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Exxon’s Climate Strategy Will Become Increasingly More Transparent

Exxon Mobil Corp. is moving forward with a plan to reveal to its stakeholders how it expects climate change will impact its business plans going forward. The announcement came yesterday, which is part of its overall progression into becoming more transparent.

To that end, Exxon told the US Securities and Exchange Commission that it would inform its shareholders of the underlying dynamics that it said would have an impact on keeping temperatures below the 2 degree Celsius mark by mid century — the level thought by climate scientists to be necessary to prevent the worst possible environmental scenarios and one prescribed by the Paris climate agreement.

Shareholders have demanded full insight into the financial and technological risks that Exxon faces as a result of a world that is trending toward lower CO2 emissions. Exxon is evolving in this respect. Once opposed to global climate talks, the oil company is now in favor of them and it has encouraged President Trump to remain involved in the Paris agreement. Likewise, Exxon is increasing the transparency into its business operations as it is relates to its climate strategy, little-by-little.

That is in contrast to a current investigation into ExxonMobil had duped its shareholders about what it knew and when it knew climate change. News reports have alleged that the company knew of the potential dangers as far back as 1977 and did nothing to warn its shareholders. Exxon has responded that the moves are “politically motivated.”

“It is not practicable at this time to estimate the impact these trends would have on the undiscounted cash flows for individual asset groups or any resulting impairment charges,” Exxon said in its most recent earnings release.

The context is more about its natural gas deposits and how this would impact earnings. But the company has said natural gas will remain a major part of its business formula, given that it is often discovered alongside the oil that it finds. Natural gas is not just increasingly used to generate electricity but also as a valuable feedstock in the chemical and manufacturing processes.

Natural gas has about half the CO2 emissions as does coal when it is used as a fuel source. As such, Exxon has come out in favor of regulatory actions to force oil and gas developers to capture more of the methane that escapes during the discovery and transportation phases. Methane is the most potent greenhouse gas emission there is. (Exxon was joined by BP, Eni, ExxonMobil, Repsol, Shell, Statoil, Total and Wintershall.)

“This is an unprecedented victory for investors in the fight to ensure a smooth transition to a low carbon economy,” Thomas DiNapoli, state comptroller for New York said, as it relates to giving stakeholders more insight its climate strategies. “Climate change is one of the greatest long-term risks we face in our portfolio and has direct impact on the core business of ExxonMobil. The burden is now on ExxonMobil to respond swiftly and demonstrate that it takes shareholder concerns about climate risk seriously.”

Exxon’s latest moves, however, are not enough to stave off investigations into the oil giant’s previous activities.

New York’s attorney general is also alleging in court documents that its internal accounting practices were a “sham” — all tied to how it had been disclosing its climate risks to investors. Specifically, the state’s top prosecutor said that its internal figures differed from those it had provided the public and his office named Rex Tillerson who had been its CEO but who is now US Secretary of State.

The court documents say that between 2010 and 2014, the company used “secret internal figures” that were less than the numbers it had provided to investors: Internally, it applied a cost of $40 per ton of CO2 in 2030 while externally, it said it had been using $60 a ton in 2030. That made the company’s financials look better, the AG alleges.

“Exxon’s documents show that former Chairman and CEO Rex Tillerson was specifically informed of, and approved of, this inconsistency,” Attorney General Eric Schneiderman said, in the filing“Exxon may still be in the midst of perpetrating an ongoing fraudulent scheme on investors and the public.” 

According to the AG’s office, the information became available to it as it was looking closely at other accusations — that Exxon had apparently known of the ill-effects resulting from climate change but that it had kept that information hidden from public view. As a result of that investigation, Exxon has turned over millions of documents, resulting in the latest allegations.

Exxon said that it has done nothing wrong and that the attorney general is playing politics. “The fact that the Attorney General gave its filing to the media before the court illustrates, once again, this investigation is about politics and publicity, not law enforcement,” the company said in a statement

“For many years, ExxonMobil has applied a proxy cost of carbon to its investment opportunities, where appropriate, in order to anticipate the aggregate financial impact of potential future government policies,” it added. “ExxonMobil’s external statements have accurately described its use of a proxy cost of carbon, and the documents produced to the Attorney General make this fact unmistakably clear.”  

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