March 21, 2014

Exxon Mobil agrees to shareholder request to offer carbon data

Activist shareholders are pushing energy companies for carbon asset risk reports, claiming that developing new reserves isn’t economic because it will cause “catastrophic” global warming.

Exxon Mobil has agreed to disclose how the costs of carbon emissions could affect its business model and the worth of its fossil fuel reserves, according to a wealth management group with a focus on green portfolios.

“Shareholder value is at stake if companies are not prepared for a low-carbon scenario,” said Natasha Lamb, director of equity research at Arjuna Capital, in a written statement issued on Thursday.

Arjuna and As You Sow, an investment group promoting “social corporate responsibility,” had pushed for shareholder resolutions endorsing what they call a carbon asset risk report.

It’s the first time that Irving-based Exxon Mobil, which owns Fort Worth-based XTO Energy, has agreed to tell investors how it appraises carbon-intensive assets like oil sands under increasingly strict climate rules. Exxon Mobil is the nation’s largest oil company.

Investors are pushing for similar commitments from nine other energy producers, including Anadarko Petroleum, Chevron, Devon Energy and Hess.

Exxon Mobil declined to comment, but email exchanges between Lamb and company spokesman David Rosenthal, obtained by the Houston Chronicle, show that Arjuna withdrew the shareholder proposal in exchange for Exxon Mobil’s commitment.

“We are in agreement to proceed with your withdrawal of the Shareholder Proposal, and our producing the comprehensive report on Carbon Asset Risk,” Rosenthal wrote.

“We are very pleased with your commitment to write a report and address our concerns,” Lamb wrote in an email dated March 17.

The activist shareholders pushing for the carbon asset risk reports say that in 2012, public energy producers spent $674 billion on exploring and developing new reserves that they can’t burn without causing what the shareholders term “catastrophic” global warming.

“More and more unconventional ‘frontier’ assets are being booked on the balance sheet, such as deepwater and tar sands,” Lamb said. “These reserves are not only the most carbon intensive, risky and expensive to extract, but the most vulnerable to devaluation.”

Late last year, a collection of well-heeled investors with $3 trillion in assets under management formed the Carbon Asset Risk Initiative to press oil, gas and coal companies to publish regular reports on reserves they consider high risk because of their concentration of carbon.

The group coordinated investor letters to energy companies last fall.

Andrew Logan, director of the oil and gas program at nonprofit investor group Ceres, said it will be looking “for concrete commitments by companies to avoid making riskier investments in the most carbon-intensive assets, which would demonstrate the companies’ ability to adapt as the world transitions to a low-carbon economy.”

In an interview with the Chronicle, Arjuna Capital’s Lamb said Exxon Mobil could start publishing the carbon risk report as early as the end of this month. The investors then plan to push the company to begin divesting from the riskiest assets, such as carbon-intensive oil sands and deep-water projects, and return money to shareholders instead.

“We wanted to ensure capital discipline,” Lamb said, adding that high spending has in recent years eaten into oil company profits.

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