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Exxon Mobil foresees little climate risk; shareholders vow to keep pushing

Exxon Mobil Corp. is forecasting that its oil and gas business faces "little risk" from climate change and in a new report broadly outlined how it plans to reduce the impacts. But shareholders that pushed for the disclosure plans vowed to keep pressing Exxon to explain precisely how those risks could affect its business model and other future key decisions.

By issuing the climate report along with its annual energy demand outlook on Feb. 2, Exxon responded to pressure from investors to analyze what risks it faces under the Paris Agreement on climate change that seeks to limit global warming to 2 degrees. Some see such analysis as the first step to getting companies to address climate change risks.

Exxon projected that oil demand will decline by 20% from 2016 to 2040 while demand for coal-fired generation will drop by about 50% by 2040. But natural gas usage will increase by 0.9% per year to 2040, the report said. Exxon said it expects all but 10% of its reserves will remain profitable through 2040.

Exxon argued "no single pathway to [the 2 degree scenario] can reasonably be predicted." Moreover, while Exxon's oil and gas reserves "may be subject to more stringent climate policies in the future, we believe that investments could mitigate production-related emissions and associated costs," the company said in the report.

The company said it will reduce its exposure to climate change risks through energy efficiency and reducing flaring, venting and fugitive emissions. And it plans to shift even more to natural gas from oil, promote carbon capture and sequestration and advanced bio-fuels technologies, and transition its gasoline refining to diesel and jet fuel. The company also revealed it is eyeing expanding into renewables, including wind and solar.

Exxon said it supports the Paris Agreement "as an important framework for addressing the risks of climate change," and noted that the company is a member of the Climate Leadership Council that is pushing for a carbon tax.

The report makes no mention of New York City's lawsuit against Exxon and four other oil majors seeking to hold the companies liable for damages caused by climate change that are set to exceed $20 billion.

One of the two organizations who had pushed for the disclosure, the Christian Brothers Investment Services, or CBIS, said Exxon stopped short of outlining what climate change truly means for the company. CBIS, which manages assets for a number of Catholic institutions that want to make socially responsible investments, expects to have some behind-the-scenes talks with Exxon in the next few weeks, said Tracey Rembert, CBIS assistant director. CBIS would like Exxon to issue another report before the company's annual shareholder meeting that has not been announced but is typically held in late May.

"We still knew we wouldn't get everything we wanted in a first report ... but we're still missing a key chunk here of disclosure that we need to have them close the loop on," Rembert said in a Feb. 5 interview. "I just want to see more direct correlation with what does that mean financially, what does that mean for the make up and structure" of the company? "What does that mean for the types of companies they would want to acquire? What does that mean for the academic and research and commercial partnerships that they would want to pursue?"

"We want to get some sense that they are deeply thinking about these different avenues to give us confidence they're on top of it," Rembert said.

New York State Comptroller Thomas DiNapoli's office, which also pushed for Exxon to disclose its climate change risks, was also unhappy with Exxon's climate and energy outlook reports. "The reports rely on optimistic assumptions of undiminished growth in demand for fossil fuels in certain economic sectors, and lack a discussion of the company's goals for reducing greenhouse gas emissions," said Patrick Doherty, co-director for corporate governance in the comptroller's office. "In the coming days, we will discuss Exxon's response with company officials, and will continue to push the company and others to address the need to decarbonize."

The company issued the report the same day it posted fourth-quarter 2017 earnings that disappointed Wall Street, and its shares dropped more than 5%.