NY State, Church of England Team Up on Exxon over Emissions

New York State Comptroller Thomas P. DiNapoli and the Church Commissioners of England are pushing a shareholder resolution against ExxonMobil, with the help of a consortium of other large institutional investors. In total, they have about $1.9 trillion in assets.

The proposal demands the oil giant announce greenhouse gas reduction targets to keep the company’s practices in line with the Paris Accords, which seek to control the global average temperature and reduce its carbon footprint.

“ExxonMobil’s lack of GHG emissions reduction targets puts it at odds with its industry peers that have taken such steps,” said DiNapoli, who is the trustee of the $207.4 billion New York State Common Retirement Fund. “The world is transitioning to a lower carbon future and Exxon needs to demonstrate its ability to adapt or risk its bottom line along with investors’ confidence.”

The resolution wants ExxonMobil to set short-, medium-, and long-term targets for the gas reductions, following in the footsteps of fellow oil barons Royal Dutch Shell and Total, which have begun setting these targets following shareholder engagement from institutions.

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Edward Mason, head of responsible investment for the Church Commissioners, the Church of England’s investment arm, wants the business to “develop a clear strategy for long-term sustainability” while keeping up with the Paris Agreement’s requests. “While we have been pleased to see ExxonMobil start to address the impact of climate change on its business over the past two years, the company has much more to do. Our request would bring Exxon in line with its biggest European peer, Shell, and we believe the board can and should support it.”

The proposal was developed with the expectations of the Climate Action 100+ initiative, a group of global investors pressuring the largest oil organizations to take the action to keep their end of the Paris bargain. The group represents 310 investors with more than $32 trillion in assets under management. It is the largest shareholder engagement initiative on climate change.

“As the use of zero- and low-carbon technology increases due to technical breakthroughs and decreasing costs, and as governments take steps to limit greenhouse gas emissions, fossil fuel companies face enhanced risk,” reads the proposal. “These trends could limit returns to ExxonMobil’s investors by increasing the company’s operating costs or by reducing demand for its products.”

The resolution is expected to be voted on at ExxonMobil’s annual shareholder meeting next spring.

ExxonMobil could not be reached for comment.

Tags: Church Commissioners, ESG, ExxonMobil, New York State Common Retirement Fund (NYCRF), Paris agreement

The stock market took yet another pasting Monday, as investors quivered in fear over a Chinese growth-rate decrease, the Sino-American trade war, limping oil prices, woes in Europe and emerging nations—and an expected US earnings fall-off. Lurking behind the curtain, like a long-fanged movie monster, is the prospect of a recession.

Fear not, says Sam Stovall, chief investment strategist of US equity strategy at CFRA. What he calls an “EPS recession” always precedes an economic one. In an earnings recession, profits indeed slide, but you don’t get surges in unemployment and business failures, plus economic contraction, that you do in an economic recession.

Stovall doesn’t think the US will experience either kind. So don’t expect a bear market, let alone a recession, he says.

“We believe investors are premature in projecting the start of an EPS recession, and therefore an economic contraction,” he wrote in a Monday research note. Right now, from the October high, the S&P 500 is down almost 13% (in price terms, not including dividends).

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Earnings are usually the most important factor driving stocks, so the expectation that the roaring growth of earnings is subsiding has given a lot of investors the heebie-jeebies. It’s also interesting to note, from Stovall’s data, that there have been three post-World War II EPS recessions where no economic recession materialized. The last EPS recession began in 2015.

For the record, CFRA forecasts that S&P 500 EPS growth will decelerate from its third quarter 2018 peak of 28.6% to 5.2% in next year’s third period. From that point, earnings pick up to a 12% increase through 2020’s third quarter.

Tags: Earnings, S&P 500, Stock Market