Activist shareholders hope that publicly assessing and disclosing the financial risk associated with certain carbon-intensive operations will dissuade Exxon and other energy companies from extracting oil and natural gas in high-risk, environmentally sensitive areas like deep water and tar sands. Credit: Bigstock

By Bryant Harris
WASHINGTON, Mar 25 2014 (IPS)

As the international community and the U.S. government place a heightened emphasis on reducing carbon emissions as a way to combat global climate change, shareholders have convinced the oil-and gas giant ExxonMobil to publicly disclose the risk that strengthened regulation could pose to its profits.

The Texas-based company announced its intentions last week and agreed to publish a carbon asset risk report on its website by the end of the month.“If Big Oil can’t redirect capital to low-carbon energy alternatives, investors will.” -- Natasha Lamb

“Investors … are looking at the energy market and starting to see shifts that they’re concerned about,” Danielle Fugere, president of As You Sow, an advocacy group that spearheaded shareholder pressure on the issue, told IPS.

“Those range from the potential for carbon regulations to what happens if the world actually gets smart and works to limit carbon in order to prevent global warming. The investors are looking at increasing cost curves for non-conventional fuels.”

Activist shareholders hope that publicly assessing and disclosing the financial risk associated with certain carbon-intensive operations will dissuade Exxon and other energy companies from extracting oil and natural gas in high-risk, environmentally sensitive areas like deep water and tar sands.

Exxon’s decision was largely due to pressure from As You Sow and a key shareholder, Arjuna Capital. In return, Arjuna Capital and As You Sow dropped a shareholder resolution that would have put the issue to a vote at Exxon’s annual shareholder meeting.

“If we are going to avoid catastrophic climate change, we can only burn one third of [known] carbon reserves,” Natasha Lamb, the director of equity research and shareholder engagement at Arjuna Capital, told IPS. “So the big question is, if regulation market forces prevent oil companies from burning that other two-thirds, why are they spending so much in shareholder value exploiting more?

“As investors, we want to understand what kind of scenario analyses they’re running taking these huge risks into account, and if they’re profitably allocating shareholder capital.”

Investors ultimately hope that a combination of increased regulations on carbon emissions and subsequent shareholder concerns will prompt large energy firms to diversify their assets and invest in more sustainable forms of energy.

“Forward-thinking companies need to re-assess how they allocate shareholder capital and act strategically to shift their business models,” said Lamb. “If Big Oil can’t redirect capital to low-carbon energy alternatives, investors will.”

Lamb also believes that Exxon’s decision will set a precedent and encourage other companies to similarly disclose their carbon asset risks, lest they alienate their investors.

“There are 10 other shareholder proposals this year asking companies to report on carbon emissions risks,” Lamb said. “I would expect that, after Exxon’s announcement, you’ll see increasing disclosures from fossil fuel companies.”

The move also signifies that Exxon, which has a history of lobbying against climate change legislation, may start to take the issue more seriously in public – particularly as shareholders become concerned about the effects of carbon emissions regulations on the energy giant.

“I think it’s important that Exxon has questioned whether climate change is occurring, and I think the company’s finally saying, ‘Yes, climate change is real,’” said As You Sow’s Fugere.

While Exxon initially challenged the resolution with the Securities and Exchange Commission (SEC), the country’s main corporate regulator, the SEC overruled the challenge. Although the SEC had instituted a requirement compelling companies to publicly report on the impacts of climate change on their businesses, Congress passed legislation that blocked that mandate in 2010.

Stranded assets

Along with the rest of the international community, the United States and European Union have agreed to limit the average increase in global temperatures to two degrees Celsius above pre-industrial levels.

Yet climate scientists calculate that if humans burn more than a third of the world’s current proven carbon reserves between 2000 and 2050, there is a 20 percent risk that the global temperature will rise beyond this level. Non-profit advocacy groups like the Carbon Tracker Initiative have thus coined the term “unburnable carbon” to describe the excess reserves that would raise the global temperature by more than two degrees above pre-industrial levels.

Nonetheless, in 2012, the 200 largest publicly traded fossil fuel companies invested approximately 674 billion dollars to discover and develop new carbon reserves. Because companies cannot utilise new reserves without breaking the international community’s agreed-upon standards, some shareholders consider the exploration and development of additional carbon reserves to be a “stranded asset”, an asset that is obsolete and must therefore be recorded as a loss on a company’s balance sheets.

The Carbon Tracker Initiative’s 2013 report on unburnable carbon and the large amount of shareholder money invested in new carbon reserves prompted Ceres, a group of 70 international investors with more than three trillion dollars in assets, to pressure the top 45 energy companies to assess and report on the risks that a global decrease in carbon demand could pose.

Such initiatives are already starting to have a public impact. Last January, for instance, Ceres’s shareholders successfully pressured FirstEnergy, an Ohio-based utility company, into studying and reporting on what it could do to reduce carbon emissions in line with President Barack Obama’s goal of reducing total U.S. carbon emissions by 80 percent by 2050.

Additionally, last year As You Sow filed a vote with shareholders at CONSOL Energy, a natural gas and coal firm, requesting that the company report on the risk of stranded assets derived from carbon emissions. While CONSOL was resistant to the request on the grounds that it already produces a corporate social responsibility report, nearly 20 percent of CONSOL shareholders voted in favour of the proposal, a figure that Fugere deems significant.

“Over a billion dollars in investor assets voted in favour of that,” said Fugere. “That was about a 20 to 22 percent ruling, depending on who you ask. When you have over 20 percent of your shareholders indicating it’s a concern, companies are going to take note.”

Shareholders are calling on 15 U.S.-based multinational corporations to ensure that their global supply chains are not facilitating human rights abuses, particularly labour and sex trafficking.

A sex worker near the central station in Rome. Credit: Pier Paolo Cito/Save the Children

In a new campaign running throughout January, the Interfaith Centre on Corporate Responsibility (ICCR), which represents 300 shareholder organisations managing around 100 billion dollars in assets, is focusing on two sectors in particular, hospitality and food agriculture. These industries – which include hotels, airlines, restaurant chains, large retailers and agribusiness companies – are seen as particularly at risk for rights violations.

“To properly fight abuses like human trafficking, we all have a role to play – and business must become part of the solution through putting into practice respect for human rights and ensuring their partners, suppliers, subsidiaries and agents do the same,” Amol Mehra, director of the International Corporate Accountability Roundtable, a network based here, told IPS.

“Business has a responsibility to respect human rights, but this is more than just compliance with domestic laws. Instead, business must ensure that they, throughout their business relationships and including within their supply chains, avoid negatively impacting human rights and engage in appropriate judicial remediation when violations do occur.”

ICCR is now urging 15 U.S.-based corporations in particular to take a series of steps in this regard. These include agribusiness giants (ADM and ConAgra), retailers (Costco, Kroger, Target and Walmart), airlines (Delta, US Airways and Southwest), hotel chains (Hyatt, Starwood, Choice) and others.

The group’s members recently released a new set of principles and recommendations that would lead companies to make specific declarations to ensure that the entities within their supply chain will comply with a host of international agreements aimed at cracking down on various forms of human trafficking, including the U.N. Guiding Principles on Business and Human Rights, passed in 2011.

Companies are also urged to publish regular updates on steps taken in this direction, as well as analysis of their impact.

“These are not aspirational recommendations – they’re very practical and very much based on ongoing and emerging practice,” Lauren Compere, an ICCR board member and managing director at Boston Common Asset Management, a social investment firm, told IPS.

“We started to really engage on how to implement the Guiding Principles, taking our practical experience over the past 15 years of engaging on child labour, human trafficking, modern-day slavery. These principles offer a roadmap for companies to take to engage on this.”

ICCR has a standing relationship with each of the 15 companies, which Compere and others feel could be particularly amenable to talking about additional steps to safeguard their supply chains.

“Where companies generally still miss the grade is on disclosure, especially within the hospitality sector. Disclosure on mitigating risks around trafficking really needs a lot more systematic, standardised reporting,” she says.

“For the moment, most of the information that is available is anecdotal, without data even on the percentage of operations that are covered. Some companies are getting better on general human rights disclosure, but we’re not seeing that yet on human trafficking.”

On dealing with grievances or the mitigation of risks, she says, in many companies there is still no real understanding of the full impact that corporate policies are having.

20-30 million

Estimates on the size of the global human trafficking problem are notoriously difficult. According to the International Labour Organisation, around 14.2 million people were thought to have been engaged in some form of forced labour in 2012, while another 4.5 million had been coerced into sex work.

Others say these numbers are likely far higher, with global numbers perhaps topping 30 million.

ICCR became involved in the intersection of corporate responsibility and trafficking in 2006, when a group of Scandinavian investors began pressuring the Marriott hotel chain over reports of child prostitution rings making use of the some of the company’s facilities in Costa Rica. Within a year, Marriott had rolled out a new, pointed policy on the issue, and has since engaged in annual shareholder disclosure.

While Marriott was never accused of knowingly facilitating these exchanges, the lack of stated policy was seen as detrimental to broader anti-trafficking efforts.

“Hotels, motels and others in the entertainment sector are all vulnerable to sex trafficking, and we’ve seen that if these types of businesses open their eyes they may find trafficking taking place within their operations,” Karen Stauss, director of programmes at Free the Slaves, an advocacy group here, told IPS.

“While agriculture is a bit different, all across the world this is a sector where workers are very ill-paid, often coming from rural areas where they may not have a strong education, including on their rights. Without a doubt there is no way that we’ll solve the human trafficking problem until multinational corporations get involved – they have huge buying power and thus can access much farther down the supply chains.”

Pressure from consumers, advocacy groups and national and international regulation has had an increasing impact in recent years, with more and more companies recognising that actions taken throughout their supply chains can be a damaging liability. Further, Stauss notes that the use of, for instance, forced labour typically offers profits only far down the supply chain, with little to no positive effect for parent companies.

“Unfortunately, we still constantly see companies using the language of ‘impossibility’, claiming that their supply chains are so long that it is impossible to tackle these problems,” she says.

“The way I see it, this is just a lack of vision and creativity. The information and communications technology industry, for instance, has been pushed to take this on [due to U.S. legislation] and we’re now seeing that sector doing things that five years ago they said were impossible.”

Yet while recent federal legislation here is starting to have an impact on certain industries – such as the electronics sector – at risk of using so-called conflict minerals, there is currently no broader U.S. law requiring corporations to take steps to ensure that their supply chains are free of human trafficking.

Important precedent in this regard has come from California, however, which in 2010 passed landmark legislation requiring such regular disclosure for certain large companies (related information is available here).

While efforts to adopt a similar law at the federal level failed during the last congressional session, Stauss says supporters are expecting a new such bill to be introduced in coming weeks – and notes that the coalition of lawmakers and stakeholders in favour of such a law has continued to grow.

Oil giant Chevron's corporate offices in Houston Texas are housed in the old Enron buildings at 1400 Smith St. Credit: Jonathan McIntosh/cc by 2.0

By Carey L. Biron
WASHINGTON, May 29 2013 (IPS)

At an annual shareholder meeting held Wednesday, upper-level management for the oil conglomerate Chevron faced renewed questioning over its record-setting political contributions during last year’s national election.

At the meeting, a shareholder resolution on the issue focused on Chevron’s alleged refusal to explain how the company’s political spending has benefited shareholders, particularly given the excoriating criticism the contribution has garnered, and called for a cessation of the practice.

The resolution failed to pass, however, receiving just four percent of shareholder backing.

Of particular interest has been a lump payment of 2.5 million dollars spent by a Chevron subsidiary. Given that Chevron receives government contracts, the contribution’s timing (in the last weeks of the election) and its beneficiary (a group focused on electing Republicans to the House of Representatives) have raised concerns that the payment could have violated U.S. law.

Chevron is wrapping up “its most expensive year of political spending to date,” Green Century Capital Management, which filed the resolution, stated Tuesday, just ahead of the shareholder meeting. The advisory firm is now formally urging the company to “refrain entirely from political spending, arguing that doing so would protect against risks to shareholder value”.

Chevron, the second-largest oil company in the United States, reportedly spent a total of 3.9 million dollars during the 2012 campaign. Yet it was the 2.5-million-dollar payment to a group called the Congressional Leadership Fund that has become the focus of much interest, in part because it is the largest single corporate political contribution to date.

In 2010, the U.S. Supreme Court handed down a controversial ruling that lifted restrictions on most corporate election-related spending. The decision made the 2012 presidential election the most expensive to date.

It has also sparked a significant public backlash: according to a September poll, more than four-fifths of U.S. respondents would support limiting election spending. Further, at least 14 states have now passed resolutions urging a constitutional amendment to overturn the judicial decision, known as Citizens United.

Against this backdrop, Chevron has been widely pilloried for having racked up the largest-yet corporate political contribution since the Citizens United decision was handed down.

“This issue is important for our members because Chevron has not been willing or able to demonstrate value to shareholders of its political expenditures,” Leslie Samuelrich, a senior vice-president with Green Century, told IPS.

“Given high negative press coverage that Chevron’s contribution garnered for the company, we feel that it’s important that Chevron explain why it made this contribution, as well as a long list of growing political contributions over the years. They weren’t able to do so, so we went forward with the resolution.”

Following Wednesday’s vote, Samuelrich lauded the results, telling the media the process represented “a turning of the tide”.

Risky business

The Citizens United decision appears to have led to an immediate response from Chevron. The company has reported spending a little more than a million dollars on political contributions in 2008 and a little less than that amount in 2010, when the Supreme Court ruled.

Two years later, those figures have almost quadrupled. In addition, watchdog groups have noted that around 90 percent of corporate spending in the 2012 election went to Republicans.

“This appears to be very risky business to us,” Samuelrich says, noting that Green Century has filed similar resolutions this year with the oil company ExxonMobil, Bank of America and 3M, a manufacturing conglomerate.

“We spoke with Chevron earlier this year, but that dialogue resulted in no change whatsoever – they didn’t offer any analysis about why they made the initial contribution, nor any evaluation of the impact of their highly publicised political spending.”

Further, the company continues to be dogged by allegations that the Congressional Leadership Fund contribution could have been illegal in the first place, given Chevron’s contracts with the government.

“Under a legislative prohibition known as ‘pay to play’, government contractors can’t make these types of contributions,” Kelly Ngo, a legislative assistant at Public Citizen, a consumer watch group, told IPS. “The law is pretty clear on this.”

In March, Public Citizen and several environment groups filed a joint complaint on the issue with the Federal Election Commission, though the commission has yet to respond. The company, meanwhile, has pointed out that the payment was made through a subsidiary that doesn’t hold a government contract.

In documentation sent to IPS, Chevron’s board unanimously recommended that shareholders vote against the resolution to halt political spending.

“Chevron exercises its fundamental right and responsibility to participate in the political process … [and] advocates positions on proposed policies that will affect the Company’s ability to realize strong financial returns while meeting the world’s growing demand for energy,” the Chevron board states.

“[The] Board is confident that the Company’s political activities are aligned with its stockholders’ long-term interests.”

Ecuador legacy

Two additional resolutions floated by Chevron shareholders on Wednesday dealt with longstanding litigation against the company’s predecessor, Texaco, for having wilfully dumped oil wastes in a remote part of Ecuador from the 1960s until the 1990s. (Extensive documentation on the case can be found here, while Chevron’s responses can be found here.)

While the Ecuadorian courts have repeatedly assessed the company for 19 billion dollars in liability, Chevron has taken an aggressive line in refusing the penalty, saying a multi-million-dollar remediation has already taken place. In an unusual step, in December the company even subpoenaed some of its own shareholders, alleging that they were colluding with the Ecuadorians.

Shareholders floated a related resolution, impugning the Chevron management for the ongoing Ecuador situation, at last year’s meeting.

Although that move was rejected, it did win the backing of around 40 percent of shareholders – slightly more than was ultimately received during Wednesday’s vote, indicating continued shareholder interest to resolve the issue.

Meanwhile, the Ecuadorian plaintiffs, who allege health problems and ruined lands, are now suing Chevron in other countries in which the company operates. Following on an order earlier this month, Chevron CEO John Watson will now have to testify in a fraud-related counter-suit filed by the company against the Ecuadorians.

This year, activists have increasingly targeted Watson himself, singling him out for having originally overseen the acquisition of Texaco.

“My parents both died from cancer due to Chevron’s contamination,” Servio Curipoma, from San Carlos in Ecuador’s northeast, told Chevron shareholders and management Wednesday.

“I am still fighting for justice so that no one else will have to suffer the pain they did, and the loss I have. Chevron has lied to its shareholders, to the world, to me. I’m here on behalf of all of us to say that CEO Watson should be fired.”

Protesters came from environmental justice organisations such as Amazon Watch and Rainforest Action, as well as Ecuador, Nigeria and Angola. Credit: Judith Scherr/IPS

By Judith Scherr
SAN RAMON, California, U.S., May 31 2012 (IPS)

More than 100 people gathered Wednesday outside the gates of Chevron’s sprawling headquarters in upscale San Ramon in the San Francisco Bay area of California, where police and security barred those without passes to the shareholder meeting from entering.

The activists’ message was inscribed on a giant puppet and on the many placards they waved at passing shareholders: “Occupy Chevron and Big Oil,” “Chevron Makes Orphans,” Fracking is Environmental Rape,” “Chevron: Clean UP and Get Out of Metro Manila.”

Participants came from traditional environmental justice organisations such as Amazon Watch and Rainforest Action; their numbers were bolstered by the 99 Percent Power group, a several-months-old coalition that links the Occupy Movement with the fight against corporate greed and targets shareholders meetings.

Inside Chevron headquarters, a more sedate crowd applauded Chevron’s CEO/Chairman of the Board John Watson, who touted last year’s record corporate earnings of 26.9 billion dollars, the company’s improving safety record and Chevron’s efforts to enhance communities they work in.

“Abundant affordable energy raises living standards,” Watson said.

While some came to cheer Chevron’s progress, a number of shareholders and their proxies brought questions and criticisms focused particularly on the environmental degradation they say Chevron causes in its exploration for and extraction of gas and oil around the globe.

In particular, concern was expressed over contamination of parts of the Ecuadorean rain forest by Texaco, Chevron’s predecessor, and a subsequent 18-billion-dollar judgment against Chevron. In January, an Ecuadorean appeals court upheld the judgment.

Watson, however, told shareholders that the court decision is “an example of a fraud being perpetrated on our company”. He said, in fact, the environmental damage in question was caused by the government-owned oil company Petroecuador, which is spending 70 million dollars to remediate “the consequences of their actions”. Chevron will not pay the judgment, he said.

One group of shareholders took on the Ecuador question by calling for better board oversight. They made a formal proposal to improve management by separating the functions of chief executive officer and chairman of the board.

“Mr. John Watson is his own boss,” said Simon Billenness, speaking to shareholders in favour of the proposal on behalf of the Universal Universalist Association.

Billenness criticised a board decision to approve a 75 percent raise for Chevron’s General Counsel, which they said was based on an assessment of “outstanding management” of the case in Ecuador.

“What is ‘outstanding’ about the case is that the Ecuadorian courts have upheld an unprecedented 18-billion-dollar judgment against the company,” Billenness said, adding that plaintiffs plan to pursue Chevron’s assets in various countries outside Ecuador.

Separating the functions of the CEO and board chair would promote more independent oversight, Billenness said, noting that while the proposal lost, it did get 38 percent, up from 14 percent when the shareholders voted on the same question in 2008.

Other proposals impacting safety and the environment also failed. One would have reserved one board slot for an environmental expert; another called for better accountability around safety issues; and a third proposed preparation of a report to investors on the risks associated with hydraulic fracturing, a controversial process of extracting oil or gas from shale rock that involves shooting water, sand and chemicals down a well.

The shareholder question period got testy. First to line up at the microphones were two Watson supporters.

Shelton Ehrlich blasted those who brought the pro-environment, pro-safety proposals to the meeting. “They were brought to us by left-wing and corrupt groups,” he said, asking Watson, “Why do you put up with this crap?”

Susan Rutherford followed by thanking the corporation “for fighting the shakedown in Ecuador”.

Most of the speakers who followed travelled to San Ramon from the areas they said were contaminated by Chevron.

Luz Cusangua, who is from the damaged region in Ecuador, called on Chevron to take responsibility. “Our children are deformed, while you are celebrating profits,” she said, speaking through a translator.

Emem Okon of the Kebetkache Women Development & Resource Center in Nigeria told shareholders about a fire at a Chevron oil installation that burned for 46 days, contaminating the area and destroying the people’s livelihoods.

Cristóvão Luemba from Angola said, “Chevron’s policies in Cabinda are endangering our communities, particularly the fisheries.” He charged Chevron with daily unreported oil spills.

“When are you going to start acting right and stop thinking about your profits?” he asked.

Henry Clark of the West County Toxics Coalition described problems stemming from the Chevron refinery in Richmond, California, some 35 miles from San Ramon. He talked about the “block toxic smoke” that lasted a week during a recent flare-up at the refinery, and asked the board not to further burden the already overburdened people of Richmond with increased emissions from a new facility being planned.

The Richmond refinery is the largest single stationary source of greenhouse gases in California, according to Antonia Juhasz, writing in the “True Cost of Chevron“, an alternative annual report on Chevron.

Watson responded to each speaker. In Nigeria, Chevron addresses community needs through job creation and microlending programs, he said, and in Angola, the company takes responsibility for the spills that are Chevron’s.

“We have a policy to report every spill,” he said, arguing however that most of the spills are not Chevron’s. He talked about jobs programmes in Richmond and said that city has “some of the cleanest air in the Bay Area”.

Much to the chagrin expressed loudly by a number of activists in the meeting, João Antonio de Moraes, coordinator with the United Federation of Oil Workers in Brazil, was not admitted to the shareholders’ meeting. (He was told there was a problem with his proxy, though he said it was in order.)

In his place, Antonia Juhasz of the True Cost of Chevron coalition told shareholders about a spill in Brazil for which Chevron will be asked to pay around 22 billion dollars.

Watson took responsibility, to a degree. “We regret the 2,400 barrel spill,” he said, explaining that, working closely with the Brazilian government, they were able to stop the spill within four days.

“There was no damage to the environment,” he said, adding, “We’re not perfect. We have made mistakes and we learn from them.”

Unable to enter the meeting, Moraes addressed the activists on the sidewalk outside Chevron headquarters.

“We, Brazilian oil workers, we agree that Chevron is afraid of the people,” he said, speaking through a translator. “What they did on the coast of my country, on the beach outside Rio De Janeiro, a spill of almost a whole kilometre long, we’re going to demand that they pay for this….The force is with us, with the people, and not with the arrogance of Chevron.”