Feb 21, 2021 News
– World’s largest money manager demands greater climate change disclosure
By Kiana Wilburg
Kaieteur News – American oil giant, ExxonMobil, is facing an unprecedented rise in shareholder pressure. Its investors are not only concerned about the steep decline in profits in recent times, but more particularly, whether ExxonMobil’s spending is in alignment with the global aspiration of net zero greenhouse gas emissions by 2050.
This concern, which has sparked an uprising among shareholders with deep pockets, has led to a clamour for change in Board Directors and more importantly, a change in the way management at ExxonMobil conducts businesses.
Specifically, the world’s largest money manager and second largest investor in Exxon, BlackRock, issued in a most recent update that there would be a change to the way it engages corporations.
BlackRock, which manages US$8.67 trillion in global assets, said it would be more inclined to vote in favour of shareholder resolutions, and against boards of directors at companies.
In its update, BlackRock’s CEO, Larry Fink said, “…Given how central the energy transition will be to every company’s growth prospects, we are asking companies to disclose a plan for how their business model will be compatible with a net zero economy – that is, one where global warming is limited to well below 2ºC, consistent with a global aspiration of net zero greenhouse gas emissions by 2050. We are asking you to disclose how this plan is incorporated into your long-term strategy and reviewed by your board of directors.
We appreciate that disclosure can be cumbersome and that the variety of reporting frameworks creates further complexity for companies. We strongly support moving to a single global standard, which will enable investors to make more informed decisions about how to achieve durable long-term returns. Because better sustainability disclosures are in companies’ as well as investors’ own interests, I urge companies to move quickly to issue them rather than waiting for regulators to impose them…”
Other shareholders of ExxonMobil, who have advocated for more climate actions in the market, saw the fund manager’s statement as representative to the movement for change. (https://www.blackrock.com/corporate/investor-relations/blackrock-client-letter)
NOT THE FIRST REBELLION
But the uprising against ExxonMobil, which trails from late 2020 into 2021 had been creeping since 2017.
In May 2017 for example, ExxonMobil’s management was defeated by a shareholder revolt over climate change matters, as investors with 62.3 percent of shares voted to instruct the oil giant to report on the impact of global measures designed to keep climate change to two degrees centigrade.
The shareholder’s rebellion at the 2017 ExxonMobil annual meeting in Dallas was led by major financial advisory firms and fund managers who traditionally have played passive roles. Although the identity of voters wasn’t disclosed at the time, a source familiar with the vote had told the Washington Post that major financial advisory firm BlackRock had cast its shares in opposition to Exxon management. (https://www.washingtonpost.com/news/energy-environment/wp/2017/05/31/exxonmobil-is-trying-to-fend-off-a-shareholder-rebellion-over-climate-change/) (https://www.cnbc.com/2020/12/13/climate-change-a-7-trillion-warning-from-markets-biggest-investor.html)
In its report on the matter, The Post had said that the vote against Exxon’s management marked an important step for groups that have been trying to force corporations to adopt greater disclosure and transparency about the financial fallout of climate change.
It recalled too that BlackRock, which said since 2017 that climate disclosure is one of its top priorities, had warned on its website that “our patience is not infinite.”
Since that major victory, the uprising against ExxonMobil has swollen to an unprecedented proportion.
Last month, Kaieteur News would have reported that investment firm, Engine No 1, with the backing of the California State Teachers’ Pension Fund, had joined calls for a change at ExxonMobil, as it called for fresh blood to its board. The New York State pension fund also followed up with threats to divest its stake in the company unless it moves away from fossil fuels more quickly.
This publication would have also reported that a group of 135 investors had earlier this month, formally cemented their intention to bring massive changes to ExxonMobil by launching, “The Coalition United for a Responsible Exxon” (CURE). As of today, CURE’s over 135 members collectively represent over US$2.2 trillion in assets.
In its launching letter, CURE had raised urgent concerns about Exxon’s current direction, which it said is premised on outdated assumptions about high oil prices, demand, and margins that are incompatible with the reality of climate change and the inevitable transition to renewable energy sources. Once the most innovative leaders in the industry and a pillar of the Dow Jones (DJ), CURE said that Exxon today finds itself lagging behind other oil majors that have adapted their strategies to lead the global energy transition.
The coalition urgently demanded change at Exxon, beginning with the Board, and a new commitment to a financially, competitively, and environmentally sustainable future for the Company, its shareholders, and all stakeholders.
Under its current strategy, CURE said that Exxon continues to strand assets by making massive capital investments in upstream projects that destroy shareholder value. The Company it said, rationalizes these investment decisions through unrealistic expectations of future oil and gas prices and demand. Further to this, CURE said that Exxon’s poor decision-making has led to the highest debt levels in the Company’s history, with the worst operational net-debt-to-cash ratio among its peers. It said too that Exxon’s operational inefficiencies are also exacting a toll on profitability.
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