Oil companies used to deny that the product they sell causes climate change; now they deny what climate change means for future sales of their product \u2014 or, at least, some of them don\u2019t want to talk about it to their shareholders. So it might be time for the federal government to set some ground rules.<\/p>\n
On the same day that the world\u2019s largest private asset manager, BlackRock, called on companies<\/a> to be more forthright about the risks to their business posed by climate change, Imperial Oil, the Canadian arm of ExxonMobil,\u00a0 downplayed those risks to its shareholders.<\/p>\n In the 149 pages of financial and shareholder reports<\/a> Imperial Oil sent to its shareholders in advance of its 2017 annual general meeting, the words \u201cclimate change\u201d appear only twice and \u201cgreenhouse gases\u201d only three times. The section on climate risk to the company\u2019s business model is short and vague:<\/p>\n International accords and underlying regional and national regulations covering greenhouse gas emissions continue to evolve with uncertain timing and outcome, making it difficult to predict their business impact. Imperial\u2019s estimate of potential costs related to possible public policies covering energy-related greenhouse gas emissions are consistent with those outlined in ExxonMobil\u2019s long-term Outlook for Energy<\/em>, which is used as a foundation for assessing the business environment and Imperial\u2019s investment evaluations.<\/p>\n This statement stands in sharp contrast to Chevron\u2019s most recent filing<\/a> with the US Securities and Exchange Commission (SEC), which has a long section beginning, \u201cRegulation of greenhouse gas (GHG) emissions could increase Chevron\u2019s operational costs and reduce demand for Chevron\u2019s hydrocarbon and other products.\u201d Climate change regulation \u201ccould have the impact of curtailing profitability in the oil and gas sector or rendering the extraction of the company\u2019s oil and gas resources economically infeasible,\u201d and the company noted that \u201cincreasing attention to climate change risks has resulted in an increased possibility of governmental investigations and, potentially, private litigation against the company.\u201d<\/p>\n The latter point is likely inspired by Exxon\u2019s predicament. It faces several challenges:<\/p>\n Imperial explicitly cites ExxonMobil\u2019s Outlook for Energy<\/em><\/a> report to downplay the risk to the corporate bottom line posed by policy action on climate change. The basic argument in the report and in the related Exxon document Energy and Carbon: Managing the Risks<\/em><\/a> is that fossil fuels will continue to dominate the energy mix because governments won\u2019t bring in strong climate regulations. In Exxon\u2019s words:<\/p>\n Our Outlook for Energy<\/em> does not envision the \u201clow carbon scenario\u201d advocated by some because the costs and the damaging impact to accessible, reliable and affordable energy resulting from the policy changes such a scenario would produce are beyond those that societies, especially the world\u2019s poorest and most vulnerable, would be willing to bear, in our estimation.<\/p>\n But does Exxon\u2019s Outlook for Energy<\/em> use reasonable assumptions? The new Forecasting Failure<\/em><\/a> report prepared by Greenpeace and Oil Change International examines how energy models produced by Exxon, Shell and BP are constructed and highlights their central weakness: by extrapolating existing trends, they tend to predict that the future will be just like the present, while masking underlying potential for disruption. The report<\/p>\n It finds that the companies are highly vulnerable to disruption by clean energy technologies, and that their forecasts are playing an unhelpful role in the climate debate.<\/p>\n In Imperial\u2019s case, assuming lack of government action on climate change is particularly wrong-headed. The majority of its current and planned production is in the Alberta tar sands, where the provincial government has announced<\/a> a higher carbon price and a cap on greenhouse gas emissions from oil . Imperial was the only major oil company to not support<\/a> this policy package.<\/p>\n Furthermore, the federal government has signed on to the Paris Agreement goal of limiting warming to well below 2 degrees Celsius. In the International Energy Agency<\/a>\u2019s scenario that has a 66 percent chance of keeping warming below 2 degrees, half of global oil reserves are \u201cunburnable.\u201d The demand for oil in this scenario drops to 40 percent below current levels in 2040, and by over 55 percent by 2050.<\/p>\n These are the kinds of things that your shareholders might be interested in hearing about. It\u2019s also a broader concern for Mark Carney (former governor of the Bank of Canada and current governor of the Bank of England), who gave a remarkable speech<\/a> in September 2015 on the financial risks posed by climate change. Carney said:<\/p>\n There are three broad channels through which climate change can affect financial stability:<\/p>\n First, physical risks: the impacts today on insurance liabilities and the value of financial assets that arise from climate- and weather-related events, such as floods and storms that damage property or disrupt trade;<\/p>\n Second, liability risks: the impacts that could arise tomorrow if parties who have suffered loss or damage from the effects of climate change seek compensation from those they hold responsible. Such claims could come decades in the future, but have the potential to hit carbon extractors and emitters \u2014 and, if they have liability cover, their insurers \u2014 the hardest;<\/p>\n Finally, transition risks: the financial risks which could result from the process of adjustment towards a lower-carbon economy. \u00a0Changes in policy, technology and physical risks could prompt a reassessment of the value of a large range of assets as costs and opportunities become apparent.<\/p>\n With respect to the valuations of specific companies, he added, \u201cWhile a given physical manifestation of climate change \u2014 a flood or storm \u2014 may not directly affect a corporate bond\u2019s value, policy action to promote the transition towards a low-carbon economy could spark a fundamental reassessment.\u201d More recently, the Financial Stability Board (FSB), where Carney is the chair, wrote to the G20 finance ministers and central bankers<\/a> to argue that addressing climate-related financial risks should be one of the priorities for their March 2017 meeting in Baden-Baden.<\/p>\n A speech<\/a> by Timothy Laine, deputy governor of the Bank of Canada, in early March, had followed similar themes. He warned that \u201cwhile the economic costs of climate change are uncertain they are likely to be significant. In Canada alone, it has been estimated that, in the absence of action to address global warming, we would face annual costs of between $21 billion and $43 billion by the 2050s.\u201d<\/p>\n Laine added that alongside carbon pricing, corporate disclosure of those risks is a big part of the solution: \u201cAll investors need to know whether and how companies are exposed to any risks associated with climate change, including the impact of policy changes. For example, will the shift to a lower-carbon economy affect an oil company\u2019s profitability, either through tax changes or reduced demand for oil? Will certain oil reserves become uneconomic \u2014 aka \u2018stranded assets\u2019?\u201d<\/p>\n It is an inconvenient truth that business models of companies like Imperial can work only in a world with catastrophic levels of global warming. That\u2019s a gamble they may be willing to take, but given what is at stake they should be upfront with investors and the public that this is what they are doing. And given the climate fraud allegations plaguing Imperial\u2019s majority owner, ExxonMobil, they should probably be more upfront about the risks of litigation as well.<\/p>\n Mark Carney and the financier Michael Bloomberg are working together through the FSB\u2019s Task Force on Climate-Related Financial Disclosures<\/a> to develop \u201cvoluntary, consistent climate-related financial risk disclosures for use by companies in providing information to investors, lenders, insurers, and other stakeholders.\u201d The Greenpeace-Oil Change International report<\/a> includes a comparative analysis of the oil majors\u2019 current approaches to thinking about energy futures and recommends more robust ways to think about the future of energy, echoing the aims of the FSB task force.<\/p>\n Canada\u2019s security regulators have taken note, and on March 21 they pledged to undertake their own review<\/a> of climate disclosure in this country. Yet there is no indication that this will be more than an information-gathering exercise.<\/p>\n Voluntary reporting has limits, especially when companies have a strong self-interest in downplaying risks. One of the key findings<\/a> of the FSB task force is that \u201cthe success of these recommendations depends on near-term, widespread adoption by organizations in the financial and non-financial sectors\u201d and that \u201cwidespread adoption of the recommendations will require ongoing leadership by the G20 and its member countries.\u201d<\/p>\n Given what is at stake in an economy like Canada\u2019s, which has an outsized exposure to potentially stranded assets in the oil sands, our federal government should consider building on the FSB\u2019s proposed guidelines to enact mandatory requirements. Anything less leaves us wilfully blind to the hazards of responsible investing in the age of climate change.<\/p>\n Photo: Shutterstock.com<\/span><\/p>\n Do you have something to say about the article you just read? Be part of the\u00a0<\/em>Policy Options\u00a0discussion, and send in your own submission.\u00a0Here is a\u00a0<\/em>link<\/em><\/a>\u00a0on how to do it. <\/em>|\u00a0Souhaitez-vous r\u00e9agir \u00e0 cet article ? <\/em>Joignez-vous aux d\u00e9bats d\u2019<\/em>Options politiques\u00a0et soumettez-nous votre texte en suivant ces\u00a0<\/em>directives<\/em><\/a>.<\/em><\/p>\n","protected":false},"excerpt":{"rendered":" Oil companies used to deny that the product they sell causes climate change; now they deny what climate change means for future sales of their product \u2014 or, at least, some of them don\u2019t want to talk about it to their shareholders. So it might be time for the federal government to set some ground […]<\/p>\n","protected":false},"featured_media":252949,"template":"","meta":{"_acf_changed":false,"content-type":"","ep_exclude_from_search":false,"apple_news_api_created_at":"2025-10-08T01:33:05Z","apple_news_api_id":"de5bfe6a-59ff-4ae1-ab44-5ca867e902ff","apple_news_api_modified_at":"2025-10-08T01:33:05Z","apple_news_api_revision":"AAAAAAAAAAD\/\/\/\/\/\/\/\/\/\/w==","apple_news_api_share_url":"https:\/\/apple.news\/A3lv-aln_SuGrRFyoZ-kC_w","apple_news_cover_media_provider":"image","apple_news_coverimage":0,"apple_news_coverimage_caption":"","apple_news_cover_video_id":0,"apple_news_cover_video_url":"","apple_news_cover_embedwebvideo_url":"","apple_news_is_hidden":"","apple_news_is_paid":"","apple_news_is_preview":"","apple_news_is_sponsored":"","apple_news_maturity_rating":"","apple_news_metadata":"\"\"","apple_news_pullquote":"","apple_news_pullquote_position":"","apple_news_slug":"","apple_news_sections":[],"apple_news_suppress_video_url":false,"apple_news_use_image_component":false},"categories":[9362,9361,9372],"tags":[8638,8653],"article-status":[],"irpp-category":[4245,4327,4261],"section":[],"irpp-tag":[],"class_list":["post-264976","issues","type-issues","status-publish","has-post-thumbnail","hentry","category-economie","category-environnement","category-recent-stories-fr","tag-changements-climatiques","tag-fossil-fuels-fr","irpp-category-economie","irpp-category-energie","irpp-category-environnement"],"acf":[],"apple_news_notices":[],"yoast_head":"\n\n
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