Integrating sustainability into mainstream financial markets is essential, but far away from happening at the necessary scale. This week however I have been excited by a news story that shows the industry moving in the right direction.
Due to investor and NGO pressure, Exxon Mobil, the largest oil and gas company in the US, has agreed to disclose information to its shareholders on the risk to its business if its reserves become unburnable following stronger climate regulations in the future. As the reserves are the largest asset for a fossil fuel company, such a scenario is of high concern to investors. This idea of such a “carbon bubble” in the markets as the fossil fuel reserves become stranded assets has been discussed for the last couple of years, but Exxon is the first fossil fuel company to disclose such a risk report to its investors.
I think this sets an important example for other fossil fuel companies and the investment industry more broadly: The first step for investors to integrate sustainability factors is having the information on how these impact on their investments. There is increasing push for companies to provide information related to sustainability performance to investors: The Carbon Disclosure Project has been pushing for increased company disclosure since 2003, and is now backed by investors with more than 92 trillion dollars in assets.
Of course, ultimately what matters is how investors then use this information to change their portfolios, but it is nevertheless a step in the right direction. I hope we will see other companies follow suit in the near future.