Monday, April 18, 2016

Church of England Continues with its Doomed Exxon Engagement Strategy

In 2015 the Church of England (C of E) formally adopted a climate and ethical investment policy. Recently Exxon tried to kill a motion supported by the C of E calling for transparency on climate resilience. The SEC has ruled that the vote can go forward. If the past is any indication of the present it is very unlikely to pass. In 2014 Exxon responded to the climate concerns of shareholders by saying that the company does not believe governments would impose policies that would severely limit emissions so sharply because oil and gas are so critical to global development and economic growth. Given the track record of Exxon and other fossil fuel companies pessimism is warranted. While the new C of E investment policy calls for engagement, divestment is an option when engagement is deemed unproductive.

Shareholders in ExxonMobil will be allowed to vote on a climate change resolution brought by the Church of England and other significant institutional investors, after the US Securities and Exchange Commission (SEC) blocked an attempt by the oil giant to leave the motion off the agenda of May’s annual meeting of shareholders.

The consortium wants the company to “disclose the resilience of its business model in the wake of the Paris Agreement on climate change.” It prepared a motion for the company’s annual shareholders meeting which, if passed, would force the oil company to be more transparent on its efforts to shift to a low-carbon economy.

Similar motions prepared by the Church Commissioners and other church investors were supported by Shell and BP last year. But ExxonMobil took a different line and sought permission from the SEC to exclude the motion from the agenda for May’s annual meeting.

The Church Commissioners’ actions are part on an increasingly hands-on approach to engagement with the companies it invests in. The Exxon Mobil resolution was tabled by a consortium of investors which, in addition to the Church Commissioners, includes the New York State Common Retirement Fund, the Vermont State Employees' Retirement System, the University of California Retirement Plan and The Brainerd Foundation. Together, the group represents nearly $300 billion US (approximately £211 Billion GBP) of assets – $1 billion US (approximately £703 million GBP) of them in ExxonMobil shares.

ExxonMobil challenged the motion on the basis that the wording was too vague and that it already provided information about energy and carbon for its shareholders. But SEC lawyer Justin Kisner has rejected the company’s appeal, saying: “We are unable to conclude that the proposal is so inherently vague or indefinite that neither the shareholders voting on the proposal, nor the company in implementing the proposal, would be able to determine with any reasonable certainty exactly what actions or measures the proposal requires.”

He added: “It does not appear that ExxonMobil’s public disclosures compare favourably with the guidelines of the proposal.”

Responding to the decision, the Church of England’s head of responsible investment, Edward Mason, said: “We are delighted that shareholders will have the opportunity to confirm that they would like ongoing assurance from ExxonMobil that the company is positioning itself for the transition to a low carbon economy.”

And the New York state Comptroller Thomas DiNapoli, who is heading the move on behalf of the consortium, said: “This is a major victory for investors who are working to address the risks that global warming presents to our portfolios.

“The Securities and Exchange Commission’s determination upholds shareholders’ rights to ask for vital information. Investors need to know if ExxonMobil is taking necessary steps to prepare for a lower carbon future, particularly now in the wake of the Paris agreement. We look forward to presenting our proposal to fellow shareholders at ExxonMobil’s annual meeting.”

The investors consortium continues to face an uphill battle to get the motion approved. The Reuters news agency reports that no climate change-related proposal has ever been approved by ExxonMobil’s shareholders; and that last year they rejected - by 79 per cent – a request that they appoint a climate expert to the company's board.

Source: Gavin Drake, ACNS

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