Prosecutors allege Exxon pressured witnesses in climate case

US prosecutors have accused Exxon Mobil of harassing investors and intermediaries in the lead up to a forthcoming court battle over whether the energy giant deliberately misled people on the cost of climate change to its business.

A lawyer for the New York Attorney General has called on a
judge to step in, after the world’s largest publicly-traded oil and gas company
wrote to investment advisers and shareholders whom prosecutors have asked to
testify.

In a letter, Exxon’s legal representatives warned shareholders
and advisers that they will be subpoenaed for documents, by Exxon, if they
co-operate with the prosecution.

The case facing Exxon comes as shareholders have been
growing increasingly exasperated at the company’s approach to reporting on the
impact of climate change.

Investors demand more

In 2016, 38% of investors asked the company’s board to
publish an annual report documenting its business transition efforts. Then, in May
2017, nearly two thirds of Exxon’s shareholders voted
in favour of annual climate risk reporting at its annual general meeting.

In 2018, New York prosecutors started the ball rolling on
the latest court case. It is claimed that the oil giant has been building two
separate files on how climate change will affect its business, as governments
move to eliminate CO2 emissions. The prosecutors claim that it has shared a
more favourable interpretation of its research with investors, keeping the
other set of figures for internal use only.

The revelations have been enough for some asset owners and
fund firms to act. In May, the Church Commissioners for England, which manages
the Church of England pension fund, voted
against Exxon’s governance proposals after Exxon asked the Securities and
Exchange Commission to deny a resolution requesting the disclosure of emissions
targets.

A few days later, Reuters reported
that Legal & General Investment Management would be divesting its holdings
in Exxon from its Future World range of funds.

“ExxonMobil Corporation has not met our key minimum
requirements, including on emissions reporting and targets,” LGIM said in a
media statement at the time.

According to a separate Bloomberg report, LGIM had divested
some $300m of Exxon stock as at 7 August 2019. The move followed several years
of meetings, emails and support for shareholder resolutions, which the asset
manager claims have not had the desired effect.

Witnesses discouraged?

This latest episode in the courts started last Friday (2
August), when legal representatives for the prosecution wrote the judge Barry
Ostrager of the New York Supreme Court, who is handling the forthcoming case.

In the letter, lawyer Kevin Wallace claimed that Exxon’s
decision to approach the witnesses was “a transparent attempt to discourage
them from testifying voluntarily.”

In the lead up to the case, the prosecution had agreed to
allow Exxon to interview the witnesses in advance of the trial. And, Exxon had
been explicit that it intended to request additional information from several
of the witnesses involved in the case.

However, prosecutors took issue with the approach taken by
Exxon’s legal team which, they claim, could discourage potential witnesses from
testifying in the case.

While legal representatives for the oil company had confirmed
that they intended to obtain documents from seven of these witnesses,
prosecutors claim
that Exxon’s approach was “mischaracterizing the agreement” adding that it was
“seeking to impose disproportionate burdens” on the witnesses.

The investors and advisers contacted by Exxon are considered
key to the case, having spent years engaging with the oil giant, urging the
company to chart the risks that climate change pose to its business. The court
is scheduled to hear opening statements on 23 October 2019.

Exxon Mobil insists that it is fully committed to preparing
the business for the global transition to a low carbon economy. It claims to
have spent in excess of $9 billion since 2000 on developing lower emission
energy solutions.

“We’re focusing on advancing fundamental science to develop
breakthrough solutions that can make a difference on a global basis in
emissions reduction,” company chairman and chief executive officer Darren Woods
said in May.

“We’re doing that with our in-house scientists and with
corporate partners, through relationships with 80 universities and now with the
intellectual and computing capacity of the renowned national labs.”

In May 2019, the company committed $100 million to researching and developing lower-emissions technologies with the US National Renewable Energy Laboratory.