Investors Criticize Exxon Mobil for Little Support of Renewables

Refocus Weekly
May 31, 2006

A rating of 100 companies, including 20 in the oil sector, showed that ExxonMobil received 35 points out of 100 on a 14-point best-practice checklist, “again falling well behind its competitors,” says the letter that was signed by institutional investors which hold US$6.7 billion of the company shares. “Our company is in effect making a massive bet - with shareholders' money - that the world will remain addicted to oil for decades, even as its competitors are taking steps to hedge their bets and invest in renewables.”

“Investors demand a meeting with Exxon Mobil's board to map out a new direction to limit the risks of climate change and ensure the company is positioned to capture opportunities in alternative energy technologies,” adds one of the signatories, California controller Steve Westly, a trustee of the two largest public pension funds in the U.S. “While the state of California and other oil companies are moving ahead to reduce the risks of climate change, Exxon Mobil is stubbornly refusing to meet with shareholders.”

The letter was signed by major institutional investors who control 110 million shares in the oil company. All of them are members of the ‘Investor Network on Climate Risk’ and includes state treasurers from the states of Connecticut, California, Pennsylvania, Maryland, Maine and Vermont, as well as the California State Controller, California Public Employees' Retirement System (CalPERS), New York State Comptroller, New York City Comptroller, Evangelical Lutheran Church in America, General Board of Pension & Health Benefits of the United Methodist Church, International Brotherhood of Teamsters, Tri-State Coalition for Responsible Investment, Walden Asset Management, Nathan Cummings Foundation, and Sheet Metal Workers Pension Fund.

Connecticut State Treasurer Denise L. Nappier, said: "In effect, 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."

California State Treasurer Phil Angelides, also a trustee of CalPERS and CalSTRS, said: "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. 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."

Pat Daly, spokesperson, Tri-State Coalition on Responsible Investment, said: "Exxon Mobil's strategy on climate change is running on empty. The Exxon Mobil's board's refusal to engage in dialogue with Exxon shareholders is not constructive. Investors are asking the company to change course."

Mindy Lubber, president, Ceres and director, 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."

The joint letter reads in part: "We are major institutional investors in Exxon Mobil. 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 February 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.”