How to Earn $100 Billion in Just 12 Months

    Stockholm (NordSIP) – “Creating sustainable solutions that improve quality of life and meet society’s evolving needs.”  Who would have thought that ExxonMobil had such a dark sense of humour.  That is the tag line of the oil company’s 2023 Advancing Climate Solutions Progress Report.  It is surprising that ExxonMobil can even be bothered to produce such material, given their sustainability track record and barely concealed negative climate lobbying efforts.  Nevertheless, it is interesting reference material for those wishing to perfect their understanding of the language of greenwashing.

    A masterpiece in obfuscation

    This week the firm announced record profits of USD 55.7 billion for 2022.  In the progress report, ExxonMobil announces an increase in investment in “lower-emission initiatives” to USD 17 billion through to 2027.  That translates to an annual investment equivalent to roughly 6% of this latest annual profit.  That is clearly not enough for a company continuing to expand its fossil fuel production in the face of a rapidly worsening climate crisis.  The next question that comes to mind is: how does ExxonMobil define “lower-emission initiatives?” In its report, under the title “Positioning for a lower-emission future” the company explains that:

    “We have evolved our operating model, enabling efficiencies that better leverage the scale of an increasingly integrated company.  At the same time, we have centralized many of the skills and capabilities required by our businesses, allowing us to improve allocation of critical resources; enable continuous improvement, including detection and measurement of emissions; and drive value.  This serves us well in a variety of future scenarios, irrespective of the pace of the energy transition.”

    Well done if you made it through that paragraph, which represents a perfect example of the “management speak” employed by companies seeking to avoid a clear answer to a simple question.  The report goes on to explain how ExxonMobil intends to reduce emissions by improving their extraction and production processes, for instance through electrification or reductions in fugitive emissions.  They also point to carbon capture and storage (CCS) and hypothetical moves into hydrogen.  The key to understanding much of the content is the systematic use of non-committal language, for instance: “through 2030, we expect to more than offset emissions from new operated facilities needed to meet growing demand,” or “our emission-reduction plans consider fuel switching to hydrogen.”  Efficiency measures and the reduction in emissions from leakage and flaring are to be commended, but there is little or no mention of actually reducing fossil fuel production in the near future or significant investments in renewable energy.

    Shell hauled up before the SEC for greenwashing

    Having just announced its highest annual profits for 115 years, Shell may have to spend a small portion of that near USD 40 billion on a fine, if Global Witness (GW) gets its way.  The non-profit environmental and human rights campaigning organisation submitted a complaint to the US Securities and Exchange Commission (SEC) alleging greenwashing in Shell’s corporate reporting.  The core of the complaint concerns Shell’s stated expenditure on “renewables and energy solutions.”  Global Witness claims that the headline figure of USD 2.7 billion, or 12.2% of total capital expenditure, comprises only USD 288 million of investment in genuine renewables such as solar and wind.  As GW puts it in its letter of complaint: “Shell’s allocation of gas-related activities to a segment entitled “Renewables and Energy Solutions” (RES) and failure to provide its shareholders with disaggregated financial disclosures may have led the company to both misstate and omit material facts necessary to render RES not misleading.”  ExxonMobil and Shell both employ vague language when addressing their transition activities and conflate a whole range of elements, including fossil gas, that make it very difficult for external stakeholders to make an accurate assessment of their progress towards corporate climate commitments.

    ExxonMobil is also facing lawsuits in several US states, which allege fraud and false advertising on the basis that the company knew about the environmental harm caused by its products but covered this up to protect its revenues.  With the net closing in on these and other oil companies, one can hope that the pressure will ultimately compel them to spend a much higher proportion of their vast profits on speeding up the transition to a low-carbon global economy.  Investors holding these stocks with the aim of supporting the transition of hard-to-abate sectors though engagement should also take note of these tactics and harden their approach accordingly.

    Image courtesy of PublicDomainPictures from Pixabay
    Richard Tyszkiewicz
    Richard Tyszkiewicz
    Richard has over 30 years’ experience in the international investment industry. He has worked closely with major Nordic investors on consultancy projects, focusing on the evaluation of external asset managers. While doing so, Richard built up a strong practical understanding of the challenges faced by institutional investors seeking to integrate ESG into their portfolios. Richard has an MA degree in Management and Spanish from St Andrews University, and sustainability qualifications from Cambridge University, PRI and the CFA Institute.

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