Investors, Science Group Pressure Oil Companies to Disclose Climate Risks

New Study Examines Storm Surge, Sea Level Rise at Large U.S. Refineries; Phillips 66 Issues New Disclosure, Can Do More, Groups Say

Published Feb 24, 2015

WASHINGTON (Feb. 25, 2015)—Five major oil and gas companies aren’t doing enough to disclose risks from climate change to the U.S. Securities and Exchange Commission (SEC), including sea level rise and storm surge, according to a new report from the Union of Concerned Scientists (UCS). Several investment groups, including Calvert Investments Management, joined UCS and Ceres today in sending letters to the five companies—Chevron, Exxon Mobil, Marathon Petroleum, Phillips 66, and Valero—expressing concern about these risks. Calvert has also filed a shareholder resolution with Phillips 66 urging the company to disclose climate risks.

The UCS report, “Stormy Seas, Rising Risks: What Investors Should Know About Climate Change Impacts at Refineries,” uses storm surge modeling and geospatial data to map risks associated with flooding at coastal refineries.

“Climate change isn’t a distant threat,” says Gretchen Goldman, a lead analyst for the Center for Science and Democracy at UCS and one of the report’s authors. “Coastal refineries are already incurring costs from sea level rise and storm damage. Whether or not refiners think they will be able to manage these risks, they owe it to their shareholders to disclose them.”

While the report looks at five refineries in particular, there are 120 oil and gas facilities across the country situated within 10 feet of today’s high tide line. The report examines several ways in which climate change increases storm surge flooding risks at coastal facilities, including rising seas and increasing storm intensity. The report chronicles the costly storm-induced shutdowns and disruptions these refineries have previously faced.

The SEC asks public companies to disclose such climate-related risks to investors, yet many companies fail to do so in their filings to the agency. If companies fail to disclose and manage these risks, investors and taxpayers will likely bear the costs of future disasters, the report finds.

For the most part, companies simply do not disclose these risks or instead only address perceived risks from climate legislation. Of the companies examined, Phillips 66 does the most to disclose physical risks at its facilities, but only in general terms. The company’s latest disclosure, which was just published last week, calls the effects of climate change on its facilities “highly uncertain.” The company lists sea-level rise, changing storm patterns and intensities and changing temperatures as examples of risks they face. However, the disclosure does not mention specific facilities or steps the company is taking to protect them.

“The guidance is clear,” said Gabriel Thoumi, CFA, a senior sustainability analyst at Calvert Investments. “If you’re vulnerable to severe weather, sea level rise or other climate change impacts, you need to let your investors know that you’re aware of that risk, and tell them how you plan to deal with it. Shell recently backed investors asking the company to require it to recognize climate change risks. So Phillips, Valero, Marathon, Chevron and Exxon need to catch up and disclose their physical risks from climate change too. When these companies start to disclose their risks, investors have more confidence.”

Calvert is not alone. “Increasingly, we are seeing investors request information about how companies are managing climate change-related risks,” said Andrew Logan, who directs the Carbon Asset Risk program at Ceres, through which 75 investors managing more than $4 trillion in assets are pushing the world’s largest oil and gas, coal and electric power companies to address these issues. “Oil and gas investors see physical risks as a significant threat to their assets.”

UCS reached out to the five companies as it conducted its research. Only Exxon responded; the company pointed to its corporate citizenship report as a well as a report it contributed to on climate preparedness for the oil and gas industry. The company did not respond to UCS’s questions about the SEC guidance. Goldman has written more about these requests on UCS’s blog, the Equation.