Exxon is on trial for ‘misleading’ investors about climate change

‘Unprecedented’. That’s how the BBC described the climate change lawsuit against Exxon Mobil. But will it fall at the first hurdle or does this have legs?

New York State has accused the American oil giant of misleading investors about the impact of climate change to its bottom line. But Exxon says the claims are ‘baseless’ and ‘politically-motivated’.

Week one failed to deliver any concrete evidence from witnesses around the difference between two measures of climate costs which the company used. One – a public ‘proxy cost’ for what future energy demand would look like amid changing regulations and future tastes, and the other an internal measurement which was applied when deciding what to invest on new projects like drilling.

Let’s be clear: Exxon doesn’t deny this. But it argues the calculations were ‘proprietary’ and not misleading.

However New York state says that by evaluating new projects based on costs that were lower than it told investors it was using – the projects appeared less risky and more valuable: “By representing that it was applying higher projected carbon costs than it was actually using, ExxonMobil made its assets appear significantly more secure than they really were, which had a material impact on its share price.”

For years the company faced pressure from activists to be transparent about what the future impact from climate change might be on its fortunes, as they believed this could cause a movement away from fossil fuels and into renewables. As far back as 2013 shareholders were asking the same questions.

Now into week two, it remains the case that none of the documents show a deliberate plan of the type suggested by the New York Attorney General Letitia James. Robert Bailes, Exxon’s former greenhouse gas manager, said: “We’re not trying to trick ourselves with our own internal documents.”

However as Bloomberg reports, James doesn’t actually have to prove Exxon was tricky anyone. The case has been brought under the anti-fraud law Martin Act, and ‘intent’ doesn’t have to be proven. “This is precisely why New York is pursuing Exxon under the Martin Act,” said James Fanto, a professor at Brooklyn Law School. “New York could prevail if it showed that Exxon’s disclosure had a kind of fraudulent effect in misleading shareholders.”

A highly anticipated witness is Rex Tillerson, who left the company to serve as President Trump’s first secretary of state. Buzzfeed reports that the New York investigation previously revealed Tillerson had used a second secret email address when he acted as CEO which Exxon ‘cannot say.. if it deleted emails from..’.

Similar action is taking place against other fossil fuel companies. BP, Chevron, ConocoPhillips and Royal Dutch Shell are also facing heat from the New York courts for their role in climate change. It follows cases of six California cities and counties which filed lawsuits against the same companies last year. Only Shell commented that: “Climate change is a complex societal challenge that should be addressed through sound government policy and cultural change to drive low-carbon choices for businesses and consumers, not by the courts.”