Embedded Climate Risk

WHEREAS:

· Investors, their confidence in corporate bookkeeping shaken, are starting to scrutinize other possible 'off-balance-sheet' liabilities, including the embedded risks associated with global climate change;
· The world's largest reinsurance company, MunichRe, cites direct climate-related losses reaching $300 billion annually by 2050. Other risks have been identified:
- unexpected expenses from future regulation and taxes on greenhouse gases (GHG),
- potential future litigation,
- reputational risk for companies perceived to be causing climate change or resisting lowering carbon emissions,
- missed business opportunities;
· The Greenhouse Gas Risk Solutions unit of Swiss Re, the world's second largest reinsurer, sees inaction on climate change as a possible liability issue for corporate management and boards, and is considering the potential coverage implications for companies' directors and officers who do not address this risk.
· With the Kyoto Protocol likely to be ratified in the near future despite U.S. opposition (Associated Press, 9/3/2002), resulting GHG controls in the European Union, Japan and Russia could put U.S. companies at a competitive disadvantage against international competitors who are already used to operating in carbon-constrained environments. We believe this could diminish shareholder value in U.S. companies.
· According to a recent report by the World Resources Institute, an independent think tank, policies to mitigate climate change, such as the Kyoto Protocol, will disproportionately harm Occidental relative to its peers. This is due to the company's focus on exploration and production and lack of diversification into other parts of the value chain, as well as its portfolio mix, which is disproportionately weighted toward crude oil over natural gas.
· These costs or risks are not reported by most companies, not accounted for by analysts when assessing companies, and not reflected in quarterly reports. Nevertheless, some companies (BP, Conoco, Phillips Petroleum, Ford, DuPont,) have begun to acknowledge climate risk in their annual reports or SEC filings.

RESOLVED: that the Board of Directors prepare a report (at reasonable cost and omitting proprietary information), available to shareholders by September 2003, describing the operating, financial and reputational risks to the company associated with past, present, and future greenhouse gas emissions from its operations and products.

SUPPORTING STATEMENT
Because scientific assessment of the human contribution to climate change is now widely accepted, and legislation, regulation, litigation, and other responses to climate change are foreseeable, we believe, prudent management has a fiduciary duty to carefully assess and disclose to shareholders all pertinent information on significant risks associated with climate change. This report should include long-term strategy to address these risks; potential reductions in risk; improvements in competitiveness and profitability associated with committing to substantially reducing those emissions; and its public stance on efforts to reduce such emissions. We believe this proposal is consistent with the fiduciary duties of the corporation's officers and directors, and with good environmental and risk management.