This year, the New York State Attorney General filed a lawsuit in NY State Supreme Court against Exxon Mobil alleging the firm violated the securities fraud provisions of a 1921 New York statute called the Martin Act in connection with their public disclosures of the future costs of complying with climate change regulations, as well as the future of the company’s existing energy processes. The Attorney General alleged that Exxon misrepresented to stockholders climate change risks by excluding its public estimates of climate change costs, substituting lower internal estimates when evaluating business risks. The AG stated that this maneuver gave investors the impression that Exxon was a safer investment than it may be and caused its stock price to be overvalued.

Public corporations are required to disclosure fully to its investors complete and accurate available data of all matters related to the business’s viability. Recent rulings include risk pertaining to climate change, even if hard numbers are not attainable. While projecting business impacts from physical, business, and regulatory risks of climate change is not definitive, the NY AG believes Exxon knowingly misled the public.

Climate change business risk is focused on the oil and gas industry, as climate change may make their very business obsolete or too costly, not to mention the means it must endeavor to get oil and gas (more physically difficult). Another risk that Exxon did not disclose but is of growing importance to the oil and gas industry is the growing global movement for carbon taxes, which would hit this industry hardest.

While Exxon will, no doubt, vigorously defend itself against this lawsuit, the pending litigation does portend the future importance of changing regulations, sound data gathering, risk assessment, and clear communication by public companies now applied to climate change.

This is a non-legal assessment of developments. If you have further interest, please engage qualified legal professionals. CCES has the experts to help your entity assess the technical and physical aspects of climate change and advise on technical policy to address these issues. Contact us today at karell@CCESworld.com or at 914-584-6720.