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Exxon heads to court over NY suit alleging it misled investors on climate risks

Oil major Exxon Mobil Corp. heads to court Oct. 22 to fight a lawsuit filed by the New York attorney general alleging the company misled investors on the potential financial risks of climate change regulations, a spokeswoman from the oil major confirmed Oct. 22.

"The New York attorney general's case is misleading and deliberately misrepresents a process we use to ensure company investments take into account the impact of current and potential climate-related regulations," Exxon corporate media relations adviser Charlotte Huffaker said in an email.

The lawsuit charges that Exxon told investors for years that it was accounting for the risk of future governmental regulations on climate change by applying a proxy cost for carbon emissions to account for the possibility that the federal or state government eventually could impose a price on carbon.

The claim alleges that Exxon frequently did not apply the proxy costs as represented across all of its business activities, but in many cases applied a second set of much lower proxy costs or no proxy cost at all.

"ExxonMobil applies proxy costs and [greenhouse gas] costs precisely as disclosed and takes both into account to help make sound business decisions and meet its fiduciary responsibilities to shareholders," Huffaker wrote.

The lawsuit also suggests that Exxon and some of its top officials, including former CEO Rex Tillerson, may have lied to investors about how actively the company was addressing climate risks, and that the company gave investors a misleading analysis of future scenarios by understating the risks it could face if governments around the world act to limit global warming in line with the goals of the Paris Agreement on climate change.

The suit uses one of the strongest state securities laws in the nation: New York's Martin Act, a 1921 law that predates the creation of the federal Securities and Exchange Commission and grants the attorney general broad authority to compel testimony and subpoena records.

Investor activism has been on the rise at large energy companies as shareholders seek more accountability for addressing climate change.

Exxon has been the subject of investigations in New York and Massachusetts for its climate disclosures and activities. The SEC also looked into Exxon's climate change accounting and disclosures but dropped the probe in August.