Source: Carbon Disclosure Project. This table is condensed from the version that appears on page 54 of their report, available at www.cdproject.net.

Conclusion:
A letter to shareholders by Connecticut State Treasurer Denise L. Nappier urging support for this resolution says:

The company’s proxy materials report "ExxonMobil has long realized that climate change poses important issues for our business." They go on to say "ExxonMobil closely follows regulatory developments, typically through trade associations, so that we can participate in the debate, prepare for, and be in a position to comply with obligations if they emerge."

Given that policy, providing shareholders with a report on the potential risks related to climate change and the steps being taken to mitigate those risks would seem to be a natural next step. That is precisely what this shareholder resolution seeks."


POINT-BY-POINT RESPONSE:

ExxonMobil:
The challenge for ExxonMobil and society is to provide reliable, affordable energy to a growing global population, especially the 30 percent of the world that currently has no access to energy, while addressing long-term, uncertain risks.

Response:
The challenge for ExxonMobil is to generate long term, risk adjusted shareholder value. As a company with long capital horizons and where project life can exceed 50 years from exploration to end-of-field it is incumbent upon management to consider and advise shareholders on potential risks over this time horizon. Short of suddenly vanishing oil supplies, climate change and the public response to it may have the most profound impact on the profitability of capital investments made in the coming years.


ExxonMobil:
While the debate continues over what to do, ExxonMobil has developed and widely communicated our strategy on climate change. It involves taking sensible, economic actions now to improve efficiency and reduce emissions while pursuing research on our own and with others aimed at better understanding scientific issues and achieving technology breakthroughs which could dramatically reduce future global emissions.

Response:
Stating that "the debate continues" suggests that little concrete action has been taken to address climate change. This is not the case.

• One hundred and six countries have signed the Kyoto Protocol, the international treaty to require greenhouse gas emission reductions. Russia’s stated intention to ratify the treaty in 2003 means Kyoto could finally come into force. If the treaty comes into force it will reshape the regulatory landscape in many countries where ExxonMobil does business.
• Starting in 2005, a European emissions trading scheme will require many European-based companies to comply with carbon limits and pay penalties if they exceed them, thus putting a price on carbon emissions for much economic activity.
• In the United Kingdom, the government has endorsed action to implement a 60% cut in emissions in its Energy White Paper, while Prime Minister Blair continues to press President Bush to take action on climate change.

Outside observers are clearly expecting emissions policies to increase.

• Business Week says "U.S. companies don't have the luxury of sticking their heads in the sand over global warming." (11/4/02).
• DuPont VP David Findlay says carbon cuts "are likely a reality all over the world…The sooner you start managing your business with that in mind, the better off you will be.''
• "One thing is clear: the unrestricted right to emit greenhouse gases at no cost is fast disappearing." (Swiss Re, 10/01)

In addition, if ExxonMobil’s climate change strategy is to take actions that are "economic now" then company is clearly not assessing, anticipating or preparing for the possibility that the regulatory responses to climate change outlined above will continue to grow.

ExxonMobil:
ExxonMobil believes that our approach is comprehensive and responsible, and that it establishes a clear process, based on scientific, economic and technical analysis, that will protect long-term shareholder value as the issue evolves.

Response:
A growing proportion of shareholders is expressing concern with ExxonMobil’s approach on global warming, as evidenced by steadily rising votes on related resolutions the last three years. ExxonMobil’s approach on climate cannot be considered comprehensive or responsible because:

• It fails to recognise the potential for a price to be placed on carbon emissions;
• It fails to account for the likelihood that policies limited greenhouse gas emissions will spread;
• It does not consider reputation risks;
• It does not consider litigation risks.

ExxonMobil has not outlined a process at all – the company has limited itself to reporting on current activities and essentially promising that it is keeping watch.


ExxonMobil:
Proponents frame climate change risks and strategies, such as targets and emissions trading, from the narrow political perspective of those seeking to encourage near-term regulatory controls. We believe such controls would be ineffective because they fail to address long-term risks from growing global emissions.

Response:
ExxonMobil’s view of the political perspectives of countries and states adopting and implementing policy responses to climate change is not relevant to this resolution. Neither is the company’s opinion of whether such regimes will be successful. Clearly, many national and state governments believe their policy responses will be effective – that is why they are pursuing them.

What does matter is that targets and emissions trading are realities now. Shareholder value will not be affected by whether or not management likes those policies but whether or not management is prepared to respond effectively to them.


ExxonMobil:
Neither ExxonMobil nor any of our competitors yet know the regulatory obligations we may face. Even in nations that have agreed to restrictions under the Kyoto Protocol, few have determined what measures they will impose on companies or consumers. Consequently, at this time, attempts to assess impacts on shareholder value can only be speculative.

Response:
This statement may well be one of the strongest items of evidence supporting a vote for this resolution. Apparently ExxonMobil is unaware of current events in climate change. As outlined above, several regulatory obligations in significant markets are now quite clear. Information on carbon caps and emissions trading and renewable energy mandates are available in sufficient detail that meaningful analysis is possible.

The influence of carbon limits and pricing is so significant that several organizations already factor in shadow price for carbon emissions in long term investment planning:

• Shell: "Shell has been incorporating carbon costs in all its major projects since 2000. Today, most new investment projects, irrespective of size, must be designed for optimal profitability in a carbon-constrained world."
• ChevronTexaco: "We are incorporating greenhouse gas emission assessments into our capital project evaluations." The company has said it assumes a carbon cost of $5-$20/ton, depending on location, when evaluating potential investment opportunities.
• The World Bank incorporates climate change into its planning scenarios and has examined how to incorporate shadow carbon pricing into its project evaluations.

ExxonMobil:
ExxonMobil has widely communicated our strategy and actions to address climate change risks, including:

General Response to items outlined by ExxonMobil:
While proponents are glad to see recognition of climate as a serious issue, none of the steps below provides the information that shareholders seek. Furthermore, ExxonMobil’s response to climate has been scattered throughout a number of publications, including its corporate responsibility report, opinion advertorials, executive speeches and the shareholder newsletter The Lamp.

Shareholders should be able to find all the information in one place and have that information respond to the risks that are already demonstrating themselves.

ExxonMobil:	Response:
Recognition of the seriousness and importance of climate change risks	ExxonMobil’s failure to accept that climate risk is worth placing a value on negates claims to recognize seriousness. The investor-backed Carbon Disclosure Project did not find evidence that ExxonMobil demonstrates "Superior Awareness of Climate Change Risks and Opportunity" (See chart above.)
Scientific, technical and economic research on climate change and proposed response options, especially to resolve significant, well-known gaps	Research appears one-sided – e.g. it focuses on highlighting and examining areas of uncertainty that suggest reduced potential for climate risks, and ignores areas that indicate greater potential for climate risks. Furthermore, ExxonMobil acknowledges the scientific gaps are well known. What they don’t acknowledge is that these gaps are accounted for in the conclusions reached by the Intergovernmental Panel on Climate Change and the National Academy of Sciences, conclusions that found that fossil fuels contribute to global warming.
Measurement and reporting of emissions from ExxonMobil operations	Welcome, but not based on international standards, and lacking goals and timelines for emissions reductions.
Actions now to improve energy efficiency and reduce emissions economically	Welcome, but progress is only moderate – no better than US economy as a whole.
Investments in advanced technology and research to reduce future emissions from our operations and the use of our products by customers	ExxonMobil’s major investment – gasoline fuel cells – appears unlikely to achieve practical breakthrough in the near-term. Additionally, hydrogen based fuel cell cars—the chief technological competition –are being tested on the road in far greater numbers. The concern isn’t so much that this technological choice will fail – but that it appears to be the only option ExxonMobil is putting forward in the near-term that would be responsive to tighter emissions regimes.
Technology research to develop innovative, commercially viable solutions leading to significantly lower global greenhouse gas emissions through an investment of $100 million over the next 10 years in the Stanford University Global Climate and Energy	Project Welcome – but very minor in terms of overall R&D investment. Appears restricted in terms of technologies it will look at. Offers little assurance of mitigating risks to shareholder value.

ExxonMobil:
ExxonMobil has long realized that climate change poses important issues for our business. For over 20 years we have participated in research to understand scientific, economic, technical and policy issues, and in outreach to explain our actions and views.

ExxonMobil recognizes that climate change and its potential impacts on society and ecosystems may prove to be significant. While studies must continue to better understand these risks and possible consequences, we will continue to take tangible actions now, including working with others to develop effective long-term solutions. The history of our planet reveals that climate change is continuous and has been extreme long before the origin of mankind due to the interaction of many complex factors; hence, the quest for scientific investigation and understanding.

Response:
ExxonMobil is failing to acknowledge the well-known fingerprints of human activity on our climate – such as the speed of change which appears to be unprecedented; the sudden jumps in greenhouse gas emissions concurrent with the onset of the industrial revolution when fossil-fuels were first widely used and many others which have led to the scientific consensus that human activity is contributing to climate change.

Proponents support scientific investigation and understanding and agree that more should be and will be learned about climate change. However, this should not be used as an excuse for delay. ExxonMobil stands virtually alone in the scientific, policymaking and among its own peers in its dismissal of the human impacts on climate change.


ExxonMobil:
Proponents cite results of analyses on shareholder value without describing underlying assumptions and methods. Even after decades of research and intense public debate, both underlying scientific understanding, as well as the likelihood, nature and consequences to our business, options remain filled with significant uncertainty. Consequently, we find the relevance and reliability of the conclusions cited by proponents to be unfounded.

Resolutions are limited to 500 words only, so there is little space to include all the relevant information in the text itself. The analyses are identified and cited so that shareholders can go straight to the source.
The analyses themselves do disclose assumptions and methods, and also recognise the uncertainly in evaluating climate change impacts.

Further, the essence of risk management is to address uncertainty. ExxonMobil’s failure to consider the impact of possible (even likely) but uncertain impacts is at the core of its risk management failure. Its competitors are clearly demonstrating that risk management on this issue, even with its uncertainties, is possible.


ExxonMobil:
ExxonMobil will, of course, comply with its regulatory obligations. Proponents incorrectly imply that we will be at a competitive disadvantage because ExxonMobil has not undertaken voluntary targets or participated in emissions trading. In fact, we have extensive experience meeting emissions obligations in a variety of circumstances and with trading for both regulatory and commercial purposes.

ExxonMobil closely follows regulatory developments, typically through trade associations, so that we can participate in the debate, prepare for and be in a position to comply with obligations if they emerge.

Response:
Proponents are communicating that there is a greater degree of risk to the company and long-term shareholder value than the company’s disclosure currently reflects and for which the company appears to be unprepared.

Voluntary targets and emissions trading are just two of several strategies ExxonMobil’s competitors have already put in place in order to be as strategically positioned as possible for a wide range of existing and potentially expanding policy responses. Other possible responses include investments in renewable energy, incorporation of carbon value into future planning and audited reporting on global warming (See chart on page 1.)

No evidence is provided by XOM that they are prepared for emerging obligations.


ExxonMobil:
ExxonMobil believes that successful development and global deployment of innovative, commercially viable technology is the only path that can address long-term climate change risks while preserving and promoting prosperity of the world's economies.

Response:
Proponents do not argue that innovative, commercially viable technology will be a critical component of a response to climate change.

However, the resolution concerns what is happening in the real world – not what ExxonMobil management prefer to happen or believe should. As long as countries are establishing emissions caps, fines, renewable energy mandates and other policy responses, ExxonMobil owes it to its shareholders to explain what risks those pose to the company and how the company will respond to those developments.