Exxon & Chevron Face Shareholder Challenges On Climate Change
Above Photo: Screenshot from YouTube
Arjuna Capital and As You Sow Keep Pressure on Oil Giants to Return More Capital to Investors and Produce Roadmap for Transitioning to Low Carbon Economy
DALLAS, May 30, 2017 /PRNewswire/ — ExxonMobil and Chevron will host simultaneous annual meetings on Wednesday, May 31 in Dallas and Midland, TX respectively, and face shareholders who want the oil giants to start dealing with the realities of life in a carbon-constrained world.
At Chevron (proposal #8), a first-time resolution filed jointly by Arjuna Capital and As You Sow, with co-filer Baldwin Brothers Inc., asks for a detailed report assessing how the company can respond to climate change and the resultant transition to a low-carbon economy. The proposal asks Chevron to evaluate the feasibility of altering the company’s energy mix, separating or selling its highest carbon-risk assets, divisions, and subsidiaries, and/or buying or merging with companies with outstanding assets or technologies in low carbon or renewable energy. The Chevron resolution is available online at: https://arjuna-capital.com/wp-content/uploads/2017/05/Chevron-Low-Carbon-Transition-Resolution-Final.pdf along with a memo to shareholders at: https://www.sec.gov/Archives/edgar/data/93410/000121465917003223/j511170px14a6g.htm
At ExxonMobil (Proposal #11), Arjuna Capital and Baldwin Brothers Inc. are asking for a commitment to increase the total amount authorized for capital distributions (summing dividends and share buybacks) to shareholders as a prudent use of investor capital given growing climate-related risks of stranded carbon assets. This is the second year the shareholder proposal asking ExxonMobil to prioritize returning more capital to shareholders in light of increasingly risky investments in potentially stranded carbon assets will be put to the ballot. The company fought to exclude the proposal at the SEC two years running, but lost its challenges. The Exxon resolution is available online at: https://arjuna-capital.com/wp-content/uploads/2017/05/XOM-Proposal-Capital-Distributions_2017.pdf along with a memo to shareholders at: https://www.sec.gov/Archives/edgar/data/34088/000121465917003519/d511171px14a6g.htm
Natasha Lamb, managing partner at Arjuna Capital, said: “Oil majors have to get real if they are going to successfully transition to a carbon-constrained world. Exxon and Chevron’s continued investment in high-cost fossil fuel reserves in the face of global climate change, the Paris Climate Agreement, and disruptive technology development is no longer a prudent path forward for the companies or their investors. And simply denying climate risk is not a viable business plan. At Exxon, we believe a disciplined path would prioritize value over growth, by investing in the most profitable lower-carbon assets and returning a greater percentage of profits to shareholders. At Chevron, we are asking the company to disclose its plans to transition to a low carbon economy. Bottom line, investors need to understand if their capital is at risk or if there is a viable path forward.”
“The energy market is at a crossroads, “said As You Sow President Danielle Fugere, “low cost, low carbon technologies are competing head-on with traditional fossil-fuel based energy sources. We know who will ultimately win that match-up and it will not be high carbon energy resources. Companies like Chevron and Exxon must not only recognize this growing risk and disclose it to shareholders, but develop plans to strategically and creatively change their focus toward lower carbon, lower cost energy. We are looking forward to seeing our Companies’ creative and strategic response.”
In releasing a July 2016 report on the growing risks facing oil majors, As You Sow stated: “Higher extraction costs. International supply competition. Falling profit margins. Mounting debt. Shrinking cash. Competing technologies. Rising regulatory risk. Social pressure due to climate change. Indicators are now flashing yellow for the oil industry, which is in danger of ‘weakening’ if major oil companies continue to operate as though they are in a business-as-usual environment …”
In 2014, ExxonMobil wrote a report in response to Arjuna Capital/Baldwin Brothers and As You Sow on the potential for unburnable stranded carbon assets, following a landmark negotiation with shareholders. ExxonMobil has maintained that none of its carbon assets will be stranded, based on its internal projections of unabated global energy demand and a belief that global governments will not take meaningful action to curb global warming.
Chatham House, the London-based Royal Institute of Foreign Affairs and 2nd most influential global think tank, advocates prioritizing capital distributions over reserve growth, stating, “A major new strategy for the IOCs [Integrated Oil Companies] could be to shrink their capital base to match specific demand; shareholders will then benefit from the value released from their shares.” https://www.chathamhouse.org/publication/international-oil-companies-death-old-business-model#sthash.VrQVWX2x.dpuf