A couple of crosscurrents are occurring within the oil industry. While many corporate boards are defeating efforts by activists to disclose more and more climate risks, most are already taking bold action to curtail their CO2 emissions.
The broader question is whether large institutional investors and shareholder activists are increasing value by demanding more transparency. One school of thought concludes that as long as they are in tune with their fiduciary roles, they have a right to pursue societal objectives. For companies to profit over the long-term, they must, therefore, act not just in the interest of their stockholders but also for the benefit of the communities where they reside.
Others, though, see the current pressures as overkill. Corporations, generally, already provide investors with essential data, critics say. They note that if left to their own devices, the activists would micromanage companies. Their concern is that no matter what measures businesses take to limit their carbon footprints, they will never be enough. If that is the case, then other areas that need oversight will be neglected and shareholders will get hurt.
“Driving down the cost of capital is every company’s mandate to create present value,” says Pierre Connor, executive director of the Tulane University Energy Institute, in an interview with this writer. “Therefore if you follow that logic, you will see the reaction to demands for increased transparency and changing priorities.” Other factors also contribute, he notes, including the “democratization of information,” the fear of civil suits, and the demands of millennials who favor strong environmental, social and governance policies.
At its recent annual shareholder meeting, ExxonMobil’s investors stood by their corporate boards and rejected a handful of activists’ climate proposals. Just after that…