Exxon faces climate change ‘stress test’

The Sakhalin 1 oil and gas project in Russia, where ExxonMobil operates in partnership with Rosneft

The Sakhalin 1 oil and gas project in Russia, where ExxonMobil operates in partnership with Rosneft

Dozens of investors are backing the call for ExxonMobil, the US oil group, to “stress test” the potential impact on its business of policies to address the threat of climate change.

Shareholders have submitted proposals for the annual meetings of Exxon and eight other US energy companies, recommending that they analyse the financial risks they face if governments attempt to limit the increase in global temperatures to 2 degrees Celsius, which was the objective agreed at the Paris climate talks at the end of last year.

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Calpers, the California state retirement fund that had $ 301bn under management as of last June, has registered with the Securities and Exchange Commission, the US regulator, to be able to lobby other investors in support of the proposal at Exxon.

The moves reflect growing interest among investors in the financial implications of climate change. They also show how environmental campaigners have become increasingly adept at working with shareholders in fossil fuel companies to raise awareness of the issue.

The New York state retirement fund and the Church of England submitted the proposal at Exxon, asking the company to publish an annual assessment of the financial impact on its proved reserves and potential resources of restrictions on carbon intended to hit the 2 degrees target.

At Royal Dutch Shell, BP and Statoil, the European oil groups, boards last year decided to support similar resolutions from the Church of England and dozens of other investors. The proposals were carried by overwhelming majorities in shareholder votes.

However, Exxon and Chevron, the two largest US oil groups, have so far resisted. Both companies attempted to prevent similar proposals from coming to a vote this year but their requests were turned down by the SEC, meaning shareholders will be able to express their views at the companies’ annual meetings, which are both on May 25.

Thomas P. DiNapoli, comptroller of New York state, said investors in Exxon had “a right to know how the company is responding to climate change”, and hoped it “follows the example of its oil industry peers” in addressing the issue.

Other investors including Axa, BNP Paribas, Legal & General, Natixs, Schroders and the New York city pension fund, have also supported the proposal.

Exxon will outline its formal position in its proxy statement for the meeting, expected on Wednesday.

In its letter to the SEC explaining why it wanted to block the proposal, the company said it was already regularly assessing the potential impact of climate policies, and had concluded that “producing our existing hydrocarbon reserves is essential to meeting growing global energy demand”.

Exxon also argued that its “proxy cost of carbon” approach was a better way to assess the impact of climate policies. In its long-term decision-making, the company uses an effective carbon price, which rises to almost $ 80 per tonne for some regions by 2040, to model the impact of regulations and other measures to control emissions.

Anne Simpson, investment director for global governance at Calpers, said the fund had registered with the SEC to engage in “proxy solicitation” — trying to persuade other shareholders to support its position in the vote — because it wanted to offset all the arguments against the plan that would be deployed by the company.

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