Major Canadian institutional investors are backing shareholders' resolutions that urge Exxon Mobil Corp. and Chevron Corp. to "stress test" their operations against the risk climate change poses to their oil and gas assets.
With votes scheduled at the annual general meetings on Wednesday, activist shareholders have gathered an impressive list of financial firms and pension funds – including Canada Pension Plan Investment Board, Bank of Montreal's Global Asset Management group and the Ontario Teachers' Pension Plan – to back their push for the international oil companies to provide more transparency regarding climate risks.
In a climate assessment released this week, French-based multinational Total SA said it is reducing its exposure to Canada's oil sands to focus on lower-cost production that would still be profitable with an anticipated shift away from fossil fuels as the world looks to avoid the most catastrophic impacts of global warming.
Exxon Mobil and Chevron both produce their own broad assessments of climate risk, and each company insists its operations can withstand any such threat to their asset base over the long-term. But they face criticism that their efforts are vague and insufficient.
In addition to the CPPIB and BMO, the shareholder resolutions are endorsed by large U.S. institutions such as the California Public Employees' Retirement System (CalPERS), the largest state retirement fund; and Rockefeller & Co., a wealth management group founded by John D. Rockefeller, who created Exxon's predecessor, Standard Oil.
CPPIB said in a statement that it had been seeking better disclosure from "large greenhouse gas emitters" over the past decade, and supported 45 climate change-related shareholder resolutions in its most recent fiscal year. "We do this because we recognize that climate change has the potential to significantly impact our investments. As an engaged owner, we believe we can have a powerful influence on the companies in which we invest," the statement said.
Teachers said the request for more information from the companies was "reasonable." The Bank of Montreal did not respond to requests for comment.
The resolutions are advisory only, but are meant to send a message to the boards of directors that concern over climate is now a preoccupation for mainstream institutional investors.
"What we're trying to accomplish is to demonstrate to Exxon and Chevron that this is a critical issue and that their investors are unhappy with how they are handling it," said Andrew Logan, director of oil and gas for Ceres, an ethical investing group that has campaigned for the resolutions.
"We've got $10-trillion worth of investors who have come out in support ahead of time which really puts pressure on the company to change course," he said.
Exxon Mobil – parent company of Canada's Imperial Oil Ltd. – has been under intense fire for its handling of the climate issue. New York's Attorney-General Eric Schneiderman has launched an investigation into whether Exxon covered up for decades its knowledge of the threat of climate change. Democratic presidential hopefuls Hillary Clinton and Bernie Sanders have urged the U.S. Justice Department to join that state-level investigation.
At the same time, there is growing pressure on energy companies to disclose climate risks. Former New York City mayor Michael Bloomberg is heading a task force – appointed by Bank of England governor Mark Carney, who heads the G20's Financial Stability Board – on establishing standards for corporations to report their financial exposure to the risk of climate change.
In its report issued Monday, Total said it intends to align its business strategy with the global effort to limit the increase in global temperatures to 2 C. It said that effort means that some fossil-fuel reserves will have to remain undeveloped.
"In today's challenging production environment, we are prioritizing our projects and focusing on moderately priced production and processing assets that meet the highest environmental and safety standards," the company said. "On that basis, in 2015 we decided to reduce our exposure in Canada's oil sands, which are particularly expensive to develop and operate."
However, Total still holds a 29-per-cent interest in the Fort Hills mine, being developed by partner Suncor Energy Corp., and a 38-per-cent interest in the Joslyn mine, which has all its required permits but remains undeveloped.
In its proxy statement, Exxon Mobil urges shareholders to reject the climate resolution, arguing it already does assess its climate risk and weighs the risks of its investments against a "shadow" carbon tax that is as high as $80 (U.S.) per tonne of carbon dioxide emissions.
"We believe all economic energy sources will be necessary to meet growing demand, and the transition of the energy system to lower carbon sources will take many decades due to its enormous scale, capital intensity and complexity," it said. "As such, we believe that none of our proven hydrocarbon reserves are, or will become, stranded."