A group of activist investors representing $1 trillion in assets under management is pushing for higher standards for hydraulic fracturing, a process energy companies use to extract natural gas.
Boston Common Asset Management, the Investor Environmental Health Network and the Interfaith Center on Corporate Responsibility announced today that 55 major investment organizations and institutional investors concerned about environmental, social and governance issues (ESG) have united to support "best practices" for shale gas "fracking," a process that shoots chemicals and millions of gallons water into wells to release natural gas in shale rock. The method has been controversial and blamed for various forms of environmental damage.
In December, IEHN and ICCR published Extracting the Facts: An Investor Guide to Disclosing Risks from Hydraulic Fracturing Operations. The group is supporting 12 core goals and practices outlined in the guide that they believe companies that use fracking should adhere to:
* 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.
* Disclose fines, penalties and litigation.
Investors are seeking action from the industry due to the increasing level of uncertainty about fracking. The investor groups cite these examples of fracking's impacts:
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.