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The Reality Behind Exxon's Claims on Item 12

See Ceres' point-by-point response to a shareholder letter sent by ExxonMobil's Vice President of Investor Relations and Secretary, Jeffrey J. Woodbury.
by Shanna ClevelandCeres Posted on May 19, 2016

The following is a point-by-point response to a shareholder letter sent by ExxonMobil's Vice President of Investor Relations and Secretary, Jeffrey J. Woodbury.

Exxon Mobil Corporation
5959 Las Colinas Boulevard
Irving, Texas 75039-2298

May 16, 2016

Dear ExxonMobil Shareholders:

To address comments and questions raised by some shareholders regarding Item 12 - Report on Impacts of Climate Change Policies in ExxonMobil’s Proxy Statement, we would like to emphasize the following:

1.  ExxonMobil’s Outlook for Energy, available at, is not a “business as usual” forecast of global energy supply/demand. It includes impacts from anticipated government policies to reduce greenhouse gas emissions that are consistent with the nationally determined contributions under the Paris Agreement, and in fact anticipates further government actions beyond those committed under the Paris Agreement. In other words, the Company’s Outlook, which is reviewed and updated annually, does encompass the results of COP 21 in its planning basis. ExxonMobil’s projected energy demand and sources of supply as detailed in the Outlook are generally consistent with other third-party forecasting organizations, such as the International Energy Agency (IEA) as well as published reports by industry peers.

Ceres Response: Exxon’s most recent Outlook for Energy does not include a scenario consistent with the Paris Agreement. The Paris Agreement established a commitment from all 195 nations to keep global average temperature rise to well below 2 degrees. This simple chart shows that Exxon’s forecasted demand for oil is far in excess of the projections by other reputable sources for demand for oil under a 2 degree scenario.

Exxon Oil Demand update

2. ExxonMobil has already reported on the potential impact of a “low carbon scenario” (representative of a 2 degree Celsius scenario as requested by proponents) in its 2014 published white paper, entitled Energy and Carbon – Managing the Risks ( As that paper shows (Page 11), even in IEA’s 450 scenario, which represents an energy pathway consistent with 2 degree Celsius, significant hydrocarbon investment will be necessary to meet demand requirements.

Ceres Response: Exxon made this claim when it asked the Securities and Exchange Commission to allow it to exclude Item 12 from the proxy statement. The Securities and Exchange Commission rejected this argument out of hand, explaining: “[I]t does not appear that ExxonMobil’s public disclosures compare favorably with the guidelines of the proposal.”

The mere fact that some level of oil and gas will be needed under a 2 degree scenario does not provide any indication of whether ExxonMobil’s supply will be economically competitive. Given recent changes in market strategies by Saudi Arabia, Iran, and Russia, investors need to know how ExxonMobil’s portfolio of resources and planned projects would compete against other market players in a lower demand scenario.

The full text of the correspondence with the SEC, ExxonMobil, and the filers is available here.

3. Our investments are “stress tested” across a broad range of economic variables, not just a single scenario, to help ensure economic viability, resilience, and long-term value creation.

Ceres Response: We are glad to see ExxonMobil acknowledge that “stress testing” such as that requested by the shareholder proposal is an important part of capital planning. Investors are simply asking that ExxonMobil provide them with a public report of such stress testing including decision-useful information about the impacts on ExxonMobil’s portfolio so that investors can assess ExxonMobil’s business strategy and capital planning. ExxonMobil’s peers, including Shell, BP, Statoil, Total, ConocoPhillips, and BHP Billiton have all begun to provide some level of reporting on such stress testing to investors to assure them that they are preparing for the energy transition.

4. ExxonMobil actively participates in a coalition of oil and gas producers, the International Petroleum Industry Environmental Conservation Association (IPIECA). IPIECA addresses the pathway to a low carbon emissions future in its Paris Puzzle publication (, publicly addressing the same topic as the Oil and Gas Climate Initiative (OGCI) but through a structured, long-established organization that has standing with the United Nations and whose members provide close to 60% of the world’s energy.

Ceres Response: ExxonMobil has not provided any indication that it is positively engaging with trade associations, governments, or the United Nations to support policies that limit global average temperature rise to less than 2 degrees. Rather, ExxonMobil publicly refused to join the OGCI’s calls for carbon pricing and support for the 2 degree target ahead of the Paris Conference.

5. ExxonMobil maintains committed research in low carbon emission technologies including algae and carbon capture and sequestration. More information can be found at

Ceres Response: While we are pleased to see ExxonMobil investing in low-carbon R&D, the company does not provide any details on how much of its spending is devoted to low-carbon initiatives, making it impossible for investors to assess their significance.

In summary, we believe that ExxonMobil’s current processes sufficiently test the portfolio to ensure long-term shareholder value and resilience, and we remain confident in the commercial viability of our portfolio. For further discussion on this proposal and other important items, please review our proxy materials at

Ceres Response: ISS and Glass Lewis, the major proxy advisory firms, have both recommended that investors vote in favor of Item 12, and investors representing $10T in assets have also come out publicly in favor of the proposal.

ExxonMobil’s current processes do not allow shareholders to engage with its board nor do those processes provide any details regarding the company’s commercial viability under scenarios other than the one laid out in its annual energy outlook.

For more information please view the proxy memos prepared by the Church of England, the Vermont Pension Investment Committee and CalPERS.

Thank you for your continued support.

Jeffrey J. Woodbury

Read the post at Ceres

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Meet the Expert

Shanna Cleveland

Shanna Cleveland is a Director at Ceres where she leads the work on the Carbon Asset Risk (CAR) Initiative. The CAR Initiative, launched in 2013 in collaboration with the Carbon Tracker Initiative and with the support of the Global Investor Coalition on Climate Change, aims to prevent shareholder capital from being wasted on developing high-carbon, high-cost fossil fuel reserves that cannot be burned if the world is to avoid catastrophic climate change and drive fossil fuel companies to acknowledge and plan for the escalating physical impacts of climate change such as sea level rise, stronger storms and more severe droughts.

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