Devon Energy: Request for Report on Climate Change 2 Degree Scenario
WHEREAS: Global action on climate change is accelerating. The 2016 Paris Agreement's goal of limiting global average temperature rise to well below 2 degrees Celsius has already begun to shape international, regional, and local policy decision.
Public policy action, and the speed of technological advancements to address climate change, make it vital that Devon provide investors with analyses of the potential risks to its business under a 2 degree climate scenario. The recent Financial Stability Board's Taskforce on Climate-related Financial Disclosures guidelines recommend the energy sector evaluate the potential impact of different scenarios, including a 2 degree scenario, on companies' business, strategy, and financial planning.
A recent analysis of oil and gas company carbon asset risk found that 30 to 40 percent of Devon's potential capital expenditure is outside the 2 degree budget, creating a risk of stranded assets. (http://2degreeseparation.com/).
As long-term shareholders in Devon Energy, we are concerned about whether Devon is taking steps necessary to generate continued value for shareholders as energy demand and energy policies change.
Devon recognized in its 2017 10-K filing to the Securities and Exchange Commission the risk of regulatory changes. Devon's most recent CDP filing reports a production mix of 38 percent natural gas and 62 percent oil and liquids. As part of its oil and gas liquids production, Devon operates in the high cost oil sands of eastern Alberta, producing more than 100,000 barrels of high cost oil sands per day. The company notes that it informs itself of short term (6 months or less) developments in the climate change sphere, but discloses no analysis of how its portfolio of assets and planned capital expenditures performs under the longer time frame associated with a 2 degree scenario.
The need for extractive companies to provide disclosure on the resilience of their portfolios in light of recent climate change policies and technological trends is well established. BP, ConocoPhillips, Royal Dutch Shell, Statoil, Suncor, and Total have endorse 2 degrees scenario analysis. Major asset managers (e.g. BlackRock, State Street Global Advisors) have called for improved climate risk disclosures. Moody's announced it will take climate risk into account in establishing bond ratings. Fitch has warned the industry to prepare for "radical change."
Despite these indicators of risk, our company has provided almost no disclosure on this critical issue.
RESOLVED: Shareholders request that, beginning in 2019, Devon Energy publish, or incorporate into its existing reporting, an annual assessment of the long-term portfolio impacts of technological advances and global climate change policies, at reasonable cost and omitting proprietary information. The assessment should analyze the impacts on Devon's oil and gas reserves of a scenario in which reduction in demand results from carbon restrictions and related rules of commitments adopted by governments consistent with the globally agreed upon 2 degree target. This reporting should assess the resilience of the company's full portfolio of reserves and resources through 2040 and beyond, and address the financial risks associated with such a scenario.
Resolution Details
Company: Devon Energy
Year: 2018
Filing Date:
April 2018
Initiative(s): Carbon Asset Risk
Status: Pending