ExxonMobil (Exxon), the world’s largest oil company, conducted an historic shareholders’ vote at the company’s annual meeting on May 31, 2017. With 62 percent of shareholders in favor, the shareholders voted to compel the company to be more forthright about the impact of climate change on its business. The vote came just prior to President Donald Trump’s announcement that the U.S. would pull out of the Paris Agreement.

The May 31, 2017 shareholder vote provides a strong signal that climate change is an important financial risk and that shareholders want to know more about what companies are doing to transform their operations and products to remain competitive. Following the vote, Exxon must disclose the impact on its business under a 2-degree scenario, in which we aim to increase the world’s temperature by no more than 2 degrees Celsius. Interestingly, Exxon’s Board of Directors recommended that the shareholders vote against the resolution, but it passed nonetheless by 62.2 percent.

In addition to the shareholders’ vote and lawsuit, Exxon is defending against investigation by state governments as well. The attorneys general of Massachusetts and New York have ongoing investigations of Exxon under each state’s securities and consumer protection laws related to whether Exxon properly disclosed risks posed by climate change to the company’s business, and there is currently a federal lawsuit.

Exxon, and other companies, are being compelled to take into account what carbon pollution will eventually cost the company in its investment decisions. Although the federal government is unlikely to take action on climate change, it appears that the public and state governments have significant concerns about climate change impacts. Indicating a change in tides, last year, the same proposal was backed by only 38 percent of shareholders who voted.

(Shannon Morrissey)