By Abby Castaldi


Throughout the last decade, the effects of climate change have become more apparent as the future of our environment faces serious risks.  With activists such as 16-year-old Greta Thunburg leading the charge for reform to curb greenhouse gas emissions and our dependence on fossil fuels, much of society has become more aware of humanity’s effect on the changing climate.  This push has been evidenced by the ban of plastic straws, decreased availability of plastic bags and styrofoam, and greater market for electric cars.  As individuals have made the shift to become more eco-conscious in their daily lives, the focus has now turned to large corporations who have created more than 70% of the worlds greenhouse gas emissions since 1998.[1]

The corporate world has been on edge regarding, not only its carbon emissions, but the effect of future of government regulations on business––one of these corporations being ExxonMobil.[2]  Activists, climate change scientists, and protestors have put the pressure on corporations, and specifically oil companies, to curb their detrimental effects on the environment.  For some corporations, this pressure has resulted in increased research and funding to create sustainable sources of energy.  For others, however, the pressures of climate change and the pressures of business have created an incentive to commit fraud.  In particular, ExxonMobil has recently been exposed for its fraudulent reporting to investors of its costs and risks related to climate change.

Why is ExxonMobil on Trial?

On October 22, 2019, the trial against ExxonMobil began in New York.  A four-yearlong investigation conducted by the New York State Office of the Attorney General has culminated in a suit brought against ExxonMobil for lying to investors regarding the cost of carbon and the effect of potential governmental regulations to mitigate the effects of climate change.[3]  The investigation revealed that the oil company had been using two different figures to estimate the cost of carbon.[4]  These figures would allow the company to predict the effects of government regulations on investments and revenues.[5]  Although there is no set cost for carbon, Exxon distributed an estimated price of carbon to shareholders that was significantly higher than the one it was using in its internal books, the proxy cost.[6]

The result of this discrepancy in the accounting was an overestimate of Exxon’s revenues by as much as $1.6 billion by downplaying to investors the detrimental effects of climate change regulations on the business of the corporation.[7]  ExxonMobil was representing to its shareholders that not only had it fully considered the possible future effects of governmental regulations and incorporated those risks into its numbers, when it had not, but also that the assets of the corporation were more secure than they actually were.  Exxon assured investors that although the demand to reduce dependence on oil and gas is sparking more governmental action against oil companies, that Exxon’s investments were not only good investments but would also be more lucrative and profitable than they may actually be when subjected to greater regulations.[8]  Because Exxon gave this higher cost of carbon to investors while actually using a much lower price, Exxon misrepresented its future success to investors and exposed the corporation to potential hits from climate change regulations.

In the complaint, the Attorney General’s Office states:

Exxon provided false and misleading assurances that it is effectively managing the economic risks posed to its business by the increasingly stringent policies and regulations that it expects governments to adopt to address climate change. Instead of managing those risks in the manner it represented to investors, Exxon employed internal practices that were inconsistent with its representations, were undisclosed to investors, and exposed the company to greater risk from climate change regulation than investors were led to believe.[9]

Directors of a corporation have a fiduciary duty to their investors to not make false statements about the corporation’s affairs.  Here, by changing the price of carbon in the disclosures made to investors, Exxon misrepresented the state of the business and its future exposure to risk.[10]  As a result, not only did Exxon commit fraud, it also likely violated its fiduciary duty of loyalty to its investors.  It has been alleged that major players in the corporation, such as ex-CEO and former US Secretary of State Rex Tillerson, were aware of the fraud and misrepresentation to investors.[11]  The trial has been limited to three weeks and the Judge will issue a decision within one month after the completion of the trial.[12]

Why is this so Important?

There has not been much litigation to hold corporations accountable for their contributions to the global climate crisis since the move to stop climate change began in the 70’s.[13]  This case brings to the light a major oil corporation’s misdeeds in an attempt to downplay the effects that the fight against climate change would have on its business.  Whichever way this case is decided, Exxon Mobil’s role in the climate change crisis is at the forefront of the news and the legal field.  ExxonMobil is currently facing suits in a number of states and cities, including Massachusetts and Rhode Island.[14]  Not only will Exxon’s reputation likely take a large hit from the suit and the media exposure it has created, but the entire oil and gas industry may now be more closely scrutinized.  Although any payout that ExxonMobil will be subjected to may be small in comparison to its huge revenues, this would be a first step in holding large corporations responsible for their role in global warming and could incentivize other corporations to forge a path toward greener practices.

[1] Tess Riley, Just 100 Companies are Responsible for 71% of Global Emissions, Study Says, Guardian (July 10, 2017, 1:29 PM),

[2] Id.

[3] Aaron Cooper, The Cost of Climate Change: Trial to Decide whether Exxon Mobil was Honest with Investors, Cnn (Oct. 22, 2019, 8:59 PM),

[4] Id.

[5] Id.

[6] Irina Ivanova, Exxon Mobil’s Climate-Change Accounting Goes on Trial, CBS News (Oct. 22, 2019, 3:34 PM),

[7] Id.

[8] Oliver Milman, Exxon Mobil Faces Trial Over Allegations of Misleading Investors on Climate Change, Guardian (Oct. 22, 2019, 12:02 PM),

[9] Complaint at 1, New York v. Exxon Mobil Corp., N0. 452044/2018 (N.Y. Sup. Ct. Oct. 24, 2018).

[10] Milman, supra note 8.

[11] Cooper, supra note 3.

[12] Laura Wamsley, Exxon is on Trial, Accused of Misleading Investors About Risks of Climate Change, NPR (Oct. 22, 2019, 1:13 PM),

[13] Id. (“In only the second climate change trial in the U.S., Exxon Mobil goes to court Tuesday accused of defrauding shareholders and the public.”).

[14] Ivanova, supra note 6.