Exxon Mobil Corp. needs to do better at documenting the valuation risk its assets face as the economy moves toward lower-emitting energy sources, according to shareholders
KEY INSIGHTS
- Investors wants to know impact of International Energy Agency (IEA) Net-Zero scenario on asset retirement; especially "Decommisioning' costs
- The potential for productive assets in a fossil fuel-based economy to become stranded has yet to be fully grasped by the market.
- Level of disclosure is imperative for investors to better evaluate long-term risks and economic viability of the business in a carbon constrained future
- Exxon currently doesn’t provide such disclosure on its downstream assets because its says these obligations can’t be reasonably estimated.
- Operators may assume an asset can operate indefinitely, but this may not prove out. Investors are simply asking: what is the total cost of meeting these liabilities?
- The speed of energy transition and nature of the move away from fossil fuels pose significant potential volatility for portfolios
BOTTOMLINE
- Shareholder resolutions asking America’s biggest banks to phase out financial support for fossil fuels.
- It plans to back proposals that would require Bank of America Corp., Citigroup Inc., Goldman Sachs Group Inc., JPMorgan Chase & Co., Morgan Stanley and Wells Fargo & Co. to adopt a “time-bound policy to phase out lending and underwriting for fossil fuel exploration and development