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19 December 2019

ExxonMobil to face investor pressure, despite New York court victory

ExxonMobil managed to dodge another bullet this week, as the company was found not guilty of misleading shareholders about the true cost of climate change. The conclusion of this four-year saga will come at the dismay of climate protestors, while investor confidence is yet to properly waiver, despite the company’s stock sitting at a 5-year low. With new allegations and cases popping up left, right, centering around the oil giant’s negligence in the fight against climate change, a straw is surely soon going to break ExxonMobil’s back, if it doesn’t become more climate conscious.

The $1.6 billion lawsuit in New York court, alleged that Exxon deceived investors about the financial risks around climate change, by publishing different sets of forecast figures in the public and shareholder domains. Due to a lack of evidence on behalf of the prosecutors to prove that “any reasonable investor” was misled, the case was dismissed with prejudice, meaning that Exxon cannot face trial for these allegations in future New York cases.

Hope is not lost for protestors, with other cases including one from Massachusetts still underway regarding ExxonMobil’s lack of transparency around climate change.

ExxonMobil’s deception dates back as far as the 1977, with a 2017 paper from Harvard University analyzing 187 climate change communications from the company up to 2014. In all forms of communication coming from Exxon, “as documents become more publicly accessible, they increasingly communicate doubt” around the human influence on climate change, according to the study.

The paper indicates that 80% of internal documents acknowledge that climate change is both real and human caused, where 81% of advertorial documents express doubt around the subject.

Last week, DeSmog and the Climate Investigations Center co-launched a further collection of 53 documents from Imperial Oil – a Canadian subsidiary of ExxonMobil, revealing that this misinformation around climate change extended beyond Exxon itself. In 1978, internal documents state that there is “no doubt that increases in fossil fuel usage and decreases of forest cover are aggravating the potential problem of increased CO2 in the atmosphere.” But acknowledging the inevitable problem this would bring to business, Imperial Oil used similar tactics to cast doubt around climate change in the public sphere.

The tactics used in this situation are eerily similar to those littered around social media today and used by the tobacco industry to hide the risk of cancers associated with smoking. According to a collaborative study entitled ‘America Misled’, “The strategy, tactics, infrastructure, and rhetorical arguments and techniques used by fossil fuel interests to challenge the scientific evidence of climate change — including cherry picking fake experts and conspiracy theories.” One of the paper’s authors, Professor Stephan Lewandowsky from the University of Bristol highlighted that “Disinformation about climate change has a straightforward purpose—to block action on climate change. In America, it has largely succeeded, with policies to mitigate climate change blocked or delayed for decades.”

ExxonMobil was recently highlighted as one the top 20 global emitters responsible for a third of global emissions. With Saudi Aramco’s IPO last week, ExxonMobil dropped to become the third largest investor-owned emitter in the world, releasing over 120 million tons of CO2 equivalent per year.

This week, Exxon has come under further scrutiny, with satellites indicating that the natural gas well blowout in Ohio in February released over 60,000 tons of methane into the atmosphere – more than released by countries like France, Spain and Norway in a year.

Targeting Exxon’s misleading of the public is unlikely to cause any serious impact. Protestors will hope that noting the difference in information available to investors will be the best route to highlighting intentional misinformation in today’s court cases, and will lead to both public embarrassment and financial penalties for oil and gas companies. These cases may end up down the same route as the one in New York, but bringing public attention to Exxon’s lack of ambition around the climate crisis can only be positive. By enforcing transparency, Exxon will be unable to mislead investors to the same extent. With no choice but to show its true colors, Exxon faces two choices: up its climate ambitions or face an inevitable shareholder fallout.

ExxonMobil and Chevron have become the latest targets of climate-activist shareholder group Follow This, with public backing from investors such as Aegon and M&G Investments. With banks also starting to refocus their fossil fuel investments elsewhere, investors will start to lose faith in companies that don’t act on climate change.

This does to some extent depend on how the energy industry goes about promoting renewables. While organizations such as the IEA are responsible for accurately reflecting the state of the industry in publications like the World Energy Outlook, a severe lack of consideration around dynamic factors leads to an often pessimistic view around renewables and over-optimistic view around fossil-fuels and business-as-usual. In a presentation around this document, the IEA highlighted how weird it is that oil prices have remained constant despite falling demand. But by not acknowledging the urgency in the shift to renewables, the IEA creates a self-perpetuating cycle of investors feeling safe in backing oil and gas companies as a safe haven for their money, allowing business to carry on uninterrupted.