Investors in the world’s largest publicly held oil & gas company just voted to do their part to help mitigate climate change. At ExxonMobil’s AGM yesterday in Dallas, shareholders voted in favour of more climate information disclosure and demonstration of portfolio resilience through a transition to a low-carbon economy.
Last year there was a 38% vote in favour of a climate change proposal at ExxonMobil’s AGM. This year, the filers of the resolution received a 62% majority vote. This is a strong signal that investor resolve to keep climate resilience and disclosure issues at the forefront of engagement with companies is gaining momentum. The resolution was backed by major investors including New York State, CalPERS and the Church Commissioners for England.
The vote signals part of a new normal for oil & gas majors and this year's AGM season saw several historic milestones. Leading investors Blackrock and Vanguard both voted in favour of climate reporting at the recent Occidental Petroleum AGM, paving the way for real change in the oil & gas sector, and they were also instrumental in pushing this vote through.
In collaboration with four international investor networks (the Ceres Investor Network on Climate Risk and Sustainability; AIGCC, IIGCC and IGCC) we recently looked at 10 of the world’s largest oil and gas companies in North American and Europe, including ConocoPhillips, Shell and Total, and have discovered a significant improvement in climate risk disclosure in recent years. There are a number of key drivers, including investor engagement, such as the recent call by over 200 investors with more than $15 trillion of assets for the G20 to support and implement the TCFD’s recommendations. At the root is also a strong business case for companies to take advantage of the opportunities presented by the transition to a low carbon economy, and to think through their strategy to address systemic physical and transition risk. Investors and companies can learn a great deal from robust scenario analysis.
We ranked ExxonMobil second to last among the 10 companies assessed in terms of environmental risk disclosure, due to its limited low carbon activities and reluctance to publish comprehensive stress testing against 2⁰C. ExxonMobil is an outlier when measured against the proposed TCFD pillars of climate governance and strategy and this vote is a promising breakthrough for the future of its climate policy.
The final TCFD recommendations due in July also represent a significant landmark. The TCFD’s pillars of governance, strategy, risk management and targets/metrics will be important in mainstreaming global disclosure in the boardroom and with wider stakeholders. This will provide the transparency that companies and investors need for benchmarking and investment decision-making.
With oil prices staying lower for longer, and the bullish policy objectives of China and India on electric vehicles, investors are requesting greater disclosure to the market on financial impacts about portfolio resilience and 2⁰C transition planning. This is about building confidence, pricing risk better and assessing how companies are adapting to the energy transition.
Despite the current global dialogue around the Paris Agreement, this is a timely intervention from investors to set expectations and continue to push for a new normal in climate risk reporting. This vote is a huge step forward for the world’s largest investor-held oil and gas company and the industry as a whole.
Tarek Soliman CFA is a senior analyst at CDP and leads on the oil and gas investor research series.