How Big Oil defends itself to spooked investors

HEATED takes a look at oil companies' Q4 earnings call transcripts to see how executives handle their climate-concerned investors.

Last month, CNBC financial pundit Jim Cramer sent gleeful shockwaves through the climate activist community by proclaiming, on national television, that fossil fuel stocks were dead to him. “I’m done with fossil fuels,” he said. “They’re done.”

Citing the successful work of climate activists to get investment funds and others to divest, Cramer said Big Oil had entered the “death knell phase.” He said investors should now approach fossil fuel stock the same way they’d approach Big Tobacco stock: extremely warily, if not never again.

“The world has changed,” Cramer said. “There are new managers.”

The “new managers” Cramer was talking about are institutions like BlackRock, the world’s largest asset manager, which had just recently announced it would move rapidly toward sustainable financing and start shunning fossil fuel-oriented stocks. They’re places like the Bank for International Settlements, an umbrella organization for the world’s central banks, which had just published a report warning that climate change could cause a massive financial crisis if left unchecked. They’re banks like Goldman Sachs, which had just become the first bank to stop funding Arctic drilling. They’re institutional investors everywhere, which appear to be cutting fossil fuel stocks from their portfolios like mad.

Combine that with ExxonMobil's and Chevron's Q4 earnings reports, both of which were not good, and Cramer said he didn’t think fossil fuels would ever be a good financial bet again.

“Lots of oil execs are unhappy with my stance,” Cramer said in a blog post a few days after his comments. “But remember what I am: I am not about making friends, I am about making money. And I don't think I can help you make money in the oil and gas stocks anymore.”

Cramer’s comments were thrilling for many climate activists, because they offered proof that their efforts were working. Democratic presidential frontrunner Bernie Sanders tweeted that investors are “getting scared of fossil fuel stocks” because “the climate justice movement is making it clear that political pressure for divestment will not stop.”

But as a whole, investors may not yet be as scared of fossil fuel stocks as activists believe. Indeed, a review of Q4 earnings calls from America’s biggest oil companies showed investors were only mildly interested in climate-related matters. And when oil executives were asked about climate change and divestment during their Q4 earnings calls, they rejected the idea that they would have to stop drilling to address the threat. Instead, they defended their plans to keep drilling, and insisted that their climate problems could be solved by scaling up renewable energy or buying “societal license to operate.”

Here are some of the interesting bits I came across.

Chevron continues to push the “moral case” for fossil fuels to investors

A few months ago, HEATED reported that Chevron was encouraging employees to use talking points from “The Moral Case for Fossil Fuels.” The text argues that fossil fuels improve people’s lives, and that reducing fossil fuel use will harm people.

Chevron CEO Michael Wirth continued to use this rhetoric on his recent Q4 earnings call. Doug Leggate, a Bank of America analyst, asked Wirth to address the “philosophical” question the climate movement was presenting: “How do you anticipate challenging those kind of questions over fossil fuel is bad, everything else good, kind of thing? … It's an answer I'm looking for some help with because, obviously, it's a challenge for all of us in this business right now.

Wirth responded by insisting that Chevron would “respond to the challenge” while not “be[ing] the one that solves everything”; that environmentalists were being “pessimistic” about the future; and that ultimately, it was Chevron’s duty to improve the lives of people in “developing economies”.

“The world needs more energy. The world needs more affordable energy. And people in developing economies deserve the opportunity to see their lives improve, and affordable, reliable and ever-cleaner energy is essential to improving the quality of life on the planet, which is better today, than it has ever been at any point in history and will be better in the future,” he said.

Wirth did not address how developing economies, which scientists say are the most vulnerable to the effects of climate change, might have their lives upended by the climate crisis.

Shell says it needs “societal license to operate,” and must change “narrative” to show it’s part of the solution

In case you were still wondering why fossil fuel advertisements about the climate crisis are everywhere these days, Shell CEO Ben Van Beurden sort of inadvertently explained it in his company’s recent Q4 earnings call. It’s because Shell, and the oil industry at large, needs “strong societal license to operate.”

This is part of the reason Shell left a climate-denying industry trade group—the American Fuel and Petrochemical Manufacturers—earlier this year, Van Beurden said. It’s part of Shell’s “strategic ambition to have a strong societal license to operate and strengthening the support of society for what we do by providing transparency and leadership on the societal issues of our day.” (Shell is still a member of the American Petroleum Institute, which has spent billions sowing climate disinformation and lobbying to kill climate policy).

Van Beurden also said he was struck by “the speed with which societal attitudes are changing around our business,” and implied that the industry could be in deep trouble without support from society.

We cannot ignore that. And the narrative that we are part of the solution, that the transition is going to be more profound and complex and everything else than we ever imagined and whatever else, that narrative is actually not playing out in the minds of many. And therefore, it becomes even more important to be really skillful but also being really clear with actions, what it is that we are doing to deliver the outcomes … Because if we don't do this, I believe many players that are here on the call in the financial sector will also feel that it's their obligation to show what needs to happen to this sector.

And I believe we need to show that we are on the right side of this equation, that we are doing whatever it needs to make sure that we meet that goal. And that has become a whole lot tougher in the last year in the mind of the public. That's also positive, by the way. But I think that is a point that we are reflecting on, not just as an executive committee, but a lot of time being spent also in the Board on it. 

To me, this was a fairly stunning admission from an oil company CEO of how susceptible the industry is to public pressure, combined with a baffling display of how hard it is for these people to admit that the solution might be ramping down the burning and extraction of fossil fuels.

Exxon is still mostly ignoring what’s happening

Exxon took questions from eight different analysts at Wells Fargo, JP Morgan, Goldman Sachs, and others during its Q4 earnings call.

Despite everything going on in the world, none asked about climate change.

In all, reviewing these transcripts indicated to me that rich people are still not extremely interested in saving the world. They are still preoccupied with saving their wallets.

What I’m reading about

—THE CASE FOR INDIVIDUAL ACTION. I’ve often argued there’s too much focus on individual change within the climate movement, and not enough focus on systemic change that would make a real difference. See this tweet:

Some people interpret this to mean I’m against individual-scale action to fight climate change. That’s not true, and I’ve written extensively on the importance of individual action that happens in tandem with systemic change. See here, here, and here.

Instead of clicking those links, though, you could also just read The Washington Post’s latest op-ed on the individual action argument. Cornell University professor Robert H. Frank makes a far better case for individual action than I ever could—because he uses social science to do it. Individual action to protect the climate “is far greater than most people realize, for two related reasons,” Frank writes. “First, they have the power to shift how the people around us behave. Second, and more important, they change who we are, making us much more likely to support the large-scale policies needed for progress.

“Conscious consumption alone certainly can’t stop the warming threat,” Frank adds, “but it’s an essential step on our path forward.” Read the whole piece HERE.

What I’m yelling about

—CLIMATE DENIERS PRETENDING TO CARE ABOUT AFRICA. Yesterday on Twitter, climate justice essayist Mary Heglar made a great point about how racially insensitive politicians wouldn’t be good at solving climate change, because climate change harms black people more than white people.

In response, some climate denier Twitter user—probably a bot, who knows—said Mary’s point was “deeply wrong,” because “Africa desperately needs fossil fuels to live the comfortable lifestyle” that we all live today. And I know it was just a stupid Twitter bot, but the argument comes directly from the fossil fuel industry and the Republican Party. Both have long argued that people in developing countries need fossil fuels to live comfortable lifestyles—and that climate activists are immorally trying to take that comfort away from them.

I'm so tired of these people pretending they care about people in developing nations. Africa is the most vulnerable continent to climate change under all scenarios above 1.5 degrees Celsius. That means that if we fail to address climate change, African people will suffer most. Period. Climate deniers never address that reality; they just continue to say "Fossil fuels improve peoples' lives," as the ocean acidifies and cropslands shrivel and Australia burns and billions of locusts take over East Africa.

Conservatives say they want “comfortable lifestyles” for people in developing nations. But the only people who will secure "comfortable lifestyles" from fossil fuels are fossil fuel executives. Their profits will protect them from the problem they caused. The rest of us won’t be so lucky.

What I’m laughing about

—WHY ARE THESE PEOPLE SO CREEPY??? The conservative climate denial group The Heartland Institute is paying a blond German teenager to spout climate denial in the style of Greta Thunberg. I know I should not laugh about this, or even put it here, because it’s pretty messed up. But man, these dudes are just so crusty!

—PEARL JAM JOINS THE CLIMATE FIGHT. Oh uh, ok! Cool! Welcome, Pearl Jam!

What I’m thinking about

—BREAD. Yesterday, I made challah for the first time. Check it out:

Stay tuned for more bread pics in my upcoming spin-off newsletter. It’s called EATED, a newsletter for people who are pissed off about the climate crisis and also are hungry. (h/t Dave Weiskopf for the idea).

Just kidding. But I do like Dave’s expanded vision for an EATED newsletter:

Maybe in a few months, when I’m better at both baking and writing. Or maybe never. It’s up to you. We can do anything we want here. Rye’s the limit.

OK, that’s all for today—thanks for reading HEATED!

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