NEW YORK (Reuters Breakingviews) - The New York attorney general wants Exxon Mobil to pay. After several years investigating the company’s communications with shareholders, Barbara Underwood unveiled a suit that claims the $340 billion oil giant has misled investors about how climate change regulation would affect its business. Shareholders weren’t dupes, though. Their revolt last year forced the company to start addressing the issue. Legal heat should prod Exxon’s owners to demand more than baby steps.
The world’s largest independent, publicly-traded oil company was already on the defensive with climate change. Last year shareholders voted to demand that the company disclose more about how carbon-related environmental risks would affect its business. Then there are the rolling lawsuits, including one earlier this year when two California cities sought to make Exxon pay for coastal flooding.
The New York state AG’s lawsuit claims that Exxon didn’t properly account for future regulatory changes when it was valuing its businesses. Exxon called the claims “baseless” and said it is looking forward to refuting them. The company has some tricks up its sleeve. With California, for example, it used some of the government’s disclosures in bond documents to show that the municipalities had hedged their assumptions about climate change when it was trying to raise debt.
Exxon, under pressure from shareholders, has made some changes since Chief Executive Darren Woods took over from Rex Tillerson at the beginning of last year. In March the company attempted to address shareholder concerns about the effect of climate during its investor day. This summer it ended its association with a conservative political lobby group. Then earlier this month it said it made a donation to a campaign that is working to promote a U.S. tax on carbon-gas emissions.
None of that yet amounts to a thorough investigation of the climate risks in Exxon’s businesses. Nor has it mattered much to what shareholders care about the most: Exxon’s stock price. The shares are down almost 8 percent since Woods took over, after accounting for dividends, worse than the energy sector overall. Shareholders have mostly gone quiet, however, and they didn’t urge further action at this year’s annual meeting in May. New York’s lawsuit may just jolt some of them back into action.
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