Trial To Begin: Did Exxon Mislead Investors On Climate Change?

Oct 22, 2019
Originally published on October 22, 2019 4:29 am
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Exxon Mobil goes on trial in New York today. The state says it misled shareholders about the risks that the company faces from climate change. It's a civil lawsuit, and more cities and states are doing the same thing. They're trying to hold oil companies accountable for climate change. NPR's Laurel Wamsley has the story.

LAUREL WAMSLEY, BYLINE: New York's attorney general is suing Exxon Mobil, arguing that it defrauded the public for years by misrepresenting how carbon regulation would affect the company's financial outlook. The case goes back to 2015, when reports found that while Exxon scientists were inwardly researching climate change to plan its operations, the company was outwardly casting doubt on global warming. Then-New York Attorney General Eric Schneiderman told "PBS NewsHour" how its investigation could lead to legal action.

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ERIC SCHNEIDERMAN: There's nothing wrong with advocating for your own company. What you're not allowed to do is commit fraud.

WAMSLEY: The state argues that Exxon used two different ways to calculate carbon costs and wasn't clear when it was using one or the other, which had the effect of making its assets appear more secure than they really were. That, in turn, affected its share price, the lawsuit says, and defrauded investors. That would be a violation of a New York statute known as the Martin Act. It's the same law that's been used by previous attorneys general in the state to bring charges against big financial firms.

MICHAEL GERRARD: There's not a general law, for better or worse, against lying in general. But there is a law against lying to shareholders.

WAMSLEY: That's Michael Gerrard, a climate law expert at Columbia Law School. He says one focus in the case will be Exxon's investment in the carbon-intensive Canadian oil sands, a project some investors worried won't make financial sense under tougher climate regulations. And while the details get a little wonky, this is a case with potentially big consequences.

GERRARD: This is the first case on alleged securities fraud about climate change ever to go to trial.

WAMSLEY: Exxon says the lawsuit is politically motivated and driven by anti-fossil fuel activists. The company says it was honest with shareholders about how it calculated carbon costs. If Exxon loses, it could be vulnerable to a string of lawsuits in other states. That's because it had to give New York thousands of pages of documents, and now lawsuits elsewhere will be able to use what comes out in the trial to build their own arguments.

Laurel Wamsley, NPR News. Transcript provided by NPR, Copyright NPR.