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Exxon Mobil Shareholders Call For Climate Change Risk Assessments

The company's annual shareholders meeting in Dallas showed growing concerns about climate policies among investors.

by Collin Eaton, Houston Chronicle / June 2, 2017
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(TNS) -- DALLAS - Investors pushed Exxon Mobil to account for the threat that a warming planet and global climate policies poses to its business in a historic shareholder vote on Wednesday.

Bucking the Exxon board, shareholders approved - by a margin of nearly 2-1 - a resolution calling on the nation's largest oil company to publish an annual assessment of how global climate policies that aim to limit rising temperatures will affect the value of its sprawling oil and gas operations over the next quarter century.

The decisive vote came as President Donald Trump neared a decision on withdrawing the United States from the Paris agreement, an international accord on dramatically reducing greenhouse gases, primarily from fossil fuels.

The passage of the resolution - coming just a year after shareholders rejected a similar measure - signaled the growing concerns about climate change across society and underscored the fears about the oil industry's long-term future as governments adopt climate rules to lower carbon emissions and, ultimately, reduce demand for the oil and gas Exxon pulls out of the ground.

"The days of only the hard-core environmentalists wanting these climate disclosures are in the past," said Brian Youngberg, an analyst at Edward Jones in St. Louis. "It's going to be across the entire industry."

Exxon has some 20 billion barrels of oil equivalent in proved reserves, more than a decade worth of oil and gas, and it cut 8.8 million metric tons of greenhouse gas emissions from its operations over the past few years. At the meeting, shareholders rejected every other shareholder proposal, including one asking Exxon to report on methane emissions from wells. That garnered about 39 percent of the shareholder vote.

Sixty-two percent of Exxon's shareholders, however, voted for the nonbinding resolution on the annual climate risk assessment, compared to about 38 percent last year. Several institutional investors backed the measure, including the investment fund of the Church of England and New York State Common Retirement Fund.

The company's annual shareholders meeting at the Morton H. Meyerson Symphony Center in Dallas showed growing concerns about climate policies among investors haven't been assuaged even by the pro-fossil fuel policies of the Trump administration. As part of the resolution that passed on Wednesday, investors have asked Exxon to put out its first climate risk report next year, but the resolution held no legal authority requiring Exxon to do so.

In a news conference, Exxon CEO Darren Woods didn't say whether the company would commit to putting out an annual report on climate policy risks.

"We felt like we were addressing the needs and requests and concerns of shareholders and the broader public," Woods said. The company, he said, will have to "step back and reflect on the vote" and see "where the opportunities are to better express our position."

Exxon, which once cast doubts on climate science and the impact of fossil fuels on global warming, has in recent years moderated its stance. Earlier this year, Exxon added a climate-change expert to its board after shareholders passed a measure making it easier to nominate directors.

Last week, Woods, echoing the position of his predecessor, Secretary of State Rex Tillerson, wrote a letter to Trump imploring him to keep the United States in the Paris agreement to "maintain a seat at the negotiating table."

The company has also come out in favor of a so-called carbon tax, as a way to use market forces to lower greenhouse gas emissions by discouraging fuels that emit high amounts of carbon dioxide.

But the world's biggest public oil company still maintains oil and gas will make up 55 percent of the world's energy supply in 2040. In a presentation Wednesday, Woods said Exxon believes oil companies will have to invest more than $11 trillion in oil and gas projects by 2040 to meet growing global energy demand, which it believes will increase by 25 percent as standards of living and populations rise worldwide.

Meanwhile, oil and gas production will naturally decline over time, he said, arguing technological advances will help lower emissions, as the so-called shale revolution has. That technological breakthrough dramatically increased production and lowered the cost of natural gas, which has replaced dirtier fuels such as coal.

"We think the goal should be to reduce emissions at the lowest cost to society," Woods said. Still, he said, "we're going to look for opportunity where we can make even clearer the way we're managing that (climate) risk and the way it impacts our business."

On other business, investors signaled approval of the company's 2016 compensation plan for executives, which included a $16.8 million pay package for Woods. But the nonbinding vote came in at 68.5 percent, well below votes of around 90 percent garnered in the two previous so-called say-on-pay votes. Shareholder resolutions for reports on lobbying and compensation for women failed, earning 28 percent and 8 percent of the votes, respectively.

©2017 the Houston Chronicle Distributed by Tribune Content Agency, LLC.