Last year a majority of voting shareholders supported a proposal seeking an assessment on the impact of climate change policies and requesting an analysis of the implications to our oil and gas reserves and resources under a 2°C scenario. Although our annual disclosures provide useful information to the investment community on this matter, the vote signaled that our shareholders were interested in hearing more.
After further broad engagement with shareholders to determine what additional information would be useful, the Board supported enhancing our disclosures in line with the proposal and shareholder feedback.
Those enhancements were provided in reports published earlier this year, our 2018 Energy & Carbon Summary (ECS) and our 2018 Outlook for Energy. They included a wide range of 2°C scenarios and potential implications, how ExxonMobil continues to position its business for a lower-carbon energy future and other specific information suggested by shareholders.
After releasing the ECS and Outlook, we met again with shareholders holding over one billion shares to review the reports. We also held a special session devoted to the ECS as part of our yearly meeting with investors and investment analysts in March. The response from shareholders has been positive and supportive. Following are some common points of interest.
The 2°C scenarios referenced in the ECS and the Outlook were developed as part of a study conducted by Stanford University’s respected Energy Modeling Forum. That work, known as the EMF 27 study, was published in 2014. It is among the most recent and comprehensive multi-model, peer-reviewed studies available. You can find more information on the scenarios in the ECS on pages 6-9.
The use of the EMF 27 scenarios made sense for a number of reasons. The models were developed by independent groups of experts in the field. This addresses potential concerns over the quality of the models as well as reducing the potential for bias in developing assumptions.
The multi-model study was also conducted, in part, to support the Fifth Assessment Report of the Intergovernmental Panel on Climate Change (IPCC). That assessment formed a basis for the 2016 Paris Climate Agreement, which we have supported.
The Stanford study focuses on the impact of climate policies starting in 2010, using past empirical data to help anchor their respective future forecasts to 2100. Besides the impacts of policy, the EMF 27 study also focuses on the role of technology to target a 450 PPM CO2eq stabilization level consistent with a 2°C objective. Given the potential advantages to society of utilizing all available technology options, we focused on the EMF 27 models that leveraged all technologies to achieve a 2°C outcome. As such, these models highlight areas of potential scientific advancement and the importance of technology in expanding and providing solutions.
It’s important to note that the models incorporate many improvements to technologies over time. This includes improvements in renewables and other alternatives to oil and gas, as well as technologies enabling use of oil and gas with lower related CO2 emissions. As such, the models aim to represent the dynamic and evolving energy landscape in a carbon-constrained future; they are not static or locked in time. Given the array of possible policies and technologies in the future, using a broader range of scenarios provide better insights regarding potential 2°C pathways than relying on simply one or two.
The EMF 27 results highlight the importance of simultaneous, rapid deployment of technology across the entire energy system to accelerate efficiency gains and reduce greenhouse gas emissions. As new multi-model studies are published, such as those that are anticipated in support of the IPCC’s Sixth Assessment, we will consider them in future reviews.
As a point of comparison, the recent International Energy Agency Sustainable Development Scenario, shown on the far left in the chart below, forecasts demands for 2040 total energy, oil and gas, coal and other energy (nuclear/renewables) within the range of EMF 27 scenarios used in our ECS.
Other Disclosure Frameworks
There are several disclosure frameworks being suggested lately by market participants, including the recommendations of the Task Force on Climate-related Financial Disclosures. We considered the TCFD framework among others and continue to monitor developments. Our sustainability disclosures substantially address many of the key disclosure aims of other frameworks, including the TCFD recommendations. For example, the ECS addresses the four key “pillars” of the TCFD framework – governance, strategy, risk management, and metrics.
In summary, the dual challenge of providing reliable, affordable energy to support growing prosperity while also addressing the risks of climate change is critically important and requires thoughtful engagement across society. We hope that our disclosures help to further our shareholders’ understanding of these important topics. We greatly value the ongoing engagement with stakeholders on this subject and we look forward to further discussions on this and other matters.