shareholders of Chevron - Office of the State Comptroller

INVESTOR LETTER ON CHEVRON AND ECUADOR The undersigned shareholders of Chevron collectively represent $580 billion in assets under management. We include many long term holders of Chevron stock. We note the upholding of the $18 billion Aguinda v. Texaco verdict against Chevron by the Ecuadorian Appeals Court earlier in January of this year. We urge Chevron to use the occasion of this most recent legal setback to take a fresh look at its options to address Texaco’s legacy in the Ecuadorian rainforest. We ask Chevron to meet with the shareholders signed below to discuss how the company will protect its reputation and shareholder value moving forward. The original lawsuits that were later consolidated into Aguinda v. Texaco were initiated nearly two decades ago in the United States. After acquiring Texaco, Chevron eventually had the case relocated to Ecuador as the appropriate jurisdiction for the case. As part of this process, Chevron committed to abide by the decision of the Ecuadorian court system. In February 2011, an Ecuadorian Provincial Court found Chevron liable for over $18 billion in compensatory and punitive damages for deliberately polluting vast areas of the Amazonian rainforest from oil drilling and its waste products. The judgment was upheld by the Ecuadorian Appeals Court in January 2012. This judgment is comparable in size only to BP’s commitment to a $20 billion compensation fund for those affected by its 2010 Gulf of Mexico oil spill. Despite management’s continual assertion that it intends to challenge the judgment at every opportunity, its financial exposure has only grown over time and its options to evade the $18 billion judgment have greatly narrowed in recent months. In addition to the Ecuadorian Appeals Court decision, other Chevron legal initiatives have been rebuffed.  In September 2011, the U.S. Court of Appeals for the Second Circuit lifted a lower federal court injunction that purported to bar the Ecuadorian plaintiffs from enforcing their $18 billion judgment against Chevron’s assets outside of Ecuador.  The Ecuadorian appellate court has also now twice rejected Chevron’ s attempts to suspend the court’s $18 billion judgment based on Chevron’s proceedings at the Permanent Court of Arbitration against the Republic of Ecuador under the U.S.-Ecuador Bilateral Investment Treaty. Over the course of the nearly 20 years of litigation, Chevron has suffered significant reputational damage from its attempts to defend Texaco’s record in Ecuador. The current attempts to undo the Ecuadorian court’s verdict only keeps the case in the public eye and further damages Chevron’s reputation.

1 Declaration of Chevron Deputy Comptroller Rex Mitchell in support of Chevron Corporation Motion for a Preliminary Injunction, filed 2/5/11, p. 4.

In failing to negotiate a reasonable settlement prior to the Ecuadorian court’s ruling against the company, we believe that Chevron’s Board of Directors and management displayed poor judgment that has exposed the Corporation to a substantial financial liability and risk to its operations. Chevron itself has admitted in sworn legal statements that the company is at risk of “irreparable injury to [its] business reputation and business relationships” from any potential enforcement of the Ecuadorian court judgment. Moreover, Chevron stated that this injury to the company “would not remediable by money damages.”1 This has led shareholders to question whether the company’s leadership can properly manage the array of environmental and human rights challenges and risks that it faces. A significant percentage of shareholders have already supported a resolution calling for the appointment of a director with expertise in environmental liabilities. This year, shareholders, citing management’s handling of the case in Ecuador, have filed two new resolutions calling for corporate governance reforms, one asking that Chevron separate the positions of Chief Executive Officer and Chair of the Board and the other asking that Chevron lower the thresholds for calling special meetings of shareholders. We request that Chevron arrange a meeting with shareholders signed below to address the following issues. We request that Chevron:  Disclose fully to shareholders the risks to its business and its operations from any enforcement of the $18 billion judgment and in particular reconcile its legal testimony citing “irreparable damage” to its business with the company’s past public statements to shareholders.  Reevaluate whether endless litigation is the best strategy and discuss with shareholders whether the company could adopt a more productive approach, such as reaching an equitable settlement, to both provide for a proper remediation for past environmental damages and better protect future shareholder value. Signed,


Investor Letter to Chevron on Ecuador - Signers Organization

Signer

Title

New York State International Brotherhood Teamsters Unitarian Universalist Association United Steelworkers Danske Capital MN Storebrand Investments Pax World Mercy Investment Services Catholic Health Partners Christus Health Boston Common Asset Management Zevin Asset Management Oneida Tribe of Indians of Wisconsin Christian Brothers Investment Services, Inc. Progressive Asset Management, Inc. Missionary Oblates Dominican Sisters of Hope Ursuline Sisters of Tildonk Marianist Province of the US Congregation of the Passion First Affirmative Financial Network, LLC Pinnacle Investment Advisors Newground Social Investment NorthStar Asset Management, Inc. Bâtirente Veris Wealth Partners Sisters of Charity of Cincinnati Region VI Coalition for Responsible Investment Sisters of Charity (Halifax) Sisters of St. Francis of Philadelphia Congregation of St. Basil Province of St. Joseph of the Capuchin Order Bon Secours Health System, Inc. Krull & Company Spring Water Asset Management Our Lady of Victory Missionary Sisters School Sisters of Notre Dame, Central Province Unitarian Universalist Service Committee Oxfam America

Thomas DiNapoli Ken Hall Tim Brennan Gary Beevers Thomas H. Kjærgaard Faryda Lindeman Hans Aasnæs Julie Fox Gorte, Ph.D Susan Smith Makos Susan Smith Makos Donna Meyer Lauren Compere Sonia Kowal Susan White Dan Nielsen Richard W. Torgerson Rev. Séamus P. Finn OMI Valerie Heinonen, o.s.u. Valerie Heinonen, o.s.u. Bro. Steven O'Neil, SM Fr. Michael J. Hoolahan, CP Steven Schueth Julie Skye Bruce Herbert Julie N.W. Goodridge François Meloche Anders Ferguson Ruth Kuhn, SC Ruth Kuhn, SC Joan J Butler, SC Nora M. Nash, OSF Margaret Weber Michael H. Crosby, OFMCap Edward Gerardo Peter W. Krull Lars M. Lewander Sister Clarita Trujillo Barbara Jennings, CSJ Rev. William F. Schulz Chris Jochnick

State Comptroller General Secretary-Treasurer Treasurer and CFO International Vice President for Oil Bargaining Head of SRI and Corporate Governance Advisor Responsible Investment and Governance CEO Senior Vice President for Sustainable Investing Vice President of Social Responsibility Vice President of Social Responsibility SRI Consultant Managing Director Director of Socially Responsible Investing Trust Director Director, Socially Responsible Investing Director of Social Research & Shareholder Advocacy Director, JPIC Ministry Director, Shareholder Advocacy Director, Shareholder Advocacy Shareholder Action Coordinator Treasurer President Portfolio Manager Chief Executive President and CEO Extrafinancial Risk Manager Partner Chair, Corporate Responsibility Committee Coordinator Congregational Treasurer Director Corporate Social Responsibility Corporate Responsibility Director Corporate Responsibility Office Director, Community Commitment and Social Investments President & Founder President General Treasurer Director, Midwest Coalition for Responsible Investment President and CEO Director of Private Sector Engagement
