Moodys warns oil exporters face climate credit risks

It comes after Royal Dutch Shell lost a climate lawsuit this week while Exxon and Chevron faced shareholder revolts.

“These actions represent a substantial shift in the landscape for oil companies, which had previously prevailed in courts, and largely fend off significant shareholder votes, on climate related matters,” Moody’s said.

A Dutch court ruled that Shell must deepen planned greenhouse gas emission cuts while on the same day ExxonMobil’s shareholders selected two climate-activist candidates to the company’s 12-member board of directors. Chevron shareholders urged the company to limit emissions from the combustion of oil and natural gas.

“Climate-driven risks such as carbon transition represent the greatest ESG-related threat the energy sector faces; these three events further underscore the intensifying pressure on oil companies to decarbonize,” Moody’s said.

The credit ratings agency said it saw the developments at ExxonMobil as the most significant of the three because the outcome was binding and could not be appealed. It could also herald similar developments across other US oil major boards.

“The increasing potential for evermore stringent investor climate- and emissions-related investment thresholds are likely to lead to higher capital costs and diminished access to capital for oil companies that do not keep pace with investors’ expectations for transitioning to a low carbon business model,” Moody’s said.

It comes as oil companies benefit from a rebounding oil price that is now skirting $70. Strong economic date from the US and a recovering global economy has boosted the outlook for the commodity this year.