Both inquiries raise the fundamental issue of whether the current system has, in fact, failed investors and the public at large.Ĭurrently, the SEC requires full disclosure of all information deemed “material” for investors in companies’ regulatory filings, while everything else is voluntary. ![]() In the U.S., the SEC and the New York attorney general are pressing Exxon hard to disclose more of this information in its financial statements. Intensifying price competition from cleaner energy sources such as natural gas and solar energy and the increasing cost of developing “clean coal” to satisfy government criteria overwhelmed the industry’s already declining revenue. The collapse in coal equities last year highlighted that concern. Those limits hinge on keeping global warming to no more than 2 degrees Celsius over pre-industrial levels, although some have warned that even warming of 2 degrees is unsafe. Stranded assets are mainly oil and gas reserves that might have to stay in the ground as a result of policy actions that seek to limit greenhouse gas emissions. Regulators in both the United States and Europe have been urging oil and gas companies to say more about the potential for their booked assets to become “stranded” over time. A growing body of academic research, including our own, however, suggests markets have access to substantial climate risk information, and that the SEC and others would be wise to tread carefully. Some, like Carney, are worried about a financial crisis similar to 2008/09.Īll this is premised, however, on the notion that investors don’t already have enough information to accurately price in the impact of climate change. ![]() Bank of England Governor Mark Carney and others worry that the under-reporting of climate change information is creating a big risk for financial markets – a carbon “bubble” – that could lead to a major market failure. This debate matters not only to investors but to the public as well. Disclosure advocatesare pressing the SEC to take more decisive action.īut what’s the proper policy that balances the need for disclosure with its costs and impact on confidentiality? That probe and others build on the claim that the present system of voluntary and mandatory disclosure has failed investors by not providing enough information on the risks of climate change. It follows the opening of a Securities and Exchange Commission (SEC) investigation into how Exxon discloses the impact of that risk on the value of its reserves. As governments step up efforts to regulate carbon emissions, the thinking goes, fossil fuel companies’ assets are worth less. Some took Exxon’s statement as evidence that the fossil fuel industry is not doing enough to inform investors about climate change risk. The company said that 4.6 billion barrels of oil and gas assets – 20 percent of its current inventory of future prospects – may be too expensive to tap. ![]() 28 that it may have to take the largest asset write-down in its history. The announcement is the latest sign of how the industry-wide downturn has dragged down ExxonMobil, which was bumped from the prestigious Dow index earlier this year.Paul Griffin, University of California, Davis and Amy Myers Jaffe, University of California, DavisĮxxon Mobil announced on Oct. “Continued emphasis on high-grading the asset base – through exploration, divestment and prioritisation of advantaged development opportunities – will improve earnings power and cash generation, and rebuild balance sheet capacity to manage future commodity price cycles while working to maintain a reliable dividend,” said chief executive Darren Woods. To raise money, the company also plans to divest less strategic assets, depending on market conditions. ![]() Exxon Mobil said on Monday it will write down as much as $20 billion (€16.7bn) in assets as the oil giant slashes capital spending due to low oil prices amid the coronavirus pandemic.ĮxxonMobil, which has reported losses the last three quarters, said it will account for a $17-20 billion write-down in the fourth quarter based on shifting assets from the United States, Canada and Argentina out of its development plan.
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