Donald Trump's decision to withdraw the United States from the 2015 Paris climate accord is doubly boneheaded. From a global perspective - ultimately, the only perspective that counts when it comes to planetary climate change - the move badly undermines the greatest international effort to curb temperature rises we have to date. Even if many countries boost their efforts to enforce the pact, some will take a US exit as carte blanche to duck a set of emission reduction pledges that were already diluted by their non-binding status.
As well as defying the worlds of science and diplomacy, the move is also contrary to the prevailing views of business and international capital. The president says he wants to put American jobs first, specifically those connected to carbon-intensive industries. It's doubtful that pulling out of Paris will support that aim. Shale producers hardly need further encouragement, as they are already pumping enough oil to cap both international prices and their free cash flow. Meanwhile, the US coal industry is in decline not because of anti-pollution legislation, but because it is an uncompetitive source of power. The opposite is true of renewable energy. America's solar industry added jobs 17 times faster than the overall economy last year, and the offshore wind energy market is set to grow at 25 per cent a year until 2021. Battery and storage costs are plummeting. Electric vehicles will soon contribute to General Motors' (US:GM.) profits.
Investors can already see the writing on the wall. The day before Trump's announcement, shareholders in ExxonMobil (US:XOM) voted through an annual general meeting (AGM) resolution calling on the company to publish an annual impact report on climate change. The world's largest listed oil and gas company will now be forced to disclose "the long-term portfolio impacts of technological advances and global climate change policies", including an assessment of possible restrictions to government-imposed greenhouse gas emissions.
The resolution was proposed by the Church of England Commissioners and the state pension fund of New York, where Exxon is currently under investigation over allegations that it misled investors in the way it accounts for the impact of climate change. Such activism is no longer a fringe view. Exxon's second-largest shareholder, BlackRock, backed the proposal. Meanwhile, reports suggest largest investor Vanguard also threw its weight behind the resolution, which passed with 62 per cent of the vote despite board opposition. The vote also follows similar successful investor campaigns at the 2015 AGMs of BP (BP.) and Royal Dutch Shell (RDSB).
Campaigners seized on the vote as another sign of growing institutional investor concern with the boards of oil and gas majors. "This historic majority vote sends a resounding message that market forces are continuing to drive toward low carbon transition," said Sue Reid, vice-president at climate campaigner Ceres. "Investors expect companies - especially carbon-intensive companies like Exxon - to show how they are addressing the corresponding risks and opportunities."
ExxonMobil and much of the hydrocarbon industry are publicly supportive of the Paris agreement, even if the current business strategies of large oil companies are inconsistent with the need to stop the planet warming by more than 2 degrees above pre-industrial levels. The Exxon vote will draw those discrepancies into sharper investor focus.
