Feb 24, 2021 News
– Says it runs counter to Paris Agreement
By Kiana Wilburg
Kaieteur News – Following heightened calls from its shareholders that more action is needed in the fight against climate change, America’s biggest energy firm, ExxonMobil, announced that it would be reducing its emissions by 2025. In this regard, it said that shareholders can expect to see a reduction of its upstream greenhouse gas emissions by 15 to 20 percent when compared to 2016 levels.
The oil king said this will be supported by a 40 to 50 percent decrease in methane intensity, and a 35 to 45 percent decrease in flaring intensity across its global operations. It followed up the foregoing by stating that these actions which cover Scope One and Scope Two emissions from operated assets, are “projected to be consistent with the goals of the Paris Agreement” to bring global temperatures to 1.5 degrees Celsius.
These statements however have done nothing to quell the concerns of shareholders. In fact, one investment group, Engine No. 1, has come forward to expose the company’s deceit.
In a letter to ExxonMobil’s Board of Directors, Engine No. 1 said that scrutiny of the company’s claims reveals that its efforts fall short of what is needed to position it for long-term value creation in a rapidly changing world, and highlights the significant long-term risks associated with the company’s current business model. In fact, the investment firm noted that claims of consistency with the Paris Agreement fall far short of targeting net zero emissions by 2050.
In its letter, Engine No. 1 stated, “None of the Company’s new claims change its long-term trajectory which would grow total emissions for decades to come. This is not consistent with, but rather runs directly counter to the goals of the Paris Agreement. We also continue to believe that without new members of the Board with the necessary expertise and experience, ExxonMobil will have little choice but to continue seeking to create the appearance of transformative long-term change, rather than working to make it a reality.”
It continued, “This is not just a climate issue but a fundamental investor issue – no different than capital allocation or management compensation – given the immense risk to ExxonMobil’s current business model in a rapidly changing world,” Engine No. 1 also stated in its letter.
Engine No. 1 stated in closing that while the company has pointed to the frequency with which the Board refreshes itself, “we believe it is telling that such refreshment over the years has not been accompanied by a new direction or material progress on these issues. We believe that enhancing the company’s long-term future requires a clean break with the past, and we look forward to continuing to make the case for real change at ExxonMobil.”
It should be noted that Engine No. 1’s position is being supported by the Church of England and the California State Teachers’ Retirement System – one of the largest public-sector pension schemes in the US.
The activist investment firm, launched by two hedge fund industry veterans, had declared this month that it plans to nominate four directors to Exxon’s 10-person board who have expertise in clean technology and running energy companies. They are: Gregory Goff, Kaisa Hietala, Alexander Karsner, and Anders Runevad.
New York State Comptroller, Thomas P. DiNapoli, whose fund owns a roughly US$300 million stake in Exxon, according to Refinitiv data, has expressed support for this move by Engine No. 1. In a comment published by Reuters, he said, “Exxon’s refusal to adequately address climate risk is of serious concern to many shareholders and is a sign of significant governance issues. The company’s board needs overhauling. We’re looking forward to reviewing the slate of new directors.”
Besides pushing Exxon to add new directors with more relevant energy industry experience to the board, the investment firm has said in the last two months that it wants Exxon to cut costs on projects that are unlikely to earn money, create a better plan for success in the renewable energy sector and to overhaul management compensation to better align with shareholder value creation.
What are Scope 1, 2 & 3 Emissions?
Greenhouse gas emissions are categorized into three groups or ‘Scopes’ by the most widely-used international accounting tool, the Greenhouse Gas (GHG) Protocol. Scope 1 covers direct emissions from owned or controlled sources. Scope 2 covers indirect emissions from the generation of purchased electricity, steam, heating and cooling consumed by the reporting company. Scope 3 includes all other indirect emissions that occur in a company’s value chain.
There are a number of benefits associated with measuring Scope 3 emissions. For many companies, the majority of their greenhouse gas (GHG) emissions and cost reduction opportunities lie outside their own operations. By measuring Scope 3 emissions, organizations can:
• Assess where the emission hotspots are in their supply chain;
• Identify resource and energy risks in their supply chain;
• Identify which suppliers are leaders and which are laggards in terms of their sustainability performance;
• Identify energy efficiency and cost reduction opportunities in their supply chain;
• Engage suppliers and assist them to implement sustainability initiatives
• Improve the energy efficiency of their products
• Positively engage with employees to reduce emissions from business travel and employee commuting.
It is important to note that ExxonMobil has not committed to doing any of the foregoing which would certainly bring it in line with the Paris Agreement objective.
(Source on Scopes: www.carbontrust.com)
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