☀️☕️ Exxon Mobilises its Climate Lawyers

📝 Focus

• Exxon Mobilises its Climate Lawyers

📊 In the Markets

• US highs; Japan exports; HK/China’s bazooka-less; Foreclosures surge

📖 MoneyFitt Explains

• 🎓️ Free Cash Flow

💸 Personal Finance Corner

• How to Manage Both Financial and Mental Well-being

📝 Focus

Exxon Mobilises its Climate Lawyers

ExxonMobil has filed a lawsuit to prevent a climate resolution calling for an acceleration in greenhouse gas emission reductions from reaching a vote at its annual meeting in May. 

This unprecedented legal action against two of its own shareholders, activist groups Follow This and Arjuna Capital, marks a rare move by a company to block a shareholder motion and is the first time Exxon has taken such a measure. 

While Exxon aims to achieve net-zero emissions from its own operations by 2050, it has, unlike European oil and gas peers, resisted setting targets for emissions resulting from consumer use of its products, known as scope 3.

..... ▷ To be fair, it’s not just the act of a giant corporate looking to divert actions limiting its impact on greenhouse gas emissions and climate change. 

Companies frequently seek SEC approval to exclude certain petitions. 

And in late 2021, the minority shareholder friendly SEC revoked Trump-era policies that allowed companies to block shareholder climate proposals that included targets and dates.

SEC regulations prohibit the resubmission of shareholder proposals year after year without gaining increasing investor support. Prior similar motions at Exxon's annual meetings showed decreasing support, dropping from 27.1% in 2022 to 10.5% in 2023. 

Clearly the majority of shareholders prefer Exxon to limit exploration capex and “run for cash” so it can keep milking the industry while it can to drive up free cash flow🎓to fund huge dividends and share buybacks… much as Big Tobacco has done to spectacular effect for decades. (MFM: Run for Cash) 

Exxon also claims that the resolution would not only fail at the vote again but would also amount to micromanaging the company, violating another SEC rule. 

(But it’s still the act of a giant corporate looking to divert actions limiting its impact on greenhouse gas emissions and climate change.)

..... ▷ Scope 3 emissions account for a company's indirect greenhouse gas footprint, encompassing upstream and downstream activities in its value chain.

This includes purchased goods and services, employee travel, and the use of its products or services by consumers. 

In essence, it captures the comprehensive climate impact beyond a company's direct operations.

For an oil and gas company, it’s obviously a total overhaul of its business model, far beyond tweaking the emissions profile of its operations. 

..... ▷ And it’s doable (or at least plannable)…

Shell aims for net-zero Scope 3 emissions by 2050, with an interim target of a 65% reduction by 2050 compared to 2017 levels. Their strategy involves phasing out refined product production, investing in renewables, and engaging with customers to reduce their emissions.

BP also has a net-zero Scope 3 target for 2050, aiming for a 30% reduction by 2035. Their approach focuses on divesting high-carbon businesses, investing in renewables and low-carbon fuels, and collaborating with customers to decarbonise their operations.

TotalEnergies of France, Eni of Italy and Repsol of Spain have similar targets. 

🇸🇬 Singapore: Let’s Get MoneyFitt!

📊 In the Markets

The S&P 500 hit a second consecutive record high close on Monday as tech stocks continued to push forward, though only Apple and Nvidia of the Magnificent Seven were in the black. Tesla slid 1.6% on weakening electric car demand. 

The SOX Philly semiconductor index reached a new all-time high, with Nvidia touching a fresh record and closing up 0.3%, while AMD dropped 3.5%.

Food processing and grain trading giant Archer-Daniels-Midland (ADM) lost $8.8bn in market value as its shares plummeted 24% after placing its CFO on administrative leave amid an investigation into accounting “irregularities” in its high-margin Nutrition segment, plus a small cut in the full-year profit forecast. 

Traders continue to adjust rate cut expectations, with a focus now on a potential 25-basis-point (0.25%) cut in May. According to the CME Group's FedWatch Tool, traders are now pricing in only a 41% chance of a rate cut in March, from exactly double that expected a month ago. Coincidentally, 82% is also the chance of a cut now being priced into futures markets for May.

Asia-Pacific markets had a mixed performance on Monday after China maintained its loan prime rates as expected. 

Japanese shares have benefited from the "anywhere-but-China" strategy from global investors who as a whole have been structurally underweight Japan for decades. This year, it has also benefited from diminishing expectations for a speedy end of the central bank’s ultra-loose monetary policy, particularly after the devastating New Year's Day earthquake, though coming at the expense of a weaker JPY… which in turn benefits the country’s exporters.

Japan’s exporter-heavy Nikkei 225 surged 1.6% to a near 34-year high, with the broader Topix gaining 1.4%.

Conversely, Hong Kong’s Hang Seng index continued its disastrous start to the year by declining 2.5%, led by real estate stocks, among the worst of which was China Resources Land, which plunged 9.5%. China’s CSI 300 index was only a little less painful, closing 1.6% lower amid as yet unfounded speculation that Beijing had been using state funds to prop up the market.

As expected, the People’s Bank of China decided to leave the bazooka at home and kept one- and five-year loan prime rates unchanged. 

This had been the implication of Premier Li Qiang’s speech in Davos last week. The confident message was that 5.2% GDP growth was delivered in 2023 without extra stimulus, so why would we need any new measures for economic or financial market stimulus in 2024? 

The rush for the exits then accelerated, with retail investors joining foreign institutions. Year-to-date outflows from China's stock market are likely already over $5 billion and it looks like offshore investors will be net sellers of Chinese equities for the first January since 2014.

And then yesterday, Li Qiang called for more effective measures to stabilise China’s crashing stock markets at a meeting of the State Council that he chaired, according to the Xinhua news agency. He emphasised the need to find ways to attract long-term investors and improve the basic systems of the markets while improving the quality and investment value of listed companies (all laudable but with long term effects.)

Meanwhile, foreclosed homes surged 43% to 389,000 units in China last year, according to a China Index Academy survey. Foreclosures have been increasing since 2020, with numbers continuing to climb in early 2024. 

This rise, amid a prolonged if not terminal property market downturn and an uneven economic recovery, reflects an alarming trend of increasing mortgage delinquencies with pretty dire implications for the rest of the economy.