Valero Energy Corporation | Interfaith Center on Corporate Responsibility

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<strong>Company:</strong>
<p>Valero Energy Corporation</p>
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<strong>Year:</strong>
<p>2025 </p>
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<strong>Issue Area:</strong>
<p>Climate Change, Lobbying & Political Contributions </p>
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<strong>Focus Area:</strong>
<p>GHG Reduction and Targets </p>
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<strong>Status:</strong>
<p>Filed</p>
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<h2>Resolution Text</h2>
<p>WHEREAS: Transparent and accurate emissions disclosures are an essential tool for investors seeking to assess corporate climate risk.1 Scope 3 emissions, including emissions from the use of its fossil fuel products, are known to make up nearly 90% of the oil and gas industry’s overall emissions, emphasizing the need for transparent and accurate Scope 3 disclosures.2 Although Valero Energy Corp discloses its Scope 1 and 2 operational emissions, it does not disclose its Scope 3, value-chain greenhouse gas (GHG) emissions leaving investors in the dark about the vast majority of the Company’s emissions.</p>
<p>Most major oil and gas companies, including Valero’s peers Phillips 66 and Marathon Petroleum disclose Scope 3 emissions from the combustion of their sold products.3 Even Neste, a global leader in biofuels refining, clearly and transparently reports Scope 1-3 emissions from its renewable fuel products, complying with the Greenhouse Gas Protocol, and keeping its disclosures comparable with other energy companies.4</p>
<p>The utility of Valero’s existing emissions disclosures is severely limited by the Company’s failure to disclose its major source of greenhouse gas emissions, and by its departure from the well-accepted norms of GHG accounting used by Valero’s peers. While the Company does disclose GHG emissions intensity figures of sold products, this limited disclosure is significantly less useful to investors than that of Valero’s peers and other major oil and gas companies, which disclose Scope 3 emissions inventories.</p>
<p>Valero’s failure to provide full and comparable information impedes effective investor decision-making by obscuring Valero’s full climate impact and its exposure to climate-related risk. By increasing the Company’s GHG emissions disclosures in alignment with its peers, Valero can provide investors with transparent and decision-useful information about the Company’s degree of exposure to climate-related risk.</p>
<p>BE IT RESOLVED: Shareholders request that Valero measure and disclose its material Scope 3 greenhouse gas emissions.</p>
<p>SUPPORTING STATEMENT: Given that the vast majority of Valero’s greenhouse gas emissions are likely Scope 3 product-related emissions, at management discretion, Valero’s Scope 3 disclosure could be limited to product-related emissions to minimize cost while serving investors’ transparency needs.</p>
<p>1 https://ghgprotocol.org/sites/default/files/standards/Corporate-Value-Chain-Accounting-Reporing-Standard_041613_2.pdf, p.47,107, 109;https://ghgprotocol.org/sites/default/files/standards/ghg-protocol-rvevised.pdf, p.81;https://ghgprotocol.org/sites/default/files/2023-03/18_WP_Comparative-Emissions_final.pdf,p.12</p>
<p>2 https://www.americanprogress.org/article/why-companies-should-be-required-to-disclose-their-scope-3-emissions/</p>
<p>3 https://issuu.com/phillips66co/docs/2024_sustainability_and_people_report, p.27, 53;https://www.marathonpetroleum.com/content/documents/Responsibility/Sustainability_Report/2023_SustainabilityReport.pdf, p.8, 47;https://www.neste.com/en-us/sustainability/reporting, p.38</p>
<p>4 https://www.neste.com/en-us/sustainability/reporting, p.38;https://ghgprotocol.org/sites/default/files/standards/Corporate-Value-Chain-Accounting-Reporing-Standard_041613_2.pdf, p.21</p>
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<h3>Lead Filer</h3>
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<div class=”views-field views-field-nothing”><span class=”field-content”> David Shugar</span></div><div class=”views-field views-field-title views-field-field-shareholder”><span class=”field-content”>As You Sow</span></div>
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Resolution Details

Company:

Valero Energy Corporation

Year:

2024

Issue Area:

Inclusiveness

Focus Area:

Environmental Justice, Racial Justice

Status:

Withdrawn

Resolution Text

RESOLVED that shareholders of Valero Energy Corporation (“Valero”) urge the Board of Directors to oversee an independent third-party racial equity audit analyzing Valero’s impacts on nonwhite stakeholders and communities of color and Valero’s plans, if any, to mitigate those impacts. Input from civil rights organizations, experts on environmental racism, and employees should be considered in determining the speciﬁc matters to be analyzed. A report on the audit, prepared at reasonable cost and omitting conﬁdential and proprietary information, should be publicly disclosed on Valero’s website.

SUPPORTING STATEMENT

Several aspects of Valero’s business and operations suggest that a racial equity audit would be useful. In 2020, the Oﬀice of Federal Contract Compliance Programs found that a Valero subsidiary had used an employment selection processes with an adverse impact on nonwhite applicants.1

Valero’s Environmental Justice Policy Statement asserts that Valero “strives to operate as a good neighbor, and looks for opportunities to work with local oﬀicials and directly with fence line neighbors to improve the quality of life for neighbors and communities.”2 But Valero has come under ﬁre for polluting communities of color:

· Residents have fought to limit a Texas reﬁnery’s emissions of hydrogen cyanide, a neurotoxin, in Hispanic neighborhoods.3

· The neighborhood in which another Texas reﬁnery is located, which is 90% African American, “ranks above the 95th percentile nationally for both the EPA’s air toxics cancer risk and respiratory hazard metrics.”4

· As You Sow’s Racial Justice Scorecard for S&P 500 companies placed Valero in the bottom 10, with negative scores on the environmental racism performance indicators, meaning that it harms communities of color more than beneﬁts them.5

A racial equity audit could also examine whether Valero’s political activities have a negative racial impact. In 2019, Valero and the American Fuel and Petrochemical Manufacturers (“AFPM”), to which Valero belongs,6 lobbied states to criminalize pipeline protests.7 Valero contributed 2020 election results,8 an action some viewed as “a direct attack on the voting rights of people of color.”9

Last year, Valero argued that two reports it had issued, a “Racial Equity Assessment” and “Audit of Valero’s Environmental Justice Commitments and Actions”, obviated the need for a racial equity audit. Neither of those reports was produced by a ﬁrm that is clearly independent from Valero: The Assessment was produced by a partner in a law ﬁrm that has represented Valero for at least 10 years in securities oﬀerings, transactions, and litigation.10 Montrose Environmental Group, which conducted the Audit, was a “diamond sponsor” of a recent Valero charity fundraiser and will reprise that role in 2024,11 suggesting that it does or hopes to do business with Valero. While the Assessment focuses on Valero’s public processes, commitments and positions, a racial equity audit would analyze Valero’s actual behavior.

1 https://www.dol.gov/sites/dolgov/ﬁles/ofccp/foia/ﬁles/2020-03-25Valero-CA-SW-Redacted.pdf

2 https://s23.q4cdn.com/587626645/ﬁles/doc_downloads/2021/09/Environmental-Justice-Policy-Statement.pdf

3 https://www.sierraclub.org/texas/blog/2020/08/houston-community-continues-ﬁght-against-valero-for-polluting-air-hydrogen

4 https://www.greenpeace.org/usa/valero-energy-blocking-climate-solutions-taking-handouts/

5 https://www.asyousow.org/press-releases/2021/8/11/environmental-racism-metrics-as-you-sow-racial-justice-scorecard

6 https://esg.investorvalero.com/wp-content/uploads/2023/09/Trade-Associations_FINAL_07-01-22-to-06-30-2023.pdf

7 https://theintercept.com/2019/08/19/oil-lobby-pipeline-protests/

8 https://www.cnn.com/interactive/2021/01/business/corporate-pac-suspensions/

9 See https://www.nytimes.com/2021/01/15/us/politics/lankford-apology-election-biden.html; https://www.marketwatch.com/story/business-leaders-call-for-action-on-trump-after-mob-siege-at-capitol-11609976655

10 E.g., https://www.bakerbotts.com/news/2021/12/baker-botts-represents-valero-energy-corporation-in-billion-dollar-senior-notes-oﬀering; https://www.sec.gov/Archives/edgar/data/1583103/000158310313000013/exh81-formofopinionofbaker.htm https://www.epa.gov/sites/default/ﬁles/2017-12/documents/court_document_us_app_cadc_17-1259_12.12.2017_peition_for_review.pdf

11 https://valerotexasopen.com/beneﬁt-for-children/sponsors

Resolution Details

Company:

Valero Energy Corporation

Year:

2024

Issue Area:

Climate Change

Focus Area:

Climate Change, Climate Financing

Status:

Challenged

Resolution Text

WHEREAS: As the window narrows to limit global warming to 1.5°C and avoid the most catastrophic impacts of climate change, experts and investors, including the ScienceBased TargetsInitiative and CA100+, are clear that companies must achieve actual near-term emissions reductions, rather than relying on carbon offsets.1 Many carbon offsetting projects do not produce additional and permanent real-world emissions reductions.2 Public skepticism and increasing legal scrutiny make it imperative that companies ensure corporate reduction strategies result in actual emission reductions that align with 1.5°C.

Companies are facing public backlash from investigations into corporate offsetting projects,3 resulting in multiple lawsuits alleging that offset use is misleading.4EmergingUK and US reporting requirements require companies to separately account emissions and offsetting, and more broadly, EU regulations prohibit companies from counting carbon credits toward meeting emissions reduction goals.5In addition to these legal and reputational risks, reliance on offsetting can result in misallocated decarbonization expenditures and missed opportunities to align with a decarbonizing economy.

To mitigate reputational, regulatory, and legal risk, it is in Valero’s best interest to adopt an emission reduction plan that does not rely on carbon offsets. Valero has a goal to“reduce and offset” its global refining emissions 100% by 2035, including plans to“displace,” or offset, emissions through “blending of and credits from low-carbon fuels.”6 Only 7% of this goal is achieved with absolution emissions reductions, while the rest of the near-term goal relies on displaced emissions, carbon credits, and carbon capture. Moreover, a large part of Valero’s strategy appears to involve using avoided emissions from its value chain to “displace” operational emissions. It is unclear to investors how Valero is avoiding “double counting” in doing so, posing potential regulatory and legal issues. Such disclosure gaps hinder investors from accurately assessing Valero’s exposure to climate-related financial risk. Additionally, by failing to achieve substantial emissions reductions, this goal does not align with limiting global warming to 1.5°C.

By adopting near-term reduction goals that do not rely on offsets and avoided emissions, Valero can ensure its decarbonization strategy aligns with the global 1.5°Cgoal, prepare for emerging regulation, and position itself to maximize long-term value in a transitioning economy.

BE IT RESOLVED: Shareholders request that Valero adopt a 1.5°C-aligned, near-term emissions reduction target that does not include the use of carbon offsets and avoided emissions.

SUPPORTING STATEMENT: Proponents suggest, at Board discretion, that the Company:

Disclose a timeline for setting near-term 1.5°C-aligned emission reduction goals;
Consider approaches used by advisory groups such as the Science Based Targets initiative; and
Include an enterprise-wide climate transition plan to achieve 1.5°C-aligned emission reductions.

1 https://sciencebasedtargets.org/resources/files/SBTi-criteria.pdf, p. 10

2 https://www.bloomberg.com/news/articles/2022-11-21/junk-carbon-offsets-allow-companies-to-claim-they-re-carbon-neutral

3 https://www.bbc.com/news/science-environment-60248830

4 https://www.clientearth.org/media/nq4jnyww/ce-offsets-legal-briefing.pdf , p.5

5 https://www.ft.com/content/53f84f03-1f1c-4240-977f-9de0e4893377; https://www.gov.uk/government/news/uk-to-enshrine-mandatory-climate-disclosures-for-largest-companies-in-law ; https://corpgov.law.harvard.edu/2023/10/22/california-enacts-major-climate-related-disclosure-laws/ ; https://ghgprotocol.org/sites/default/files/standards/ghg-protocol-revised.pdf , p.62

6 https://investorvalero.com/esg/default.aspx

Resolution Details

Company:

Valero Energy Corporation

Year:

2023

Issue Area:

Inclusiveness

Focus Area:

Racial Justice

Status:

Vote

Vote Percentage:

11.90%

Resolution Text

RESOLVED that shareholders of Valero Energy Corporation (“Valero”) urge the Board of Directors to oversee an independent third-party racial equity audit analyzing Valero’s impacts on nonwhite stakeholders and communities of color and Valero’s plans, if any, to mitigate those impacts. Input from civil rights organizations, experts on environmental racism, and employees should be considered in determining the specific matters to be analyzed. A report on the audit, prepared at reasonable cost and omitting confidential and proprietary information, should be publicly disclosed on Valero’s website.

SUPPORTING STATEMENT

High-profile police killings of black people have galvanized the movement for racial justice. That movement, and the disproportionate impacts of the pandemic, have focused public attention on systemic racism, environmental racism, racialized violence and inequities in employment, health care, and the criminal justice system.

Several aspects of Valero’s business and operations suggest that a racial equity audit would be useful. In 2020, the Office of Federal Contract Compliance Programs found that a Valero subsidiary had used selection processes with an adverse impact on nonwhite applicants.1

Valero’s Environmental Justice Policy Statement asserts that Valero “strives to operate as a good neighbor, and looks for opportunities to work with local officials and directly with fence line neighbors to improve the quality of life for neighbors and communities.”2 But Valero has come under fire for polluting communities of color. Residents have fought to limit a Texas refinery’s emissions of hydrogen cyanide, a neurotoxin, in Latinx neighborhoods.3 The neighborhood in which another Texas refinery is located, which is 90% African American, “ranks above the 95th percentile nationally for for both the EPA’s air toxics cancer risk and respiratory hazard metrics.”4

Valero ranks as the 39th worst toxic air polluter in the U.S., and 64% of those affected are nonwhite.5 It ranks as the 62nd worst water polluter6 and the 24th worst greenhouse gas polluter.7 As You Sow’s Racial Justice Scorecard for S&P 500 companies placed Valero in the bottom 10, with negative scores on the environmental racism performance indicators, meaning that it harms communities of color more than benefits them.8

A racial equity audit could also examine whether Valero’s political activities have a negative racial impact. In 2018, Valero helped defeat Washington State’s carbon tax initiative, giving nearly $1 million to the No on 1631 campaign.9 In 2019, Valero and the American Fuel and Petrochemical Manufacturers (“AFPM”), to which Valero belongs,10 lobbied states to criminalize pipeline protests;11 AFPM also supports rolling back fuel efficiency standards.12 Reportedly, Valero contributed $192,000 during the 2020 election cycle to Members of Congress who objected to certifying the 2020 election results,13 an action some viewed as “a direct attack on the voting rights of people of color.”14

Finally, an independent audit would provide objectivity, assurance and specialized expertise beyond what would be possible with an internal analysis.

1 https://www.dol.gov/sites/dolgov/files/ofccp/foia/files/2020-03-25Valero-CA-SW-Redacted.pdf

2 https://s23.q4cdn.com/587626645/files/doc_downloads/2021/09/Environmental-Justice-Policy- Statement.pdf

3 https://www.sierraclub.org/texas/blog/2020/08/houston-community-continues-fight-against-valero- for-polluting-air-hydrogen

4 https://www.greenpeace.org/usa/valero-energy-blocking-climate-solutions-taking-handouts/

5 https://peri.umass.edu/toxic-100-air-polluters-index-current

6 https://peri.umass.edu/toxic-100-water-polluters-index-current

7 https://peri.umass.edu/greenhouse-100-polluters-index-current

8 https://www.asyousow.org/press-releases/2021/8/11/environmental-racism-metrics-as-you-sow- racial-justice-scorecard

9 https://www.vox.com/energy-and-environment/2018/10/26/18026074/koch-industries-bp-colorado- washington-fracking-carbon-tax

10 https://esg.investorvalero.com/wp-content/uploads/2021/10/July-2020- June2021_Member_Organizations_Report_DRAFT_08272021.pdf

11 https://theintercept.com/2019/08/19/oil-lobby-pipeline-protests/

12 https://influencemap.org/influencer/American-Fuel-Petrochemical-Manufacturers- cacc951ea59addfcc713fbb359e2680c

13 https://www.cnn.com/interactive/2021/01/business/corporate-pac-suspensions/

14 See https://www.nytimes.com/2021/01/15/us/politics/lankford-apology-election-biden.html; https://www.marketwatch.com/story/business-leaders-call-for-action-on-trump-after-mob-siege-at- capitol-11609976655

Resolution Details

Company:

Valero Energy Corporation

Year:

2023

Issue Area:

Climate Change

Focus Area:

GHG Reduction and Targets

Status:

Vote

Vote Percentage:

33.10%

Valero Climate Transition Plan and GHG Reduction Goals – Proxy Exempt Solicitation

Valero proxy memo 2023 FINAL[54].pdf

Proxy Exempt Solicitation
https://www.sec.gov/Archives/edgar/data/1035002/000121465923004126/x323230px14a…

Resolution Text

WHEREAS: In 2018, the Intergovernmental Panel on Climate Change advised that net greenhouse gas (GHG) emissions must fall 45 percent by 2030 and reach net zero by 2050 to limit warming below 1.5 degrees Celsius and prevent the worst consequences of climate change.[1]

A 2021 International Energy Agency report concluded that limiting warming to 1.5 degrees Celsius would require no new internal combustion engine sales after 2035, nearly 90 percent of global electricity generation from renewable sources by 2050, and electrification of areas previously dominated by fossil fuels.[2] Wood Mackenzie concludes that “survivors in this shrinking market for refined products are coastal, primarily [national oil companies]-owned integrated refinery/ petrochemical facilities located in industrial clusters with low-carbon operations…” .[3]

As policymakers, consumers and companies move to tackle climate issues with growing urgency, regulation of high-carbon products will significantly increase as demand decreases. These transition risks pose fundamental challenges to companies like Valero Energy (“Valero”), the world’s largest independent petroleum refiner.

While Valero has adopted short-term GHG reduction targets, it does not provide a robust decarbonisation plan ensuring a resilient business model through the energy transition, exposing the Company to reputational, regulatory and transition risks. Valero’s climate action plan includes minimal absolute emissions reductions and an overreliance on unverified “displaced emissions” with no reduction target or actions associated with scope 3 emissions.

Valero is falling behind peers in managing risks and opportunities of the energy transition and curbing its GHG emissions. Phillips 66 and Marathon Petroleum have set targets for their scope 3 emissions and are investing in multiple low-carbon technologies and fuels. Integrated producers like Shell, bp, and Equinor have announced targets to reduce emissions and plans to align capital spending with lower emissions pathways.

Valero maintains that it leads the industry in producing low-carbon renewable fuels. Ramping up the scale, pace and rigor of its climate-related initiatives could unlock further opportunities for growth in new renewable fuels, help strengthen financial resilience, and avoid investments in assets that will lose value as the global economy transitions away from fossil fuels.

RESOLVED: Shareholders request Valero issue a report, at reasonable expense and excluding confidential information, within a year and updated annually thereafter, on its climate transition plan to align operations and value chain emissions with a well-below 2 degrees Celsius scenario, including short-, medium- and long-term reduction targets for Valero’s full GHG emissions (scopes 1, 2, and 3).

Supporting Statement: In developing a report and assessing targets, we recommend, at management’s discretion:

Developing a robust low-carbon transition plan, taking into consideration frameworks like Climate Action 100+ Net Zero Benchmark or Net Zero Standard for Oil and Gas[4], showing evidence of implementation to meet Valero’s targets;
Including a plan for capital expenditures necessary to implement the transition plan and meet targets; and
Consulting industry best practice and third-party experts on target setting and carbon accounting methodologies.

[1] https://www.ipcc.ch/sr15/chapter/spm/

[2] https://www.iea.org/reports/net-zero-by-2050

[3] https://www.woodmac.com/news/the-edge/what-different-scenarios-tell-us-about-the-future-of-oil-and-gas/

[4] https://www.iigcc.org/resource/net-zero-standard-for-oil-and-gas-companies/

Measure and Disclose Scope 3 GHG Emissions

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