Providing possible new fuel for securities fraud lawsuits, a new study published in Science found that Exxon’s internal projections on climate change accurately forecast warming consistent with subsequent observations. Exxon’s projections were also consistent with independent academic and government models. The findings are potentially significant because they could provide support for securities fraud lawsuits alleging that Exxon’s internal predictions were accurate and inconsistent with public representations.
Study finds Exxon predictions were largely accurate. The study is the first systematic quantitative evaluation of Exxon internal modeling of the effect of fossil fuels on climate change.
According to the study, Exxon internal memos were previously made public that indicated Exxon has known since the late 1970s that its fossil fuel products could lead to global warming with “dramatic environmental effects before the year 2050.” However, numerical and graphical data produced by Exxon scientists visually demonstrating this has received little attention, the study says.
The study found:
- In private and academic circles since the late 1970s and early 1980s, ExxonMobil predicted global warming correctly and skillfully;
- 63 to 83 percent of the climate projections reported by ExxonMobil scientists were accurate in predicting subsequent global warming;
- ExxonMobil scientists correctly dismissed the possibility of a coming ice age in favor of a “carbon dioxide induced ‘super-interglacial’”;
- ExxonMobil scientists accurately predicted that human-caused global warming would first be detectable in the year 2000 ± 5;
- ExxonMobil scientists reasonably estimated how much CO2 would lead to dangerous warming.
Implications for securities fraud lawsuits. According to the study, while ExxonMobil Corp and Mobil’s public communications promoted doubt about climate change, internal documents as well as peer-reviewed Exxon and ExxonMobil studies overwhelmingly acknowledged that climate change is real and human-caused.
Quantitative demonstrates that internally, Exxon was accurately predicting that carbon emissions would cause climate change, while publicly downplaying or denying these effects, could provide ammunition for securities fraud lawsuits. But first investors would have to show that Exxon did deceptively downplay the effects of carbon emissions caused by its products.
From a slightly different angle, the New York State Attorney General sued Exxon Mobil in 2018, alleging that the company misled investors regarding the risk that climate change regulations posed to its business. Exxon Mobil won dismissal of the action in 2019 when the court found that the Attorney General did not show that Exxon obscured the true costs to its business.
Notably, in that case, the judge stated, “Nothing in this opinion is intended to absolve ExxonMobil from responsibility for contributing to climate change through the emission of greenhouse gases in the production of its fossil fuel products. ExxonMobil does not dispute either that its operations produce greenhouse gases or that greenhouse gases contribute to climate change.”
Investors would need to clear hurdles in piecing together securities fraud actions using the results of the new study. Investors would need to show that any contradictions between Exxon’s public statements and internal forecasts were material misrepresentations or omissions; that the investors relied on the misrepresentations; and that they were damaged as a result. Proving the elements of securities fraud sufficiently to satisfy pleading standards could be challenging.
But even if any such lawsuits fail, Exxon Mobil will likely face new ESG-related reckonings based on the new revelations about its accurate assessments of the effect of carbon emissions on climate change.