ExxonMobil Faces Shareholder Challenge on Oil Sands Risks
May 23, 2011 - At its annual meeting on Wednesday, ExxonMobil* will face a shareholder resolution challenging the company to disclose more information about its controversial investments in the Canadian oil sands. The proposal was filed by Green Century Capital Management (Green Century), the investment advisor to the environmentally responsible Green Century Funds.
Canada’s oil sands, also known as tar sands, are the second largest oil resource in the world, comprising over 173 billion barrels in reserves. Extraction and conversion of oil sands into usable fuel is expensive, energy-intensive and environmentally-damaging, requiring clear-cutting of the Boreal Forest, extensive water use, and the creation of massive amounts of toxic waste. Even using the most conservative lifecycle analysis, oil from this source emits between 15% and 40% more greenhouse gases than the average of oil from conventional sources.
ExxonMobil has dramatically increased investments in the oil sands over recent years through its stake in Imperial Oil* and through ExxonMobil Canada*. At the end of 2010, ExxonMobil’s total proved reserves in the oil sands were over 2.78 billion barrels-just over 11% of the company’s total proved reserves. Recently, the company has begun touting its investments in the oil sands through a national advertising campaign.
Investors and financial analysts have raised doubts about the long-term economic viability of oil sands development given the high costs of extracting and converting oil sands, along with risks to future profitability presented by rising carbon costs, environmental regulations, and oil price fluctuations.
A May 2010 report by RiskMetrics, a division of MSCI, titled “Canada’s Oil Sands: Shrinking Window of Opportunity” finds “that the rush to develop oil sands brings many risks for companies and investors. Rising production costs and asset retirement obligations could erode the balance sheets of these companies. Carbon costs and mounting environmental regulations could detract from their bottom lines. Companies must be willing to invest upfront to address these challenges when designing new projects, while recognizing that cost effective solutions in many instances do not yet exist. This quandary leaves oil sands producers exposed to growing risks and a shrinking window of opportunity that may close over time.”
“ExxonMobil’s considerable investments in the oil sands expose the company to significant financial and regulatory risks, yet the company fails to provide meaningful disclosure on this important issue,” said Larisa Ruoff, Director of Shareholder Advocacy for Green Century. “Without transparency, shareholders have no way of knowing how the company is managing and mitigating these potential risks.”
The oil sands proposal at ExxonMobil (Item #9 on the company’s proxy statement) was filed by Green Century Capital Management; Congrégation des Soeurs des Saints Noms de Jésus et de Marie; Madeline Moore, CFP; School Sisters of Notre Dame; Sisters of St. Dominic, Tacoma, WA; and Trillium Asset Management.
This is the second year this resolution was filed at ExxonMobil. Last year, the proposal was supported by over 25%** of the shares voted.
“We believe this strong vote indicates that a substantial portion of the company’s shareholders support increased transparency and accountability related to its oil sands operations and we encourage the company to respond swiftly and fully to its investors,” continued Ruoff.
Green Century Capital Management is an investment advisory firm focused on environmentally responsible investing. Founded by a partnership of non-profit environmental advocacy organizations in 1991, Green Century's mission is to provide people who care about a clean, healthy planet the opportunity to use the clout of their investment dollars to encourage environmentally responsible corporate behavior. Green Century believes that shareholder advocacy is a critical component of responsible investing and actively advocates for greater corporate environmental accountability.
*Neither the Green Century Balanced Fund nor the Green Century Equity Fund held ExxonMobil Corporation, Imperial Oil or ExxonMobil Canada as of March 31, 2011. Please refer to the Green Century Funds website for current information regarding the Funds' portfolio holdings. These holdings are subject to risk as described in the Funds' prospectus. References to specific investments should not be construed as a recommendation of the securities by the Funds, their administrator, or their distributor.
** The percentage in favor was calculated by (i) dividing the number of votes in support of the proposal by (ii) the sum of the number of votes voted in support of and against the proposal. Abstentions and broker non-votes were not included in the calculation.
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The Green Century Funds are distributed by UMB Distribution Services, LLC. 5/11
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