Four members of Congress asked the Securities and Exchange Commission late Friday to investigate ExxonMobil’s past federal filings to determine if the company violated securities laws by failing to adequately disclose material risks to its business posed by climate change.
The letter to the SEC from members of the House Oversight and Government Reform Committee, led by California Democrat Ted Lieu, cites recent separate investigative series by InsideClimate News and The Los Angeles Times regarding Exxon’s early research into climate change. The articles revealed that Exxon’s top management (NYSE: XOM) knew as far as back as the late 1970s of the threat of global warming from the burning of fossil fuels. A decade later, the company spearheaded industry efforts to derail regulation of greenhouse gas emissions and cloud public understanding of climate science.
The call for an SEC inquiry is the latest in a growing chorus of lawmakers, politicians and activists pressing for federal probes into Exxon’s handling of climate change. Members of the House and Senate have asked the Justice Department to investigate the company. Late last week, Democratic presidential frontrunner Hillary Clinton joined fellow candidates Bernie Sanders and Martin O’Malley in demanding a Justice Department inquiry. A coalition of nearly 50 environmental and other watchdog groups last Friday also mounted a campaign for an investigation.
Senate Democrats led by Rhode Island’s Sheldon Whitehouse wrote ExxonMobil’s chief executive Rex Tillerson last week asking if the company sent donations to a financial clearinghouse that backed climate denial efforts after the oil giant said it had stopped directly funding such groups.
The letter to the SEC was signed by Lieu and fellow Democrats Mark DeSaulnier of California, Matthew Cartwright of Pennsylvania and Peter Welch of Vermont. Two weeks ago, Lieu and DeSaulnier were among the first to write to Attorney General Loretta Lynch requesting a Justice Department investigation.
“Companies need to be held accountable if they massively defraud the public. This is owed to the American people and to shareholders. It is also the law,” Lieu said in an email. “There has been enough evidence uncovered in the media reports to warrant an SEC investigation to see if ExxonMobil violated securities laws.”
SEC spokeswoman Judith Burns declined to comment on the letter.
As early as 1977, Exxon scientists repeatedly briefed the company’s top executives of the probability of rising global temperatures driven largely by fossil fuel use and the potentially catastrophic effects of a warmer world. Exxon scientists and managers warned of possible future policies to cut fossil fuel emissions, internal memos show, and the company established an ambitious in-house climate research program in part to have a credible voice in the development of such rules.
Starting in 1981, the company delayed the development of the massive Natuna natural gas field in the South China Sea because of the vast amounts of carbon dioxide it believed it would release. Natuna was ultimately shelved in the 1990s because of the CO2 question.
Yet federal securities filings from the 1980s indicate that Exxon did not elaborate on the problem of climate change, or spell out the possible risks to its own business, such as those reflected in its deliberations on Natuna.
When it eventually acknowledged the issue to stockholders, the company emphasized the scientific uncertainty around climate change and concern that regulation could stifle business and the economy.
An early reference in filings comes in 1991, when Exxon tells shareholders of funding climate studies. But the statement fails to convey the breadth of its internal research or the warnings its scientists were relaying to top management.
Instead, Exxon emphasized that there was too little scientific evidence to compel action. “We recognize that potential global climate change is a concern to many, and we will continue to back efforts to learn more about it,” according to the company’s 1997 annual report filed with the SEC.
Eventually, the company told shareholders in 2001: “ExxonMobil recognizes that the risk of climate change and its potential impacts on society and ecosystems may prove to be significant.”
In 2010, the SEC issued guidance requiring publicly traded companies to disclose material risks that climate change could pose to their businesses, including threats to facilities and infrastructure and the impact of emission reduction rules on corporate income.
Oil companies, including Exxon, have a record of weak disclosure of climate risks, analysts have found. Last week, 35 members of both houses of Congress, led by Senators Jack Reed (D-R.I.) and Brian Schatz (D-Hawaii) and Representative Matt Cartwright (D-Pa.) sent the SEC a letter asking what the commission is doing to enforce corporate disclosure of climate risks. The lawmakers suggested that the SEC needs to press for more meaningful information from corporations.
The lawmakers wrote: “With extreme weather and sea-level rise expected to worsen in the coming years, we believe that the SEC may need to redouble its efforts to ensure that all reporting companies are in conformance with the SEC’s Climate Change Guidance.”