Legal and General Investment Management (LGIM) and Christian Brothers Investment Services (CBIS) have co-filed a shareholder resolution for ExxonMobil’s 2023 AGM, calling for greater disclosure of asset retirement obligations.

In particular, the resolution requests that the board fully disclose the quantitative impact of the International Energy Agency (IEA) Net-Zero Emissions (NZE) scenario on all asset retirement obligations.

The pair argued that asset retirement obligations are an “essential part” of the energy transition and particularly significant for the oil and gas sector, with many in Exxon’s peer group already disclosing a considerable amount of asset retirement obligations detail.

Despite this, they noted that Exxon currently doesn’t provide such disclosure on its downstream assets, claiming that such obligations can’t be reasonably estimated as they will run well into the future.

Given this, and following “years” of individual engagement with the ExxonMobil board and relevant decision makers, the coalition of investors filed a shareholder resolution calling for further transparency and disclosure from the company, particularly amid concerns around the costs associated with the decommissioning of Exxon’s assets in the event of an accelerated energy transition.

The duo argued that this information is “vital” for the company’s shareholders, helping them to better evaluate financially material risks and provide insight that is decision useful as investors assess long term value and economic viability of the business in a carbon constrained economy.

LGIM also highlighted the resolution as an “organic escalation step” for the investment stewardship team, given ExxonMobil’s business model is not aligned with the Paris Goals of 1.5 degrees.

LGIM head of investment stewardship and responsible investment integration, Michael Marks, stated: “By filing this proposal, we are seeking greater clarity into the costs associated with the retirement of Exxon’s assets, in the event of an accelerated energy transition.

"We believe such level of disclosure is imperative for investors to better evaluate long-term risks and economic viability of the business in a carbon constrained future.”

Adding to this, Christian Brothers Investment Services chief investment officer, John W. Geissinger, stated: “Last year, a majority of Exxon’s shareholders voted for our resolution seeking an audited report assessing the financial impact of the IEA NZE assumptions, including future asset retirement obligations.

“Despite this, the company’s disclosures still give investors little insight into how retirement costs might accelerate, and how large they might be.

"Exxon may assume an asset can operate indefinitely, but this may not prove out. Investors are simply asking: what is the total cost of meeting these liabilities?"

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