ExxonMobil has been sued by New York state’s attorney general for allegedly misleading investors over the risks that climate change regulations posed to its business. The suit claims that while Exxon had been telling investors for more than a decade that it had used an implied cost of carbon in its investment decisions, its statements were “materially false and misleading”. The use of this “proxy cost of carbon”, projected to rise over time, was presented by the company as a way to incorporate expected future curbs on emissions into its business planning.
However, the attorney-general’s office alleges that Exxon was in fact often using a lower undisclosed carbon price or no price at all when it made decisions. As a result, the attorney-general’s office said, the company was “deceiving investors as to the company’s true financial exposure to increasing regulations and policies adopted to mitigate the adverse effects of climate change”. It accused Rex Tillerson, who was Exxon’s chief executive from 2006 to 2016 when he became President Trump’s secretary of state, of having known for years that the statements about its use of a proxy cost of carbon were misleading.
The attorney-general’s filing at a state court in New York said it was seeking damages, restitution for investors, and “such other and further equitable relief as may be necessary to redress Exxon’s violations of New York law and its fraudulent and deceptive acts”. The action is being brought under the state’s Martin Act, a wide-ranging law that prohibits companies and individuals from making “any representation or statement which is false” when they knew or should have known the truth. The attorney-general’s office added that Exxon had marketed itself as a secure long-term investment, and had courted long-term investors including New York state pension funds which have about 1.4m members and hold Exxon shares with a combined value of approximately $1.5bn. Barbara Underwood, the attorney-general, said: “Investors put their money and their trust in Exxon — which assured them of the long-term value of their shares, as the company claimed to be factoring the risk of increasing climate change regulation into its business decisions.
Yet as our investigation found, Exxon often did no such thing.” The company said it “looked forward to refuting these claims as soon as possible and getting this meritless civil lawsuit dismissed”. In a statement it said: “These baseless allegations are a product of closed-door lobbying by special interests, political opportunism and the attorney general’s inability to admit that a three-year investigation has uncovered no wrongdoing.”