Shareholders in ExxonMobil are set to vote on a range of climate change-related proposals at the energy company’s AGM next week.
The resolutions include one filed by Dutch activist group Follow This asking ExxonMobil to set a medium-term reduction target covering the greenhouse gas (GHG) emissions of the use of its energy products – Scope 3 emissions – in line with the aim of the Paris Climate Agreement to limit global warming to 1.5°C above pre-industrial levels.
‘Setting a Paris-aligned medium-term target covering Scope 3 is paramount, because the medium term is decisive for the company and the Paris Accord and because Scope 3 accounts for around 90 percent of total Scope 1, [Scope] 2 and [Scope] 3 emissions,’ Follow This writes.
The group adds: ‘The current energy crisis and the climate crisis can be addressed simultaneously by investing the windfall profits from high oil and gas prices in other energy sources. Diversification of the energy supply would foster energy security by reducing dependency on oil and gas fields tied up in geopolitical conflict and reduce emissions to address the climate crisis simultaneously…
‘It is in the company’s and its shareholders’ best interest to pursue the opportunities the energy transition presents. [T]his will also pre-empt risks of losing access to capital markets, policy interventions, litigation, liability for the costs of climate change, disruptive innovation and stranded assets.’
ExxonMobil’s board has urged shareholders to vote against the proposal. It writes in the company’s proxy statement that it ‘agrees with the proponent that we can be, and are in fact working to be, a leader in the energy transition’ but also states that ‘setting Scope 3 targets can have significant unintended consequences for society’.
The board says: ‘As we discussed with the proponent, calculating Scope 3 emissions at a macro level can provide useful insights into sources of emissions and opportunities for an economy to improve,’ the board notes. ‘[But] applying Scope 3 targets to an oil and gas company incentivizes asset divestments or reduced production of products that society needs.
‘In the first case, the [GHG] emissions still occur but are no longer attributable to the original asset owner. This does not reduce global emissions and may, depending on the capabilities and commitments of the new owner, increase overall emissions. In the second case, where operations are discontinued, the need for that energy remains. Consumers are forced to make do with less energy, pay significantly more for their energy or, depending on availability, turn to alternative, higher-emitting sources like coal.’
Among other things, it argues that company-specific Scope 3 targets disincentivize companies from ‘providing products that help society reduce emissions by displacing higher-emitting alternatives’.
Another proposal on the ballot at the AGM highlights the evolution of climate-related proposals and the specificity of disclosures they seek from companies. The resolution, filed by As You Sow CEO Andrew Behar, requests that ExxonMobil ‘disclose a recalculated emissions baseline that excludes the aggregated GHG emissions from material asset divestitures occurring since 2016, the year [the company] uses to baseline its emissions.’
Behar writes in supporting materials: ‘The economic risks associated with climate change exist in the real world rather than on company balance sheets. Transferring emissions from one company to another may reduce balance sheet emissions but does not mitigate company or stakeholder exposure to climate risk or contribute to the goal of limiting global temperature rise to 1.5°C.’
He states that ExxonMobil has reported absolute Scope 1 and Scope 2 emissions cuts since 2016 of roughly 10 percent on both equity and operated bases but that the company has also made significant asset sales. ‘It is unclear how ExxonMobil accounts for these divestitures in its emissions reporting,’ Behar writes. ‘Therefore, shareholders cannot determine whether ExxonMobil’s reported GHG reductions are the result of operational improvements or of transferring emissions off its books.’
ExxonMobil’s board recommends that investors vote against the resolution, stating that it is one of 10 new reports being sought by proponents at the AGM. It agrees that GHG metrics and calculation methods should incentivize actions to address emissions and acknowledges that ‘the proponent is aligned with our long-held position that divesting assets to manipulate company-specific absolute emissions is not a constructive way to reduce global emissions. We make divestment decisions to maximize value and improve competitiveness, not to manage emissions.’
But it argues that the proposal ‘narrowly focuses on divestments and doesn’t address the broader measurement issue associated with continuing to responsibly meet society’s needs while reducing emissions. In addition, it would lead to a reporting basis that is inconsistent with the majority of industry. It also fails to recognize the company’s disclosures and clear actions to achieve its emission-reduction plans, and the progress that is being made to achieve them.’
An ExxonMobil spokesperson declined to comment beyond the proxy statement.