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March 21, 2014
ExxonMobil to Report on Stranded Assets
    by Robert Kropp

A shareowner resolution is withdrawn by As You Sow after Exxon agrees to becomes the first oil and gas company to report on the impacts of unburnable carbon assets on its business model.


As an isolated agreement, the announcement by As You Sow that ExxonMobil will report to shareowners on the effects of stranded assets will not reverse the effects of climate change. It won't alter the reality of the greenhouse gases already pumped into the atmosphere by the nation's largest oil company, or erase the fact that Exxon spent decades funding climate skepticism while lobbying against climate change legislation.

It's also unlikely that the divest vs. engage debate will be settled by the successful engagement by As You Sow and the wealth management firm Arjuna Capital. Yet, considering that Exxon is the largest of the 45 fossil fuel companies co ntacted by a coalition of institutional investors organized by Ceres, the agreement strongly suggests that the issue of stranded assets—the fossil fuel reserves now treated as assets that will have to stay in the ground if global temperature increases are to be limited to no more than 2°C—has become an issue that companies can no longer ignore.

As You Sow and Arjuna “agreed to withdraw their shareholder resolution in exchange for ExxonMobil providing information to shareholders on the risks that stranded assets pose to the Company’s business model, how the company is planning for a carbon constrained world, how climate risks affect capital expenditure plans, and other related issues,” the shareowners stated. “The report will provide investors with greater transparency into how ExxonMobil plans for a future where market forces and climate regulation makes at least some portion of its carbon reserves unburnable.”

According to a 2011 report by Carbon Tracker, up to 80% of fossil fuel reserves now treated as assets are unburnable.

“That the largest American oil and gas company is the first to come to the table on this issue says a lot about the direction that energy markets are taking,” said Danielle Fugere, President of As You Sow. “Companies need to acknowledge that preparing for a low-carbon future is a necessity, not a choice.”

During the 2013 proxy season, As You Sow and the Unitarian Universalist Association (UUA) filed resolutions requesting that CONSOL Energy and Alpha Natural Resources report on impact of coal reserves that "may become unusable, unmarketable, or otherwise not economically viable as a result of greenhouse gas restrictions." As You Sow's resolution at Alpha gained the support of 20% of shareowners, a strong showing for a first-time resolution at a fossil fuel company.

This year, resolutions addressing stranded assets have been filed at 10 fossil fuel companies. According to As You Sow's 2014 Proxy Preview, a second resolution addressing climate risk, from the Christopher Reynolds Foundation, was challenged by Exxon and withdrawn. “Despite the challenge, the company agreed to release a public letter confirming the importance with which ExxonMobil and its board view the risks of climate change,” the Preview stated.

“A careful and detailed assessment of the potential for stranded assets is an important first step for all fossil fuel companies,” said Andrew Logan of Ceres.

“Investors are the canary in the coal mine and will move their money to avoid material risk,” said Natash Lamb of 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.”

A report published by Ceres in January found that current levels of investment in clean energy by institutional investors are nowhere near the amounts necessary to minimize the effects of climate change. A minimum of $1 trillion per year through 2050 will be needed to avoid the worst impacts of climate change. Institutional investors collectively manage about $76 trillion in assets.

 

 
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