CERES ANALYSIS OF TWO NEW REPORTS FROM EXXONMOBIL:
NO MEANINGFUL ADVANCES ON CLIMATE CHANGE, CONTINUED SHAREHOLDER RISKS DUE TO LACK OF LEADERSHIP ON RENEWABLE ENERGY
Ï BP, Shell Investing Up to 80 Times More Than Exxon in Cleaner Alternative Energy;
Ï Exxon Understates Existing Renewable Energy Advances in Order to Defend Its Reliance on Oil
ExxonMobil now admits global warming is real and poses risks but the company has not yet taken steps -- such as meaningful alternative energy investments -- that would demonstrate that ExxonMobil is managing the risks to its shareholders and capturing the opportunities posed by climate change, according to a new report issued today by Ceres.
The Ceres report, ExxonMobil's Corporate Governance on Climate Change, analyzes ExxonMobil's statements on climate change and renewable energy in its recent Corporate Citizenship Report (issued last week on May 18) and its 2006 Tomorrow's Energy document (issued in February 2006).
Andrew Logan, report co-author and oil program director at Ceres, said: "Both of ExxonMobil's reports demonstrate a corporate plan and mindset unprepared to lead in a carbon-constrained world.
ExxonMobil's statements, plans, actions, and investments on climate change and clean energy lag behind competitors like BP and Royal Dutch Shell. ExxonMobil's shareholders bear a substantial financial and competitive risk as a result of the company's lack of strategic focus on R&D and deployment of clean, renewable energy technologies.
Both ExxonMobil reports spend more time explaining the company's position on climate change than we have seen in the past. However, they also make it unmistakably clear that Exxon's fundamental business approach has not changed. The company still firmly believes that oil is the future and that there is no reason to invest meaningfully in clean energy and alternative fuels."
In his foreword to the report, Robert A. G. Monks, corporate governance expert and founder of Institutional Shareholder Services, writes: "The world needs leadership in making the best decisions about global warming and world energy needs for the next fifty years. ExxonMobil has maybe the premier position from which to provide this leadership. In unhappy contrast to virtually all aspects of its operating performance, ExxonMobil declines to act like a leader in these critical areas. We are all the poorer."
As the new Ceres report notes: "ExxonMobil does not analyze or quantify the effect on the company and on shareholder value of any plausible greenhouse gas regulatory scenarios; in fact, the company states that 'it is impossible today to assess the potential implications for shareholder value from initiatives to address climate change,' in part because no governments have established definitive regulations for the 2008-2012 Kyoto period or for post-2012. The company believes that its strong financial position, management efficiency, and technical capacity will enable it to evolve as opportunities arise in an uncertain future. In other words, ExxonMobil's plan appears to be to stay the course and try to adjust when changes occur. ExxonMobil's plan is one that involves adaptation, as opposed to leadership."
The new Ceres analysis includes the following points:
Ï ExxonMobil underplays existing renewable energy advances in order to make the case for oil and gas remaining dominant in the future. ExxonMobil expects wind power, solar power, and biofuels to supply about 2 percent of world energy by 2030, despite the fact that current calculations by the Renewable Energy Policy Network estimate that renewable energy already supplies roughly 4 percent of world power. Specifically, ExxonMobil forecasts that biofuels will grow from less than 1 million barrels per day in 2005 to more than 3 million in 2030. ExxonMobil predicts that wind and solar will grow about 11 percent a year "supported by subsidies and related mandates", despite the fact that grid-connected solar power grew by 60 percent per year from 2000 to 2004.
Ï ExxonMobil's investments in clean energy R&D and deployment are minimal. The company declares that it is conducting research into hydrogen production technologies for fuel cells, though the extent of support for that research is unclear. Exxon's principal investment in clean energy research appears to be support of the Global Climate and Energy Project (GCEP) at Stanford University, which the company describes as the "largest-ever privately funded research effort in low-greenhouse-gas energy." GCEP involves solar, hydrogen, and carbon sequestration research and is sponsored by Exxon and three other corporations, all of which will invest up to $225 million combined over 10 years. Exxon contributed just under $9 million to GCEP through 2005 and "plans to invest up to $100 million" over the decade, which represents, on an annual basis, about one-sixtieth of the $600 million per year the company invests in R&D. Instead, ExxonMobil diverts corporate resources to support the work of some of the nation's leading skeptics on climate change, who claim that fears of global warming are overblown.
Ï ExxonMobil lags far behind competitors like BP and Royal Dutch Shell. In sharp contrast to Exxon's approach, BP was the first major oil company to state publicly, in 1997, that the risks of climate change are serious and that precautionary action is justified. Since then, its business planning and long-term strategy have been focused
on the need to stabilize atmospheric GHG concentrations, even as global energy use continues to grow. BP established BP Alternative Energy in 2005, which plans to invest $8 billion over 10 years in solar, wind, hydrogen, and combined-cycle generation technologies, representing an annual expenditure of 80 times ExxonMobil's comparable yearly expenditure. Royal Dutch Shell has invested more
than $1 billion since 1998 to develop alternative energy technologies and has established Shell Renewables and Shell Hydrogen as business units.
Ï ExxonMobil continues to cloud the scientific consensus on climate change. In its two reports, ExxonMobil finally acknowledges that human activities have contributed to the increased concentrations of greenhouse gases and that this accumulation "poses risks that may prove significant for society and ecosystems." ExxonMobil declares that "these risks justify actions now, but the selection of actions must consider the uncertainties that remain." The supposed "uncertainties" are documented at great length by Exxon in both documents. In addition, ExxonMobil continues to fund the few remaining climate skeptics.
For the full text of the new Ceres report, ExxonMobil's Corporate Governance on Climate Change, go online to http://www.ceres.org
The new Ceres analysis showing continued risk to shareholders is consistent with other recent research. In 2004, Goldman Sachs unveiled its Energy Environmental and Social Index, which ranked ExxonMobil ranked dead last among the major oil companies on climate change and 12th out of 23 total, behind BP, Royal Dutch Shell, BG, ENI, OMV, Repsol, Amerada Hess, and Chevron Texaco. In an update to the Goldman Sachs Index report in 2005, BP and Royal Dutch Shell scored 5 out of 5 for renewable and alternative energy. ExxonMobil scored a 2, underscoring the report's statement that: "The Majors except ExxonMobil lead on developing alternative energy sources."
A March 2006 report commissioned by Ceres and authored by the Investor Responsibility Research Center evaluated companies in several industry sectors against a Climate Change Governance Checklist consisting of 14 governance steps in 5 categories that companies can take to proactively address climate change. The checklist topics include: Board Oversight, Management Execution, Public Disclosure, Emissions Accounting, and Emissions Management & Strategic Opportunities. Using a 100-point scoring system, ExxonMobil scored 35, compared to 90 for BP and 79 for Royal Dutch Shell. These two prime competitors to ExxonMobil have set long-term GHG reduction goals and measure emissions from customer use of their products.