ExxonMobil may be in climate denial, but its investors shouldn’t be

ExxonMobil may be in climate denial, but its investors shouldn’t be
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ExxonMobil has prepared a new climate report in response to shareholder concerns about climate change, and the verdict is in: If you were hoping that ExxonMobil would seriously address the issue, you’ll be disappointed.

Climate risk may be real, according to the report. But it won’t affect Exxon’s bottom line.

In ExxonMobil’s 2018 energy and carbon summary the company sees no risk to the company's finances as it continues to drill and sell every last barrel of oil and gas in its portfolio. The consequences for the climate is of no concern to the company.


This report comes in response to a 2017 shareholder resolution co-filed by the New York State Common Retirement Fund and the Church of England. The resolution, which received 62 percent of the vote of shareholders over strenuous objections from Exxon’s management—like all shareholder resolutions—wasn’t binding. But after it was re-filed for 2018, Exxon agreed to issue its report, and the resolution was withdrawn.


Does Exxon’s report finally address shareholder concerns about climate risks to the company? Hardly. Shareholders have been asking for a long time for Exxon to analyze how it is going to transition to a low-carbon future, and whether its business is at risk from such a transition.

For years, Exxon has denied climate change and the associated risks. In this report, it does acknowledge a theoretical pathway that would aim to limit global warming to 2 degrees Celsius (3.6 degrees Fahrenheit over pre-industrial levels) “would generally lower the world’s demand for total energy, oil, natural gas and coal.”

Incredibly, however, the report dismisses the possibility of any business risk as a result to ExxonMobil.

The report tells shareholders instead not to worry.

The truth is, investors would do well to be concerned about how ExxonMobil remains blind to the inroads being made by renewable energy, although it is happening around the world, even — ironically enough — under its nose in Texas, its home state.

Shareholders should worry also that Exxon is blind to alternative technologies like electric cars and electric transport technology that challenge oil and gas.

Shareholders should worry that the company has announced a large-scale investment program for new drilling in the U.S. even after three years of its drilling operations losing money. Stock analysts generally sympathetic to the company are among those sounding the knell about how that particular strategy has no real investment rationale.

Shareholders should worry that the company has written off billions of dollars on bad natural gas investments over the past two years and 20 percent of its worldwide tar sands reserves last year. That’s 10 years of capital investment, gone.

Shareholders should worry that a recent Carbon Tracker analysis suggests as much as 40 to 50 percent of Exxon’s upstream capital expenditures may prove wasted under the 2-degree-Celsius scenario, a higher percentage than any other oil major.

Shareholders should worry that after realizing a nearly 30 percent increase in the price of oil in 2017, the company still missed its profit targets by a wide margin.

Shareholders should worry that municipalities are suing the company for damages related to climate change, joining attorneys general in New York and Massachusetts who have taken legal action against the company for misleading investors.

Shareholders should worry — and they should divest. The main reasons include:

•  After several years of weak performance, lower revenues and smaller payouts to investors the company has decided, in the near term, to settle for more of the same.

  • Long-term, the company is showing very weak finances, no remediation plans and a future of further decline in size and influence
  • The company has offered no climate-risk strategy.

Shareholders who voted in good faith to compel a meaningful response have been stiffed. They are left in the position now of continuing to try to engage constructively with the company and risk being used and humiliated, again. Or to go another way. 

We favor divestment.

Kathy Hipple is the finance professor at Bard’s MBA for sustainability program and a former international institutional investment advisor at Merrill Lynch.

Tom Sanzillo is director of finance at the Institute for Energy Economics and Financial Analysis.