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Jan 10, 2016

Shareholders ask oil producers for climate lobbying disclosure

Companies face more pressure from investors concerned about support for trade association efforts opposing climate risk solutions

In the wake of widespread government commitments at the Paris climate talks to reduce carbon emissions in the years ahead, socially responsible investors have filed proposals with 11 US oil and gas producers asking for increased disclosure about their lobbying activity around climate risk.

Walden Asset Management, the Boston-based socially responsible investment firm, helped coordinate the initiative that resulted in filing shareholder resolutions at the 11 companies, which have been criticized for supporting the US Chamber of Commerce’s efforts to sue the Environmental Protection Agency (EPA) to block the Clean Power Plan, a central element of the Obama administration’s plan to reduce greenhouse gas emissions.  

Two different shareholder resolutions were filed at oil and gas companies. The first one, which has been filed with roughly 40 companies, including Pfizer and UPS, requests basic disclosure of direct and indirect lobbying, citing climate as a prime example. The second resolution asks for a comprehensive review of each company’s position and support for trade association lobbying or public policy advocacy on energy policy and climate change by groups such as the American Legislative Exchange Council (ALEC). Chevron, ConocoPhillips, Devon and Exxon Mobil have received both resolutions, while among the 11 energy companies, Chesapeake Energy, CONSOL Energy, Occidental Petroleum, Phillips 66, Spectra Energy, Suncor and Tesoro have been targeted only for the first one.

‘We are arguing that the world has changed since COP21. The global context has changed, the debate has a different character.’ says Tim Smith, director of ESG shareowner engagement at Walden. ‘That’s why we think we have the wind at our backs when we’re going in and talking to a company’ about the need to look at its climate-related risks.

He cites considerable resistance in the US oil industry to making changes in lobbying or to making a public statement if a company is doing so. As COP21 approached, companies across various industries made statements supporting the need for action on climate change, including mining companies and 10 European oil producers that called for dramatic and urgent action. ‘There wasn’t one US oil company that joined in any of these statements, even though they were asked,’ Smith says. ‘Exxon at the last moment did send a one-pager that supported a carbon tax.’

Where non-US oil companies such as Royal Dutch Shell, BP and Statoil have been willing to re-evaluate their positions on climate risk, US oil companies have been much more cautious about speaking out, possibly because of a much more polarized political climate here, he says.

The resolutions’ sponsors are roughly 30 concerned investors, including sustainable investment firms, public pension funds, faith-based investors and foundations and NGOs.

In 2015, similar climate lobbying resolutions filed at Devon Energy and Occidental Petroleum received votes of support in the mid 20 percent range, Smith says. While public debates, political pressure and concerns about their reputation in Europe may move oil companies on climate issues, they can ignore fairly high investor votes on such proposals because they believe they’re protecting their own interests, he says.

‘We have not seen any US oil companies stop and say We need to do a wholesale review of our lobbying on climate. We think there’s a strong case that these companies are on the wrong side of history on their climate lobbying, and we’re making that case as vigorously as we can,’ but it’s unlikely to be acted on, Smith says.

In contrast, nearly identical climate-related resolutions at BP, Royal Dutch Shell and Statoil received nearly unanimous support from shareholders last year after those companies supported the resolutions on their proxies.

Despite their apparent intransigence on climate lobbying, some oil companies, such as Exxon, to their credit, do acknowledge now when speaking with legislators in Washington that is climate change is real and human activity is a contributing factor and, as well as outlining the efforts they’re making to try to address it, Smith says.

‘That’s important because it’s validating the discussion about climate change and it’s validating the fact that we need to find solutions,’ he says.

But they continue to fund well-known climate change deniers such as the American Petroleum Institute and the National Association of Manufacturers that are actively working against efforts to find climate risk solutions or to keep things as they are. Exxon did stop funding the Heartland Institute, ‘a robust climate denier’, a few years ago and has maintained its scientific integrity in the research it does on matters like carbon capture and sequestration, says Smith. He suspects there is more discussion these days within oil companies about which organizations to fund and what kind of research to support, he adds.    

This proxy season more than 100 companies will receive shareholder resolutions on climate focused on other matters besides lobbying activity. These include a repeat filing by the Province of St. Joseph of the Capuchin Order asking that Exxon add an climate change expert to its board and a resolution by the Tri-State Coalition for Responsible Investment asking Exxon to commit to the 2-degree Celsius global temperature increase agreed on by leaders at COP21.

David Bogoslaw

Associate Editor and Online features producer for Corporate Secretary