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Pension funds exercise their energy muscle

Pension funds are putting pressure on ExxonMobil to start telling its shareholders how climate change will affect the oil giant’s business, according to Ben Walsh at the Huffington Post:

“The California public employee pension fund and the New York City pension fund, which together manage $433 billion in investments, told fellow shareholders in a letter to support a resolution calling for the company to disclose in detail how it could be harmed by new government policies limiting carbon emissions and other shifts due to climate change.”

Energy companies have already faced several shareholder revolts arising from concerns about the impact of climate change policies and because of the current world over-supply of oil and gas.  The trend adds additional pressure to companies that have already lost investment due to the various divestment campaigns around the world.

At present, energy companies are not obliged to provide a risk assessment of the impact of climate change policy on their business.  However, the widely held view is that energy companies have under-stated the potential risks to their shareholders.  In future, shareholders – including institutional shareholders like pension funds – may well demand higher dividends to reflect the additional risk of investing in fossil fuels.  If so, this could limit the capital available for further exploration in future.

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