Oil majors are on track to suffer the “next wave of shareholder class actions” for failing to disclose the impact of climate risk on their businesses, a new report on the largest European and US companies in the sector reveals.
Oil Majors and Climate Risk: What Investors Need to Know, released today, comes as ExxonMobil faces investigation for its failures on climate risk disclosure.
The report lists ExxonMobil, Occidental and Chevron as the worst offenders, but says BP, Shell and Total are not far behind.
Senior corporate lawyer for ClientEarth Alice Garton says shareholders have a right to press management about information that appears to mislead on sustainability challenges facing the company.
“Where the information disclosed about the potential impact of climate risk to the business is false, misleading or incomplete, and this affects the share price, investors can sue.
“These cases could well represent the next wave of shareholder class actions.”
ExxonMobil is currently under investigation by both the US Security and Exchange Committee and New York Attorney General Eric Schneiderman.
Schneiderman is investigating the company for misleading investors, particularly regarding “stranded assets”, which represent reserves on its balance sheet that face being stranded due to government policies to curb climate change.
The report singled out BP, Shell and Total for their poor disclosure on the impact of electric cars on their businesses.
The report points out this is despite many automotive manufacturers planning to sell upwards of 25 per cent more electric or low emission hybrid vehicles as early as 2025.
Legal & General Investment Management’s head of sustainability and responsible investment strategy Meryam Omi says investors want oil majors to play “positive and leading role” in the transition to a low carbon economy.
But she adds: “Firms have to be more transparent on their long term energy assumptions and capex sensitivities to new technologies that can impact their future business models.”