Investors Want Transparency. ExxonMobil Offers Smoke and Mirrors

June 30, 2017 | 9:03 am
Kathy Mulvey
Accountability Campaign Director, Climate & Energy Program

Yesterday, an industry-led task force issued final recommendations on how companies across all sectors should report on climate-related financial risks. ExxonMobil, which faced a shareholder rebellion on this issue at its annual meeting last month, could have seized the opportunity to welcome the recommendations and commit to improving its own reporting. Instead, the company released its 2016 Corporate Citizenship Report, revealing that ExxonMobil continues to funnel more than $1.5 million to groups that have spread disinformation on climate science and/or seek to block action on climate change.

Final recommendations of the Task Force on Climate-Related Financial Disclosures

Disclosure of climate-related risks has become an expectation of mainstream investors, as demonstrated by last month’s unprecedented shareholder votes calling on ExxonMobil and Occidental Petroleum to report annually on how they will ensure that their businesses remain resilient in the face of climate change policies and technological advances designed to limit global temperature increase to well below 2° Celsius.

The Financial Stability Board (FSB) is an international body that monitors and makes recommendations about the global financial system. Recognizing the potential systemic risks posed by climate change to the global economy and economic system, the FSB set up a Task Force on Climate-Related Financial Disclosures (TCFD) chaired by former New York City mayor Michael Bloomberg.

Yesterday, the TCFD issued its final report, laying out four widely adoptable recommendations on climate-related financial disclosures that are applicable to organizations across sectors and jurisdictions. The TCFD’s recommendations are a major milestone toward clear, comparable, and consistent reporting of climate-related risks. A key recommended disclosure is what a 2°C or lower scenario would mean for companies’ businesses, strategies, and financial planning.

The recommendations emerging from this industry-led process have limitations—including that the disclosures are voluntary. G20 leaders should enthusiastically adopt the TCFD recommendations in July, and then G20 and other governments should look to translate the TCFD’s recommendations into national laws and regulations.

Fossil fuel company support—and opposition

Through an extensive public consultation process in which the Union of Concerned Scientists and other stakeholders participated, a broad range of respondents were generally supportive of the TCFD’s draft recommendations.

Yesterday, more than 100 firms expressed support for the TCFD’s final recommendations. Royal Dutch Shell deserves credit for being among those supporters. Shell CEO Ben van Beurden said:

“I agree that companies should be clear about how they plan to be resilient in the face of climate change and energy transition. I believe it is right that it should be transparent which companies are truly on firm foundations over the long-term. I not only applaud the Task Force for its work to achieve this aim but I have signed a letter confirming Shell’s support for the initiative. The details matter and I look forward to Shell working with the Task Force on those details. Specifically, how we present forward-looking information in an uncertain world, the disclosure of commercially sensitive data and the feasibility of providing the suggested detail to the standard required of financial filings. Ultimately, however, both Shell and the Task Force want this plan to be fit for purpose.”

I’m eager to see how Shell’s public commitment to better disclosure of climate-related risks and opportunities translates into action: in UCS’s 2016 Climate Accountability Scorecard, the company scored “Poor” in the area of fully disclosing climate risks.

Meanwhile, Shell’s support for the TCFD sharply distinguishes the company from fossil fuel industry peers BP, Chevron, ConocoPhillips, and Total SA, which funded a report attacking the TCFD’s draft recommendations.

Launched with an event at the US Chamber of Commerce, the report claimed that adoption of the TCFD recommendations could obscure material information, create a false sense of certainty about the financial implications of climate-related risks, and distort markets.

ExxonMobil’s selective “citizenship”

While ExxonMobil has so far been silent on the TCFD’s final recommendations, yesterday the company launched its 2016 Corporate Citizenship Report.

This report includes a statement from ExxonMobil’s External Citizenship Advisory Panel. As it did last year, the panel encouraged the company to elaborate on its business plans for the low-carbon transition, by “more explicitly describ[ing] how it is aligning its long-term corporate strategy and research priorities with climate change risks and opportunities.”

The external advisors also suggested that ExxonMobil take “additional measures to promote public policies that reduce climate change-inducing greenhouse gas emissions, such as taking a leadership role to bring about a revenue-neutral carbon tax.” (The company got positive PR last week for supporting a carbon tax proposal put forth by the Climate Leadership Council, but questions remain about what ExxonMobil and other supporters will do to advance the proposal and how much traction it will get).

This year, the hand-picked panel also noted that “the company is engaged in a legal and public dispute with visible social actors centering on what the company knew about the implications of climate change, and when and what it decided to do about it. Although the company has every right to defend itself in the litigation, these criticisms highlight the need for more proactive and constructive dialogue with critics.”

Earlier this year, former advisor Sarah Labowitz resigned from the panel in protest over the company’s attacks on civil society organizations, including UCS.

Still funding disinformation and deception

The Corporate Citizenship Report includes ExxonMobil’s 2016 Worldwide Giving Report, in which the company reported donating $1,650,000 to groups that have spread climate disinformation, including the American Legislative Exchange Council (ALEC), Manhattan Institute, the Mercatus Center, the National Black Chamber of Commerce, the National Taxpayers Union Foundation, the Washington Legal Foundation and the aforementioned US Chamber of Commerce. This total is slightly less than in 2015’s donations to the same groups, which came to nearly $2 million (read the details in my colleague Gretchen Goldman’s blog).

ExxonMobil’s affiliations with ALEC and the US Chamber helped to earn the company a score of “egregious” in the area of Renouncing disinformation on climate science and policy in UCS’s 2016 scorecard.

Last month, while ExxonMobil was publicly expressing support for the U.S. staying in the Paris Climate Agreement, ALEC labeled the agreement a “bad deal,” claiming that leaving it in place “would be an outrage” and that it “undermines American democracy.”

At last month’s annual shareholders’ meeting, I was planning to ask CEO Darren Woods a question about ExxonMobil’s continuing support for groups like ALEC and the US Chamber, particularly in light of his blog saying that “it’s going to take all of us—business, governments, and consumers—to make meaningful progress” on climate change.

But Mr. Woods cut the Q&A period at the annual meeting short, so I’ll pose my question here: When is your company going to stop supporting trade associations and industry groups that incorrectly emphasize scientific uncertainty around climate change and oppose climate action that you and your company are on the record as supporting?

Growing numbers of people around the world await a response.