Engine No 1 Warns ExxonMobil Over its ‘Existential Business Risk’, Questions Climate Change Efforts
- 28-Apr-2021 12:00 PM
- Journalist: Robert Hume
San Francisco-based activist investor, Engine No 1 has warned ExxonMobil, a petrochemical heavyweight, that the US major is exposed to an “existential business risk” as it continues failing to take mandatory actions on the climate change as governments gear up to slash emissions.
The activist investor questioned the credibility of ExxonMobil’s planning and strategy regarding climate change and also highlighted the company’s negative financial outlook. The investor also showed concerns over a steep fall in the company’s expenditure in transitioning to a lower carbon future.
The investment firm has been very active and has been applying various steps to convince shareholders to push for change and in lieu of that, it has nominated four, highly qualified members to Exxon Mobil Corporation’s Board of Directors to be elected at the company’s shareholders meeting.
Engine No 1 also pointed at the reluctant behavior of ExxonMobil to accept and adapt ways towards a more sustainable business development, contrary to its rivals such as BP which has already shifted gears towards cleaner energy. Not only this, experts have also observed that Exxon is also not much positive about the investment in renewables and net-zero emissions commitments put forth by its competitors.
The news comes against the backdrop of Exxon’s latest billion-dollar carbon capture and storage (CCS) project which the activist believes lacks feasibility. ExxonMobil has just rolled out a proposal for a USD 100 billion CCS project alongside Houston ship channel, as per which the captured CO2 emissions will be securely stored under the US Gulf of Mexico. However, Engine No 1 has considered the proposal as shallow which lacks substance as it relies upon the concept of ‘carbon tax’ which is unlikely to get the congress’ s nod. The activist fears that even if carbon tax gets a nod, it will potentially hamper the nation’s oil and gas demand.
In December 2020, Exxon set the target of slashing its greenhouse gas intensity by 15 to 25% by 2025, complemented by its plans to curb methane emissions and flaring. But Engine No 1 has claimed that Exxon’s total emissions are set to rise by 2025.
In response to the firm’s concerns, ExxonMobil released a letter earlier this month arguing that Engine No 1’ s plan is vague and undefined. The company also stated that without providing relevant details, the investment firm asked ExxonMobil to cut investments in high return and advantageous projects that will generate earnings and cash flow.