Investors Seek Meeting with ExxonMobil Execs over Climate Policy

Investors Seek Meeting with ExxonMobil Execs over Climate Policy

Seventeen leading U.S. pension fund and other institutional investors controlling $658 billion in assets are pushing for a face-to-face meeting with independent members of the ExxonMobil board of directors as a result of growing financial world concerns that ExxonMobil is "a company that fails to acknowledge the potential for climate change to have a profound impact on global energy markets, and which lags far behind its competitors in developing a strategy to plan for and manage these impacts."

Pension fund trustees from seven states, New York City, and eight other major institutional investors with over 110 million ExxonMobil shares worth an estimated $6.75 billion made the request for the meeting this week. All those seeking the action from Exxon Mobil are members of the Investor Network on Climate Risk. The group of 17 consists of six state treasurers (Connecticut, California, Pennsylvania, Maryland, Maine, Vermont), the California State Controller, the California Public Employees' Retirement System (CalPERS), the New York State Comptroller, New York City Comptroller, Evangelical Lutheran Church in America, General Board of Pension and Health Benefits of the United Methodist Church, International Brotherhood of Teamsters, Tri-State Coalition for Responsible Investment, Walden Asset Management, The Nathan Cummings Foundation, and the Sheet Metal Workers Pension Fund.

"Shareholders deserve to know if the companies they own are going down the prudent path -- adopting environmental practices that will enable them to survive and thrive in a world of increasing environmental concern and regulation - or whether they are following a path that will damage both our environment and our bottom line," said California State Treasurer Phil Angelides, also a trustee of CalPERS and CalSTRS. "The growing risks of climate change and the skyrocketing gas prices consumers are facing highlight the need for increased investment in alternative energy sources. Exxon Mobil must come clean with shareholders about the company's risks and demonstrate the company is ready to face the environmental challenges of the future."

Mindy Lubber, president of Ceres and director of the Investor Network on Climate Risk, said: “Investors and Wall Street analysts have recently evaluated Exxon Mobil's corporate governance on climate change relative to its peers such as BP and Shell, and Exxon Mobil has not scored well. Investors in the Investor Network on Climate Risk are now joining forces to ask Exxon Mobil's board to meet with shareholders to discuss the company strategy to protect long-term shareholder value in a carbon-constrained world.”

According to Connecticut State Treasurer Denise L. Nappier, “ExxonMobil is making a massive bet -- with shareholders' money -- that the world’s addiction to oil will not abate for decades, even as its competitors are taking significant steps to prepare for a rapidly changing energy environment. As investors, we are concerned that ExxonMobil is not sufficiently preparing for 'tomorrow’s energy’ and runs the risk of lagging significantly behind its rivals. As shareholders, we need to meet with the ExxonMobil board directly, to learn how it plans to safeguard long-term shareholder value in light of the serious challenges -- and opportunities -- presented by climate change.”

The joint letter reads in part:
We are major institutional investors in ExxonMobil. We are interested in discussing with board members on the Public Policy Committee your plans to manage the transformation of ExxonMobil from a 20th Century oil company to a company that will meet the world’s energy demands within carbon constraints in the a 21st Century.

In your Feb. 24 letter to Treasurer Nappier you wrote that the Tomorrow’s Energy report, released in February 2006, represents the board’s position on climate change. If so, this is troubling, as the Tomorrow’s Energy report paints a picture of a company that fails to acknowledge the potential for climate change to have a profound impact on global energy markets, and which lags far behind its competitors in developing a strategy to plan for and manage these impacts.

The new report is built around what appears to us to be two serious contradictions. First, while the report states that “advances in technology are critical to successfully meeting future energy supply and demand challenges,” our company appears not to be making any significant investment in new energy producing technologies. Second, while recognizing that the world is responding to climate change by putting limits on CO2 emissions from burning of fossil fuel, there appears to be no strategic analysis of how these limits could impact the market for selling Exxon Mobil’s major product -- oil.

Outside analysts are also concerned. Goldman Sachs recently ranked oil companies on their environmental and social performance, which it concludes are important drivers of future performance and valuation. On climate change, the company scored 12th in its industry, far behind competitors like BP, Shell, and Total. For long-term investors, such underperformance is troubling. According to Goldman Sachs, “the companies that have the potential for creating significant value are those that have the most strategic options available to embrace a low-carbon world.” For ExxonMobil investors, this is not encouraging.

A new report by IRRC, Corporate Governance and Climate Change: Making the Connection (PDF), rates 100 companies, including 20 companies in the oil sector, against a 14-point best-practice checklist. ExxonMobil received only 35 points out of a possible 100 in this analysis, again falling well behind its competitors.
The full text of the letter from the 17 institutional investors is available online.