, as their [report] has, that ExxonMobil's approach to climate change is diminishing shareholder value," said ExxonMobil spokesperson Cynthia Langlands. "ExxonMobil has taken many concrete steps to address the risk of climate change. These include: Conserving energy in our refineries and chemical plants resulting in 37 percent more efficiency than 25 years ago."

The report acknowledges that this is "a positive step, but it is not a particularly noteworthy." The report documents how ExxonMobil's improved efficiency falls in line with that of the U.S. economy, the U.S. chemical industry, and the U.S. iron and steel industry, and falls way short of emissions reductions made by Shell and BP.

ExxonMobil also points to its ten-year, $100 million investment in Stanford University's Global Climate and Energy Project (GCEP), which will research technologies that reduce greenhouse gas (GHG) emissions that contribute to global warming.

However, the report counters that ExxonMobil has only committed to providing $10 million a year for three years.

"Even if ExxonMobil participates the full ten years, it will only be spending one-tenth of one percent of what the company plans to spend on new oil and gas exploration over the same period (announced in October 2002 as $100 billion)," states the report. "The investments at Stanford are also substantially less than the sums that competitors are spending on low carbon energy technologies."

"Just one of BP's recent renewable energy investments, in a solar plant in Spain, alone exceeds $100 million," the report adds.

ExxonMobil has no current investments in renewable energy, nor does it participate in emissions trading or carbon pricing, and it has not set internal emissions reductions targets, according to the report. Shell is involved in all four of these activities, BP in three, and ChevronTexaco in two, the report states.

The report states that shareowners can begin to rectify the situation by voting for two resolutions that call for the company to report on climate-change risk and renewable energy development, respectively. Shareowners are also advised to support a resolution that calls for splitting the Chair and CEO positions.

The report recommends shareowners vote against the re-appointment of Philip Lipincott as chair of the Public Issues committee. According to the report, that committee has failed to properly manage the climate change issue.

The resolutions have the backing of major institutional investors, according to Campaign ExxonMobil, the coalition of environmental and religious investors that encourages the company to adopt more sound environmental policies and practices. Institutional Shareholder Services (ISS), which advises institutional investors on proxy voting, is again supporting the renewable energy resolution, which received a 20.3 percent vote last year, as well as the new climate change resolution.

 

 
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