In Wake of Instances of Problem Drilling, Regulatory Rumblings and Shareholder Unrest, Investors Seek Greater Certainty through 12 “Best Practices” Guidelines; Growing Coalition Includes Sustainable and Religious Investors in U.S., Europe and Australia.
Major investors are no longer willing to sit by idly as energy companies engaged in shale gas fracking face concerns about industry drilling problems, growing regulatory uncertainty, and increasing opposition from concerned shareholders.
Today, Boston Common Asset Management (“Boston Common”), the Investor Environmental Health Network (“IEHN”) and the Interfaith Center on Corporate Responsibility (“ICCR”) announced that 55 major investment organizations and institutional investors with nearly $1 trillion in assets under management (“AUM”) have united to support “best practices” for the fracking of shale gas. Spearheaded by the trio of sustainable investing and religious investing groups, the growing coalition seeking industry action includes investment organizations focused on Environmental, Social and Governance (“ESG”) factors and those that are not.
The supporting organizations represented in the coalition encompass dozens of institutional investors in the U.S., Europe and Australia, including: APG All Pensions Group, Australian Council of Superannuation Investors, Dexia Asset Management, Mercy Investment Services, Green Century Capital Management, and Regnan – Governance Research & Engagement Pty Ltd. (See the full list of 55 below.)
In December 2011, IEHN and ICCR published “Extracting the Facts: An Investor Guide to Disclosing Risks from Hydraulic Fracturing Operations.”
(See https://www.iehn.org/documents/frackguidance.pdf for the full text.)
Steven Heim, managing director and director of ESG Research and Shareholder Engagement, Boston Common, said:
“Assuming that hydraulic fracturing is going to continue to be used in some form, investors need to have greater certainty in the marketplace as to industry practices and government regulation. Currently there is no such certainty and that is really why investors are speaking up. The marketplace has spoken: The best course here for investors, the environment and human health will be if all shale gas extractors wake up, get the message, and use these tools to do it right.”
Richard Liroff, PhD., executive director, Investor Environmental Health Network, said:
“We’re encouraging a corporate race to the top in adopting best practices. The best-practices guide backed by major investors offers both currently achievable goals, such as minimizing fresh water use, and more aspirational goals, such as virtually eliminating toxic chemicals from fracturing operations. The guide cites practices that are already used by 17 companies. Many companies will save money and lower risks; providing business, environmental, and community benefits.”
Sister Nora Nash, director of corporate social responsibility, Sisters of St. Francis of Philadelphia, and member of the ICCR, said:
“Shale gas companies must earn their ‘social license’ by operating in a more responsible manner. Companies must address the community and environmental concerns prompting bans and moratoria. They must listen closely, respond sensitively, and account to both investors and communities for their actions. Otherwise, this is an uncharted process of unwanted development that deprives communities of their rights and leads to litigation and loss of investor confidence.”
Investors are seeking action from the industry due to the increasing level of uncertainty about fracking. Examples of the impacts include the following:
- Spreading moratoria and bans compromise development prospects. Recent restrictions on the industry include: moratoria in New York State and Delaware River Basin Commission; a moratorium in the Province of Quebec, Canada; and outright bans in France and Bulgaria. Shell has estimated that two-fifths of its New York State acreage could be off-limits due to pending rules on fracking in that state. Chevron’s exploration license in Bulgaria has been cancelled.
- Inconsistent practices making it impossible for investors to make informed choices. While some companies have voluntarily increased disclosures, particularly around chemicals used in fracking, there is no systematic reporting on risk management and reduction steps, which means investors may lack information critical to fully evaluating energy companies engaged in shale gas extraction.
- Growing shareholder unrest. Investor concern is evident in high levels of shareholder votes supporting requests for more fracking disclosure. In the 2010 and 2011 proxy seasons, 21 shareholder resolutions at 16 companies received strong support, averaging 30 percent votes on six resolutions going to votes in 2010, and an average 40 percent votes on five resolutions voted on in 2011. Most of the remaining resolutions were withdrawn in the course of discussions with companies, which either took positive action or pledged that they would do so in the near future.
ABOUT THE BEST PRACTICES GUIDELINES
Extracting the Facts: An Investor Guide to Disclosing Risks from Hydraulic Fracturing Operations was inspired by energy companies’ requests, in dialogues with investors, for enhanced guidance on disclosure of risk management practices. The guide is organized around 12 core goals and supporting practices and indicators:
- Manage risks transparently and at board level;
- Reduce surface footprint;
- Assure well integrity;
- Reduce and disclose all toxic chemicals;
- Protect water quality by rigorous monitoring;
- Minimize fresh water use;
- Prevent contamination from waste water;
- Minimize and disclose air emissions;
- Prevent contamination from solid waste and sludge residuals;
- Assure best in class contractor performance;
- Secure community consent; and
- Disclose fines, penalties and litigation.
In alphabetical order, the full list of the 55 investors, investment management and institutional investor firms supporting the “best practices” guidelines for fracking are as follows: Adrian Dominican Sisters (USA); Adveq Real Assets, Adveq Management AG (Switzerland); APG All Pensions Group (Netherlands); As You Sow (USA); Australian Council of Superannuation Investors (Australia); Bon Secours Health System, Inc. (USA); Boston Common Asset Management, LLC (USA); Calvert Investments, Inc. (USA); Catholic Health East (USA); Catholic Health Partners (USA); Dignity Health(USA); Catholic Super (Australia); Ceres (USA); Christian Brothers Investment Services, Inc. (USA); Christopher Reynolds Foundation (USA); Compton Foundation (USA); Congregation Sisters of St. Agnes General Council (Fond du Lac, WI) (USA); Dexia Asset Management (Belgium); Domini Social Investments LLC (USA); Dominican Sisters of Hope (USA); Dominican Sisters of Mission San Jose (USA); Ethos (Switzerland); Everence Financial (USA); First Affirmative Financial Network (USA); Governance for Owners (United Kingdom); Green Century Capital Management (USA); Local Government Super (Australia); Maryknoll Sisters (USA); Mercy Investment Services (USA); Miller/Howard Investments, Inc. (USA); NEI Investments (Canada); Northwest Coalition for Responsible Investment (USA); Park Foundation (USA); Parnassus Investments (USA); Pax World Funds (USA); Portfolio 21 Investments (USA); Qube Investment Management Inc. (Canada); Regnan – Governance Research & Engagement Pty Ltd (Australia); Religious of the Sacred Heart of Mary, Western American Province (USA); Rose Foundation for Communities and the Environment (USA); Shareholder Association for Research and Education (SHARE) (Canada); Sisters of Charity of Saint Elizabeth (USA); Sisters of St. Dominic, Congregation of the Most Holy Name, San Rafael (USA); Sisters of St. Francis of Penance and Christian Charity, St. Francis Province (USA); Sisters of St. Francis of Philadelphia (USA); Sisters of St. Joseph of Orange (USA); Sisters of St. Louis, California Region (USA); Sisters of the Holy Family (USA); Socially Responsible Investment Coalition (SRIC) (USA); Swift Foundation (USA); The Sustainability Group at Loring, Wolcott & Coolidge Trust, LLC (USA); Trillium Asset Management LLC (USA); Ursuline Sisters of Tildonk, U.S. Province (USA); Walden Asset Management, a division of Boston Trust & Investment Management (USA); and Zevin Asset Management (USA).
ABOUT THE GROUPS
Boston Common Asset Management is an investment manager and a leader in global sustainability initiatives, specializing in long-only International equity, US equity, and US balanced strategies. Boston Common seeks sustainable, long-term capital appreciation by investing in diversified portfolios of what it believes are high-quality companies through rigorous analysis of financial, and environmental, social and governance (ESG) factors. As shareowners, Boston Common urges companies to improve transparency, accountability, and attention to ESG issues. Boston Common is an independent, employee-owned firm and as of March 31, 2012, managed over $1.6 billion, including subadvised assets.
The Investor Environmental Health Network is a collaborative partnership of investment managers, advised by nongovernmental organizations, concerned about the financial and public health risks associated with corporate toxic chemicals policies. IEHN, through dialogue and shareholder resolutions, encourages companies to adopt policies to continually and systematically reduce and eliminate the toxic chemicals in their products and activities.
Currently celebrating its 40th year, Interfaith Center on Corporate Responsibility is the pioneer coalition of active shareholders who view the management of their investments as a catalyst for change. Its 300 member organizations with over $100 billion in assets have an enduring record of corporate engagement that has demonstrated influence on policies promoting justice and sustainability in the world.
MEDIA CONTACT: Patrick Mitchell at (703) 276-3266 or pmitchell@hastingsgroup.com.
EDITOR’S NOTE: A streaming audio replay of this news event will be available as of 5 p.m. EDT on May 16, 2012 at https://www.bostoncommonasset.com/.
