Exxon Mobil Corporation | Litigation disclosure beyond legal and accounting requirements at Exxon Mobil Corporation

Status
9.10% votes in favour
AGM date
Previous AGM date
Proposal number
14
Resolution details
Company ticker
XOM
Lead filer
Individual
Resolution ask
Conduct due diligence, audit or risk/impact assessment
ESG theme
  • Environment
ESG sub-theme
  • Climate change
Type of vote
Shareholder proposal
Filer type
Shareholder
Company sector
Energy
Company HQ country
United States
Resolved clause
RESOLVED: Shareholders request an actuarial assessment, omitting confidential information and prepared at a reasonable cost, of the potential cumulative risk to Exxon Mobil Corporation (‘ExxonMobil’ or the ‘Company’) from current environment-related litigation against the Company and its affiliates.
Supporting statement
This proposal was submitted by Anna Marie Lyles, 253 Jefferson Road, Princeton, New Jersey 08540, the beneficial owner of 60 shares for at least three years.

SUPPORTING STATEMENT

Environment-related litigation poses an increasing risk to oil and gas investments. For instance, BP paid more than $60bn in criminal and civil penalties and remediation costs following the Macondo blowout, and Shell has been ordered by a Dutch court to reduce its CO2 emissions by 45% by 2030.

In addition, we have observed a recent trend of courts cancelling energy production permits (e.g. in Australia, South Africa, Brazil), which poses a particular risk for investments in new production. These cancellations allegedly result from non-compliance with environmental laws and the incompatibility of new production with climate goals. Notably, we believe that courts may now use as a point of reference the International Energy Agency’s assessment in its 2021 report Net Zero by 2050 that no new oil, gas, or thermal coal projects can be approved by relevant licensing authorities in order to meet Paris Agreement emissions goals.

These environment-related lawsuits are often lengthy and we believe that the direct and indirect risks posed to the business and shareholder value in case of losing some of these lawsuits appear substantial, and shareholders deserve proper disclosure of these risks.

Media reports indicate that ExxonMobil also faces environment-related lawsuits with potentially material impacts on the business. For example:
- Multiple climate lawsuits brought by states and attorneys general alleging failures to adequately address climate risks, an obligation to pay damages for climate harms, and misleading consumers and investors regarding greenhouse gas emissions.1 Individually and cumulatively, losing these cases could have a direct financial and/or reputational impact on ExxonMobil.
- Multiple lawsuits alleging non-compliance with legal requirements by ExxonMobil’s major investment in Guyana. A court has cut two of ExxonMobil’s Guyana subsidiary’s environmental permits from over 20 years to 5 years.
- Ongoing lawsuits seek cancellation of more permits, enforcement regarding safety conditions amid reports of spills, and unlimited parent company indemnities to cover the risk of a major spill that could impact many Caribbean countries. Constitutional litigation demands that Guyana’s government halt oil and gas production entirely due to its alleged impact on the environment.
Clearly, ExxonMobil is not immune to risks of environment-related litigation. However, it discloses what we believe is insufficient information on these risks, leaving shareholders with an inadequate means to assess the future value of their investments. Therefore, the shareholders believe the board of directors of the Company should take the steps necessary to direct the Company to provide additional disclosure regarding these risks so that the shareholders are able to properly evaluate potential impact such risks may have on the shareholder value.

How other organisations have declared their voting intentions

Organisation nameDeclared voting intentionsRationale
Anima SgrForAs additional disclosure on the costs of the company's environment-related litigation would enable shareholders to understand and assess how the company is managing related risks.
In the annual report, the company does not discuss litigation risks related to lawsuits that seek the company to pay for damages caused by climate change. It states that management has regular litigation reviews, including updates from corporate and outside counsel, and at this time, management does not believe the ultimate outcome of any currently pending lawsuits against ExxonMobil will have a material adverse effect upon the Corporation's operations, financial condition, or financial statements taken as a whole.
However, additional disclosure on the costs of the company's environment-related litigation would enable shareholders to understand and assess how the company is managing related risks.
VidaCaixaFor
Rothschild & co Asset ManagementFor

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