Exxon Faces Another Shareholder Climate Lawsuit

By Dana Drugmand

An ExxonMobil shareholder has filed a lawsuit against the oil giant and some of its executives alleging they misled investors by understating how much risk climate change poses to the company’s assets.

Sarah Von Colditz filed the suit Thursday in U.S. District Court for the Northern District of Texas. Defendants include current and former Exxon executives and board members, including current chief executive Darren Woods and his predecessor, Rex Tillerson. The complaint accuses the company and executives of violating federal securities law, breaching fiduciary duties and wasting corporate assets.

Exxon is already facing two lawsuits over the company’s alleged misrepresentation of asset values to investors. The state of New York filed a lawsuit in October following a three-year investigation that showed Exxon had used two different sets of numbers to calculate climate risk—one disclosed publicly while the other was used internally. The public numbers indicated that Exxon was using higher costs of potential greenhouse gas regulations, or proxy costs, for internal planning than it was using in its business decisions.

Von Colditz cited this alleged misrepresentation in her complaint. “Exxon’s failure to employ carbon proxy cost policies that actually corresponded to its public statements violated generally accepted accounting principles,” the complaint said.

The complaint also says that Exxon’s behavior and resulting litigation has damaged the company’s credibility and reputation. It calls for stronger oversight of the company’s proxy cost and climate risk considerations.

Another shareholder climate suit against Exxon is moving forward, also in the Northern District of Texas. Exxon recently requested the court deny class certification to that suit, filed as a class action by the Greater Pennsylvania Carpenters Pension Fund.

Exxon has also been opposing efforts by investors to push the company to deal more transparently with climate issues. The Securities and Exchange Commission allowed Exxon to block a proposal requesting it set targets for reducing greenhouse gas emissions. The New York State Common Retirement Fund and the Church of England submitted that proposal for consideration to be included in the materials that shareholders will vote on at the upcoming annual meeting. On Friday, the two institutions filed a notice indicating they would vote against re-election of current Exxon board members and would vote in favor of establishing an independent board chairman.

“The Fund and the Church Commissioners believe that ExxonMobil’s inadequate responses to climate change and to engagement with Climate Action 100+ participants reflect in significant part a board that is not functioning effectively in the absence of an Independent Chairman,” the proposal says. Climate Action 100+ is an investor initiative that works to push the largest corporate emitters to curb emissions and strengthen climate-related financial disclosures.

The notice also said Exxon’s intransigence stands in contrast to other oil majors, such as Shell, that have agreed to set emissions reduction targets.