Oil and gas giant ExxonMobil is being sued for allegedly misleading shareholders over the potential impact of climate change on its business.
The lawsuit, filed by the New York State Attorney at the end of October, escalates a long-standing conflict between the energy firm and its investors. The company has been accused of being complicit in a “long-standing fraudulent scheme” to deceive investors on its climate risks.
At the centre of this accusation is that it mislead investors by pretending to have taken measures to manage the economic risks of climate change without actually doing so.
The State Attorney concluded that by allegedly deliberately misinforming shareholders the firm had put investors’ capital at risk. “Exxon’s proxy cost representations were materially false and misleading
because mit did not apply the proxy cost it represented to investors,” a statement said.
“This was especially true of investments with high greenhouse-gas emissions, where applying the publicly represented proxy cost would have had a particularly significant negative impact on the company’s economic and financial projections and assessments.”
The lawsuit follows a shareholder rebellion at ExxonMobil’s AGM last year, when investors voted by a two-thirds majority to enforce more stringent disclosure on climate risks on the firm. This came despite the board’s recommendation against the proposed motion.
The shareholder rebellion was initiated by a joint initiative between the Church of England Endowment Fund and the New York State Common Retirement Fund. It subsequently received the backing of asset managers, highlighting the ability of pension fund investors to punch above their weight when it comes to shareholder engagement.
Edward Mason, head of responsible investment at the Church Commissioners for England, called on ExxonMobil to improve its dialogue with climate groups, such as the Climate Action 100+, and to provide an Energy & Carbon report in line with the recommendations of the Financial Stability Board’s Taskforce on Climate-related Financial Disclosure. He also wants the company to set its emissions reduction targets in-line with the Paris Agreement.
