PRI signatories target fracking disclosure
LONDON, 25 March 2014
Global oil and gas production and servicing companies currently provide very limited disclosure of the risks and impacts associated with their hydraulic fracturing (fracking) activity, according to research commissioned by the Principles for Responsible Investment (PRI) to support a group of 40 of its signatories that have recently launched a 3-year engagement to improve disclosure and practices in the sector.
The findings were released today as the UK Sustainable Investment and Finance association (UKSIF) celebrates Ownership Day, a national initiative to raise awareness of the financial benefits of active ownership and encourage investors to value high quality active ownership strategies.
The research, which was carried out in late 2013 by global standards and corporate responsibility consultancy AccountAbility, analyses the disclosure practices of 56 global publicly listed companies with exposure to fracking activity across 16 indicators in four key areas: governance and risk management, water quality and use, greenhouse gas emissions and community relations. Information on company disclosure practices were collected from publicly available sources, including annual and sustainability reports, regulatory filings, third-party disclosures and company websites.
Overall, the report found that most firms do not provide a clear picture of their fracking activities and impacts, even within markets where there is a high level of production and servicing activity. The average score across all four indicators was only 21%, leaving significant scope for improvement in disclosure and reporting practices.
Nearly 40 PRI signatories with combined assets under management of approximately US$ 6 trillion, have joined the engagement, including Alphinity Investment Management (AU), Boston Common Asset Management (US), CalSTRS (US), Calvert Investments (US), Mirova Asset Management (FR), Nordea (SE), Pax World Investments (US), PGGM Investments (NL), RLAM (UK), SNS Asset Management (NL), Threadneedle Asset Management (UK) and Walden Asset Management (US).
PRI Managing Director Fiona Reynolds said disclosure levels around fracking activity and the effects this has on land use, water scarcity and greenhouse gas emissions, were increasingly being scrutinized by investors.
“As with all of the engagements we coordinate, the PRI wants to help signatories understand how ESG risks are being managed by companies, and encourage companies to improve the level of disclosure where necessary. Better disclosure will ensure investors have the information they need to manage their exposure to the financial, operational and reputational risks associated with fracking within their portfolios and make informed decisions on behalf of their beneficiaries.”
According to Piet Klop, Senior Advisor Responsible Investment at PGGM Investments, “water scarcity and quality are starting to constrain shale gas and tight oil development. PGGM is keen to engage with companies to better understand and compare business value at risk and management responses”.
Currently, the PRI is supporting its signatories to carry out 14 company engagements across a range of environmental, social and governance (ESG) issues, including employee relations and sustainable palm oil. New engagements focused on labour standards and human rights in the extractives sector, water risks and linking ESG issues with executive pay are expected to launch over the coming months. Further details on current and previous PRI-supported engagements are available on the website.
A copy of the research is available for PRI signatories to download from the signatory extranet. Members of the media can request a copy of the research by emailing email@example.com.