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Edward Mason: Exxon decision is a hugely important milestone in shareholder engagement on climate risk

It shows what investors, using all the tools at their disposal, can achieve.

This week we received confirmation that the Exxon board has agreed to implement the shareholder resolution on climate disclosure that the Church Commissioners successfully co-filed with the New York State Common Retirement Fund earlier this year. It is a hugely important milestone in shareholder engagement with companies on climate risk, and we are delighted that Exxon has finally come to this point.

The resolutions we filed at Exxon with New York State in both 2016 and 2017 came after similar resolutions at BP and Shell in 2015. These were part of what was known as the ‘Aiming for A’’ initiative, which encouraged these companies to enhance their disclosure on their business strategy on climate change, consistent with aiming for an ‘A’ rating by CDP. Both resolutions were supported by the companies’ boards and adopted with 98% approval by shareholders.

However, the support for these resolutions exhibited by the European oil and gas majors was not shared by their American counterparts, ExxonMobil and Chevron. As a result, we partnered with New York State and Ceres to co-lead on filing a 2 degree scenario analysis resolution at Exxon, our first ever shareholder proposal in the USA. It received 38% support from shareholders in 2016, the highest ever support for a shareholder proposal on climate change at Exxon and a notable achievement given the Exxon’s fierce opposition. New York State and the Church Commissioners re-filed in 2017 with over 50 investors representing over $5trn in assets. This time the resolution passed with 68% support, again in the face of opposition from Exxon.

A large minority had become an unstoppable majority, and the calls for 2 degree scenario analysis had become too strong for the company realistically to reject. Last night’s announcement would not have happened without the unprecedented level of pressure shareholders brought to bear on the Board.We are not naïve, and we know that there will be plenty more work to do with oil and gas majors on this issue, not least Exxon. The launch of Climate Action 100+ provides the ideal platform for a huge coalition of investors with over $26 trillion of assets to take collaborative engagement on climate to a new level. But Exxon’s acceptance of our request brings two thoughts to mind.

First, climate risk is an investor concern which companies simply can no longer ignore. The Paris Agreement – despite the US’s announced intention to withdraw – continues to enjoy strong global support, including for its 2 degree goal. Institutional investors are failing in their fiduciary duty if they do not assure themselves that the companies they hold are properly assessing the risks and opportunities presented by action to combat climate change and the transition to a low carbon economy.

Second, Exxon’s agreement to enhanced climate disclosure confirms that committed investor engagement and robust voting can have a decisive impact on Board and executive decision-making. Investors, working together, can make the difference between a company engaging with the Paris Agreement or not.

We look forward to continuing to work with Exxon, other companies and fellow investors on this issue. We realise that Exxon’s move is just one stage in the journey towards a low-carbon economy. But as Climate Action 100+ launches it shows the change that investors, judiciously using all the tools at our disposal, can achieve.

Edward Mason is Head of Responsible Investment at the ‎Church Commissioners for England.