UK’s largest asset manager LGIM challenges Exxon on climate plans

Christian Brothers and Investors join forces over concern that oil major fails to disclose green costsLegal & General Investment Management is joining forces with a US investor to challenge ExxonMobil’s climate plans over concerns the oil and gas major is failing to disclose the cost of transitioning to meet green targets.

Christian Brothers Investment Services, the UK’s largest asset management firm, which manages PS1.3tn of retirement and savings money, filed a resolution ahead of Exxon annual meeting, next month. The resolution calls on the board to release details about the transition costs.

The top shareholders’ joint action is an indication of increasing pressure on the board of the US oil company to do more on climate change.

This could lead to a shareholder war, as many large companies will be under scrutiny at their annual meeting in the coming months for their energy transition.

LGIM is a top 20 share holder. It said that Exxon’s concerns were about the costs of decommissioning assets in order to achieve net zero agreements. However, it noted that Exxon had not disclosed any details, even though its competitors have. Exxon’s market value is approximately $470bn.

The UK asset management firm said that investors were “concerned about costs associated with decommissioning Exxon’s Assets in the event of a rapid energy transition”, and added that this information was “vital” for the company’s stakeholders.

Exxon has not disclosed its downstream assets which convert oil and natural gas into finished products. LGIM stated that Exxon claimed the obligations were not able to be estimated because they would last for many years.

LGIM warned Exxon that its business was “not aligned” to the Paris Agreement to limit global warming at 1.5C. It noted that it had divested some shares in certain of its funds because they were concerned that the oil firm did not address climate change risks.

John Geissinger is the chief investment officer of Christian Brothers Investment Services. He said that a resolution for a report on the financial impact of climate change was made last year. This included the cost of decommissioning equipment.

“Despite this the company’s reports still provide investors with little insight as to how they are doing. . . Costs could increase, and their size. Exxon might assume that an asset will operate forever, but it may not be the case. Investors simply ask: “What is the cost to meet these liabilities?”

Exxon’s latest battle comes just a few years after Engine No. 1 restructured the board of directors of Exxon Mobil after warning that the company’s focus on fossil-fuels placed it in “existential danger”.

LGIM warned investors last month that businesses and financial markets had failed to adequately price the risks associated with climate change. The report said that a slow transition to a low carbon economy could result in global equity being more than a third below compared to a rapid shift.

Oil and gas bosses also received attention for their executive pay after a bumper year of profits. Exxon ‘s chief executive Darren Woods received $36mn in pay last year. This was a 52 percent increase from the previous year and more than twice his 2020 salary.

Exxon didn’t immediately respond to an inquiry for comment.