Ahead of oil and gas giant ExxonMobil's virtual annual shareholders meeting Wednesday morning, scores of international climate, human rights, faith, and Indigenous groups launched the Finance Climate Challenge, calling on the global financial sector to "end its support for fossil fuels and climate chaos."
"Exxon's investors must divest, with any reinvestment conditional on the company's pledge to stop expanding and wind down."
--Clara Vondrich, Stand.earth
Unveiled Tuesday, the challenge urges investors--including asset managers, pension funds, and endowments--to pull support for new fossil projects, "drop any coal, oil, gas, or petrochemical company that does not immediately stop expansion and wind down existing operations," and shift their money to funding climate solutions.
"Maintaining a safe climate requires an ambitious just transition away from fossil fuel production starting now," Hannah McKinnon of Oil Change International said in a statement Tuesday. "There is more carbon than we can afford to burn in already operating oil, gas, and coal fields and mines. New production is not Paris-compatible and investors should plan a fast exit from any company that says otherwise."
The 2015 Paris climate agreement aims to keep global temperature rise this century well below 2degC and encourages efforts to limit it to 1.5degC.
"The fossil fuel industry's plans for expansion undermine the Paris agreement, accelerate the climate crisis, violate the human rights of Indigenous peoples and impacted communities, and put all life--present and future--at grave risk," the challenge says. "These are also bad investments: The fossil fuel industry is lagging the market, with sustained underperformance for over a decade. Ahead, investors face abrupt capital destruction as fossil fuels are repriced and stranded."
"The climate emergency demands swift action," the challenge continues. "Further shareholder engagement with the fossil fuel industry only delays the rapid shift to clean energy needed to meet the Paris climate goals. Prudent fiduciaries must act now to protect portfolios and the planet. It's time for the finance sector to make a clean break with dirty energy."
The challenge makes six broad arguments to the financial sector:
- The Paris agreement requires a rapid phaseout of fossil fuels;
- The fossil fuel industry's expansion plans defy the Paris agreement;
- Shareholder engagement cannot transform the fossil fuel industry in time;
- Leaders across science, finance, and civil society demand an end to investment in fossil fuels;
- Indigenous rights must be protected; and
- Prudent investors are divesting from fossil fuels.
The arguments reference research and warnings from experts and activists about what it will take for the international community to reach the Paris goals, including findings from a 2018 Intergovernmental Panel on Climate Change (IPCC) special report on 1.5degC of warming and a pair of 2019 United Nations Environment Program (UNEP) reports on fossil fuel emissions and production.
Rather than winding down fossil fuel business and returning value to shareholders, or shifting to the production of renewable energy at scale, "the industry is set to spend close to $5 trillion on new exploration and extraction over the next decade while investing billions more in new, high emitting infrastructure for plastics and petrochemicals," the challenge warns.
Pushing back against energy industry claims that Carbon Dioxide Removal (CDR) technologies will be available to offset future emissions that would be generated from fossil fuel expansion, the challenge notes that both the IPCC and UNEP have warned of "multiple feasibility and sustainability constraints."
"The false hope of CDR reduces ambition for vital emissions reductions, locks in fossil fuel infrastructure for decades, fails to reduce deadly air pollution generated by burning fossil fuels, and poses profound risks to human lives, communities, and natural environments," the challenge says. "It is unethical to stake humanity's future on an unproven technology."
Acknowledging the fossil fuel industry's long track record of ignoring and trampling on the rights of Indigenous Peoples, the challenge also pressures investors and insurers to implement practices that respect the right to Free, Prior, and Informed Consent (FPIC) as defined in the U.N. Declaration on the Rights of Indigenous Peoples (UNDRIP).
"Fossil fuels are a bad investment, not only from an environmental and human rights perspective, but also from a financial one," said Nikki Reisch of the Center for International Environmental Law. "Financing new oil and gas developments is throwing money down a hole and, ultimately, bankrolling disaster. Investors should not allow CDR or other industry-backed technological quick-fixes to distract from the only reliable solution to climate change: shifting away from fossil fuels."
The challenge also calls out the fossil fuel industry as a bad faith partner in shareholder negotiations, condemning industry concessions as "cynical and inadequate" and pointing to over $1 billion dollars in lobbying to prevent climate action since the Paris accord.
"Shareholder engagement with the oil industry has failed. Nowhere is it more clear than with Exxon," Clara Vondrich, director of climate finance at Stand.earth, said Tuesday. "The architect of climate denial and delay is now pushing us to the brink with a reckless expansion agenda prioritizing growth of its oil and petrochemical business. Exxon's investors must divest, with any reinvestment conditional on the company's pledge to stop expanding and wind down."
The Finance Climate Challenge echoes and is backed by several organizations behind Stop the Money Pipeline, a campaign that climate, youth, and Indigenous groups kicked off in January to pressure banks, insurers, and asset managers to stop funding climate destruction. In social media posts about the challenge, some supporters referenced the campaign by including the hashtag #StopTheMoneyPipeline.
