To back up this preposterous claim (everything is not fine), the CEOs will point to their in-house climate risk analyses, which all ignore the need for fossil fuel companies to drastically and rapidly reduce their greenhouse gas emissions in order to keep the global average temperature increase to 1.5°C and avoid the worst impacts of climate change. As we’ve shown in our 2018 Climate Accountability Scorecard, UCS statements, and blog posts, major fossil fuel companies continue to make insufficient progress on climate.
A set of shareholders at ExxonMobil is so tired of the company’s failure to act that they have issued a call for shareholders to vote against all board members – a move saved for extreme events, including a proxy vote recommendation for Wells Fargo after employees had been pushed to open fraudulent accounts in 2017.
To prepare ourselves, we’ve done a deep dive into three major climate risk reports: ExxonMobil’s 2019 Energy & Carbon Summary (our expectations were low); Chevron’s Update to Climate Change Resilience; and ConocoPhillips’s Managing Climate-Related Risks, and created a detailed table comparing the reports on their climate statements and actions.
Overall, the oil and gas companies miss the mark in these reports, downplay the urgency of climate change and the depth of emissions reductions that are needed, and generally assume that they’ll continue to come out on top. We’ve summed up a few of the highlights below.
What’s a climate risk report?
In the last few years, shareholders have successfully pressured companies to report on their climate change risks. For example, how ExxonMobil might adapt if policymakers enact regulatory policies, like a carbon tax or cap-and-trade system; if solar and wind become so cheap that fossil fuel demand declines; and if sea level rise and heat waves impact refineries and other company facilities.
Companies usually only publish these reports after extensive shareholder engagement, or if such a report is requested through a shareholder proposal at the annual meeting (where shareholders vote on directors and the CEO’s pay package) and receives a majority of shareholder votes.
In 2017, 62% of ExxonMobil’s shareholders called for the company to issue a report outlining the company’s strategy for operating in a 2 degree centigrade-constrained economy. Since then, Chevron, Anadarko, ConocoPhillips, and a few other oil and gas majors have issued similar reports because of shareholder resolutions or engagement.
Climate risk reports light on details
Each of these companies is telling shareholders that it is the best equipped and best prepared to handle any sort of climate risk — be it regulations, a change in demand, or hurricanes/flooding/drought/fires/rising seas/insert your favorite climate impact here.
While companies are disclosing more climate risks than they have previously, they still haven’t listed any specific, measurable metrics that would allow shareholders to verify the companies are doing enough.
Most significantly, none of these three companies has laid out an emissions reductions plan that encompasses the full life cycle of its oil and gas products, from extraction, production, and refining to transport and use of its products.
As landmark climate science reports have stressed, not all fossil fuel assets are burnable if the world wants to avoid the worst effects of climate change. Perhaps that explains why ExxonMobil quietly downgraded its confidence in having “90 percent” of its assets produced to “the substantial majority,” which is both extremely vague and concerning for investors.
Unambitious emissions reductions goals
All three of these companies have put out some sort of quantitative emissions reductions goal. ConocoPhillips was one of the first carbon majors to come out with a firm target, even if it is underwhelming. Chevron, after years of refusal, has put out a startlingly unambitious methane goal and linked it to high-level bonuses, and ExxonMobil has merely “announced greenhouse gas reduction measures that are expected to result” in a 15 percent decrease in methane emissions by 2020.
ConocoPhillips and Chevron have only put forward intensity targets, which means they can hit their targets by decreasing emissions per barrel even if their total emissions increase. None of these three companies has included the emissions from the end use of its products – when they are ultimately burned – in its targets, even though these emissions make up around 80 percent of each company’s total emissions.
Undervaluation of renewables
The ExxonMobil, Chevron, and ConocoPhillips reports undervalue the role of renewables, claim that oil will be a big part of the energy mix no matter what, and are full of undeserved self-congratulations. Most importantly, none of these three companies takes responsibility for the emissions that come from the burning of its products or acknowledges the need to urgently and drastically reduce emissions.
At this point, it’s an established fact that solar and wind are becoming the lowest-cost option for energy. Just look at New Mexico, where a renewable energy company put forward the most cost-effective plan for supplying electricity to the state. ExxonMobil proceeds to undervalue the expected penetration of renewables, and announced that it’s doubling down on technological improvements to keep us below 2C, but also that those tech options are not currently working. This seems like a questionable strategy for a company that spent only $9 billion on low-carbon investments in the last 19 years, but $30 billion on oil and gas exploration in 2019 alone.
Chevron dedicated over half its “update” report to “actions and investments”, which include a fair number of renewable energy venture investments, but with no details to the dollar amounts invested, the time frame for expected implementation, or the emissions reductions anticipated. This section of Chevron’s report also includes the dubious claim that it is contributing to the “Zero Hunger” Sustainable Development Goal because its natural gas operations produce nitrogen, which is used in fertilizer, as a byproduct.
ConocoPhillips’s report avoids the whole “how will you reduce emissions” bit almost entirely, which seems like an odd choice for a company whose products are among the top 10 contributors of greenhouse gas emissions since the start of the Industrial Revolution.
Still squirreling out of responsibility for reducing emissions
ExxonMobil quietly admitted that its products are part of the problem of climate change, and there is only so much it can do without making major changes to its business model (a little late to the party on that one). Chevron, meanwhile, subtly claimed that it isn’t the worst fossil fuel company out there and therefore everyone should stop asking it to align its business model with the Paris agreement, which Chevron simultaneously claimed to support.
Shareholder showdown at 2019 annual meetings
UCS will be attending the annual meetings for all three companies, including the virtual meeting for ConocoPhillips this morning. Overall, ConocoPhillips has continued to engage shareholders this year and has no climate-related shareholder proposals on the ballot. Chevron has successfully engaged with a number of investors and had several shareholder resolutions withdrawn, with a company commitment to address the issue, and managed to have a shareholder resolution calling for Paris-aligned climate targets excluded by the SEC. ExxonMobil is facing down what could be a shareholder revolt, with prominent institutional shareholders calling for votes against all board members, support for a shareholder proposal to separate the role of CEO and board chairman, and support for a climate-related board committee. We’ll be reporting back on our in-person attendance at the Chevron and ExxonMobil annual meetings later this month.