Resolved clauseShareholders request that ExxonMobil's Board of Directors issue an audited report to shareholders on whether and how a significant reduction in fossil fuel demand envisioned in the IEA Net Zero 2050 scenario would affect its financial position and underlying assumptions. The Board should summarize its findings to shareholders by January 31 2022 and the report should be completed at reasonable cost and omitting proprietary information.
Whereas clause- As evidence of the severe impacts from climate change mounts, policy makers, companies, and financial bodies are increasingly focused on the economic impacts from driving greenhouse gas (GHG) emissions to well-below 2 degrees Celsius below pre-industrial levels (including 1.5 degrees C ambitions), as outlined in the Paris Agreement;
- This focus has led many ExxonMobil peers (including BP, Eni, Equinor, Repsol, Royal Dutch Shell, and Total) to commit to major GHG reductions, including setting "net zero emission" goals by 2050;
- Investors are also calling for high-emitting companies to test their financial assumptions and resiliency against substantial reduced-demand climate scenarios, and to provide investors insights about the potential impact on their financial statements;
- As of November 2020, ExxonMobil had neither committed to net-zero emissions by 2050 across its value chain, nor disclosed how its financial assumptions would change from doing so;
- In contrast, the audit reports for other high GHG-emitting companies clearly discussed this connection:
BP: how climate change and a global energy transition impacted the capitalization of exploration and appraisal costs and risks that oil and gas price assumptions could lead to financial misstatements;
Shell: how long-term price assumptions impacted by climate change could affect asset values and impairment estimates;
National Grid: noted estimates inconsistent with 2050 "net zero" commitments;
- Additionally, in 2020, BP, Shell and Total reviewed their 2019 financial accounting practices in light of the accelerating low-carbon energy transition. All three subsequently adjusted critical accounting assumptions, resulting in material impairments, and disclosed how climate change affected the adjustments;
- In October 2020, the International Energy Agency (IEA) issued a new "Net Zero 2050" scenario which describes what it would mean for the energy sector globally to reach net-zero GHG emissions by 2050. This more aggressive global action to curtail climate change is consistent with a 1.5 degrees C temperature increase globally.
Supporting statementOn May 26, 2021 there will be a shareholder vote on CBIS’ groundbreaking resolution, ExxonMobil Item 6 – Report on Scenario Analysis, at ExxonMobil on the financial impacts to energy price assumptions and accounting outcomes stemming from a Net-Zero by 2050 climate scenario, as outlined in the International Energy Agency's (IEA) recent Scenario analysis. CBIS encourages investors to vote FOR this proposal. Our rationale for a vote in favor is outlined in the proxy exempt solicitation which can be downloaded from the supporting materials.
On March 9, 2021 the U.S. Securities Exchange Commission upheld CBIS’ proposal, striking down the ExxonMobil’s attempt to block this shareholder vote at the 2021 annual meeting. Within this past week of May 2021 the proxy advisory firms Pensions & Investment Research Consultants (PIRC), Glass Lewis, and Institutional Shareholder Services (ISS) have all recommended that their clients vote IN FAVOR of CBIS’ resolution. This highlights how the disclosures requested from ExxonMobil are a reasonable expectation of the company and its industry peers and will provide important, potentially material information to shareholders’ investment decisions.
About ExxonMobil ISS writes: “A vote FOR this proposal is warranted because the company lags its peers in setting targets aligned with Paris-type goals and is involved in multiple controversies related to climate change. In light of the regulatory developments and recent volatility in oil demand and prices, shareholders would benefit from an audited report on the financial impacts of International Energy Agency (IEA)’s Net Zero 2050 Scenario".
Backing CBIS’ proposal is Climate Action 100+, the coalition of 545 investors with $54 trillion AUM. CA100+ has flagged CBIS’ resolution for support and issued its own assessment of Exxon’s publicly disclosed climate information finding the company falls short on more than half of its criteria. The respected independent think tank Carbon Tracker has also found the company deficient across six of seven categories in its latest climate report card related to its climate assumptions, accounting and audit practice.
Investors need to know how a significant reduction in fossil fuel demand envisioned in a truly rapid global response (IEA Net Zero) would alter Exxon’s assumptions such as future commodity prices, changes to useful lives, and asset retirement obligations. CBIS is therefore asking ExxonMobil to disclose how a Net-Zero industry scenario would impact it and its core financial assumptions and reporting outcomes, so that investors and the company can plan for greater resiliency.
CBIS is therefore asking ExxonMobil to disclose how a Net-Zero industry scenario would impact it and its core financial assumptions and reporting outcomes, so that investors and the company can plan for greater resiliency.