ExxonMobil - Climate Change Risk Report - Item 14
A BRIEFING ON THE CLIMATE CHANGE RISK AND RENEWABLE ENERGY RESOLUTIONS, ITEMS 14 AND 15 IN THE EXXONMOBIL PROXY STATEMENT

If you think climate change poses any risk, you should be concerned about ExxonMobil’s missing climate strategy.

INFORMATION BRIEF ON SHAREHOLDER RESOLUTIONS14 AND 15 AT XOM

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Several shareholders have requested a report on the potential financial risks to the company associated with climate change, as well as its strategy to mitigate those risks (item 14 on the proxy statement). Shareholders have also asked for a report on the company’s strategy to respond to growing competitive, regulatory and public pressures to develop renewable energy (item 15 on the proxy statement).

Why ExxonMobil Must Address Climate Risk with a Realistic Strategy
The disruption of the climate is recognized as a significant risk factor with the potential for costs to reach the hundreds of billions of dollars per year over the next several decades. (Munich Re, “Insuring Against Catastrophe,” January 2002).

New emissions policies and alternative energy targets are being imposed to limit climate change impacts. Over one hundred countries are signatories to the Kyoto Protocol, the international treaty to limit carbon emissions, which is expected to come into force later this year when Russia ratifies it. Additional proposals by some European countries set emissions reductions targets as high as 60 and 80%. In addition,15 countries have set targets for development of renewable energy. Twenty-six percent of ExxonMobil’s downstream revenue comes from Europe, where the most aggressive climate policies are.

ExxonMobil’s response to the climate change issue has been disappointing. Despite the signs that the regulatory landscape is changing for the long-term, the company has not articulated a strategy to position itself for the coming carbon-constrained future, while its leading competitors have.

Climate Change Poses Financial and Governance Risks

• Climate change exacerbated natural disasters will reach nearly $150 billion yearly in costs within the next decade worldwide. UN Environment Program, February 2001. “Climate Changes and the Financial Services Industry,” Innovest, October 2002.
• Swiss Re, recognizing climate change risk to be a potentially serious exposure for directors and officers now requires companies to disclose their climate strategy as part of their D&O insurance application. Swiss Re is one of the world’s largest re-insurers.

"The real critique of ExxonMobil right now is that neither the CEO, nor the board, nor management have a plan for appropriately managing the assets of the company given the challenge of climate change." Mark Bateman, Investor Responsibility Research Center. Business and the Environment, June 1, 2002

As a result, the company is exposed to risks from:

• Detrimental policy changes that could affect fossil fuel use. How will ExxonMobil compete in markets where greenhouse gas emissions are being limited, or fined as they will be in Europe starting in 2005? How will the company respond to sudden policy developments on emissions or renewables?
• Missed opportunities: ExxonMobil is forgoing opportunities to generate revenues through emissions trading, to boost the value of its natural gas reserves, and to develop leadership in alternative, zero-emission energy technologies.
• Reputation risk: Deutsche Bank’s September 2002 analysis pointed to the European boycott against ExxonMobil’s climate position saying “being handed a reputation as environmental enemy number one for such a big customer-facing business has to be considered a brand risk.”
• Litigation risks: Companies viewed as responsible for global warming may be held responsible for the injuries and damage it causes. (New York Times, August 18, 2002)

ExxonMobil’s Initiatives Are Not Responsive to the Resolutions

This year, ExxonMobil took some actions on climate. The company is funding a research project at Stanford, is investing in fuel cells and energy efficiency, and supports mandatory emissions reporting. While these are laudable efforts, they do not address the need to evaluate the potential financial risks from climate change or describe to shareholders how the company will mitigate those risks. They also do not explain the company’s strategy for renewable energy.

ExxonMobil’s climate strategy disclosure is weak compared to competitors

The company’s disclosure on climate change is missing where investors need it the most in the Form 10K and other reports involving financial disclosure. Instead, the company presents fragmented and scattered information throughout a number of different publications and presentations.

Shareholders should be able to find all the relevant information in one place. ExxonMobil should clearly discuss the risks associated with a changing regulatory and competitive landscape and make clear to investors its comprehensive strategy for protecting shareholders from those risks.

ExxonMobil is Doing Less than Most Competitors