March 25, 2014 – In responding to institutional shareholders, Exxon Mobil, the world’s largest fossil fuel and energy company, has agreed to disclose by the end of this month how regulations on climate change could impact the value of its assets. Back in September of 2013, 70 high-powered investors including pension funds, banks, governments and mutual fund managers controlling more than $3 trillion U.S. in assets circulated a letter to 45 fossil fuel company executives questioning reserve exposure in light of climate change and the necessity of government and nations having to implement carbon reduction policies and strategies.
Recent studies by universities, banks and NGOs have pointed out to fossil fuel companies with large holdings in carbon assets including coal, oil and natural gas, that they may never be able to mine or burn these assets in light of rising greenhouse gas (GHG) emissions. This could take tens of billions of dollars off the asset side of energy company’s balance sheets.
With Exxon making the commitment to disclose what GHG regulation means to assets it currently holds, other major companies in the fossil fuel industry are making similar pledges. Among these are BP, Shell, Total, and Suncor. I am certain there soon will be a stampede by the remaining fossil fuel companies to make similar disclosures. Of course, Exxon in its disclosures may claim that none of its reserves represent unburnable assets. We wait to see.