BlackRock ups the pressure on Exxon Mobil

Prosecutors allege Exxon pressured witnesses in climate case

US prosecutors have accused Exxon Mobil of harassing investors and intermediaries in the lead up to a forthcoming court battle over whether the energy giant deliberately misled people on the cost of climate change to its business.

A lawyer for the New York Attorney General has called on a judge to step in, after the world’s largest publicly-traded oil and gas company wrote to investment advisers and shareholders whom prosecutors have asked to testify.

In a letter, Exxon’s legal representatives warned shareholders and advisers that they will be subpoenaed for documents, by Exxon, if they co-operate with the prosecution.

The case facing Exxon comes as shareholders have been growing increasingly exasperated at the company’s approach to reporting on the impact of climate change.

Investors demand more

In 2016, 38% of investors asked the company’s board to publish an annual report documenting its business transition efforts. Then, in May 2017, nearly two thirds of Exxon’s shareholders voted in favour of annual climate risk reporting at its annual general meeting.

In 2018, New York prosecutors started the ball rolling on the latest court case. It is claimed that the oil giant has been building two separate files on how climate change will affect its business, as governments move to eliminate CO2 emissions. The prosecutors claim that it has shared a more favourable interpretation of its research with investors, keeping the other set of figures for internal use only.

The revelations have been enough for some asset owners and fund firms to act. In May, the Church Commissioners for England, which manages the Church of England pension fund, voted against Exxon’s governance proposals after Exxon asked the Securities and Exchange Commission to deny a resolution requesting the disclosure of emissions targets.

A few days later, Reuters reported that Legal & General Investment Management would be divesting its holdings in Exxon from its Future World range of funds.

“ExxonMobil Corporation has not met our key minimum requirements, including on emissions reporting and targets,” LGIM said in a media statement at the time.

According to a separate Bloomberg report, LGIM had divested some $300m of Exxon stock as at 7 August 2019. The move followed several years of meetings, emails and support for shareholder resolutions, which the asset manager claims have not had the desired effect.

Witnesses discouraged?

This latest episode in the courts started last Friday (2 August), when legal representatives for the prosecution wrote the judge Barry Ostrager of the New York Supreme Court, who is handling the forthcoming case.

In the letter, lawyer Kevin Wallace claimed that Exxon’s decision to approach the witnesses was “a transparent attempt to discourage them from testifying voluntarily.”

In the lead up to the case, the prosecution had agreed to allow Exxon to interview the witnesses in advance of the trial. And, Exxon had been explicit that it intended to request additional information from several of the witnesses involved in the case.

However, prosecutors took issue with the approach taken by Exxon’s legal team which, they claim, could discourage potential witnesses from testifying in the case.

While legal representatives for the oil company had confirmed that they intended to obtain documents from seven of these witnesses, prosecutors claim that Exxon’s approach was “mischaracterizing the agreement” adding that it was “seeking to impose disproportionate burdens” on the witnesses.

The investors and advisers contacted by Exxon are considered key to the case, having spent years engaging with the oil giant, urging the company to chart the risks that climate change pose to its business. The court is scheduled to hear opening statements on 23 October 2019.

Exxon Mobil insists that it is fully committed to preparing the business for the global transition to a low carbon economy. It claims to have spent in excess of $9 billion since 2000 on developing lower emission energy solutions.

“We’re focusing on advancing fundamental science to develop breakthrough solutions that can make a difference on a global basis in emissions reduction,” company chairman and chief executive officer Darren Woods said in May.

“We’re doing that with our in-house scientists and with corporate partners, through relationships with 80 universities and now with the intellectual and computing capacity of the renowned national labs.”

In May 2019, the company committed $100 million to researching and developing lower-emissions technologies with the US National Renewable Energy Laboratory.

Last Updated: 8 August 2019
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