Investors Release Best Practices Guidance For Safer Fracking
Call for deeper disclosures on community impacts for energy companies to earn license to operate
December 13, 2011 - Today, the Investor Environmental Health Network (IEHN) and the Interfaith Center on Corporate Responsibility (ICCR), two shareholder coalitions committed to social and environmental justice, released a guide intended to help increase disclosure and mitigate the impacts of natural gas operations using hydraulic fracturing (commonly referred to as “fracking”). Green Century Capital Management (Green Century), which together with IEHN has coordinated shareholder engagements with companies on this issue, joins 40 asset owners, investment managers and advisors responsible for more than $50 billion in assets under management in supporting this guide.
Responding to growing public concern about the environmental and social impacts of fracking operations, including a moratorium on fracking in some municipalities, as well as requests from companies for more clarity about disclosure expectations from shareholders, IEHN and ICCR have published Extracting the Facts: An Investor Guide to Disclosing Risks from Hydraulic Fracturing Operations (the Guide).
“Companies must be publicly transparent about how they manage their environmental and social impacts,” said Richard Liroff, Executive Director of IEHN and principal author of the Guide. “Genuine transparency requires them to fully disclose the steps they are taking to minimize risks, to acknowledge their challenges and failures, and to clearly define the methods they will use to continually improve operations.” Liroff continued, “The Guide offers a road map for companies to respond to the heightened concerns around fracking, and articulates industry best practices that will reduce the risks, and consequently, the impacts.”
The Guide grew out of long-term investor dialogues, with key corporate players in the energy industry and, in several cases, draws on policies and practices currently in use by energy companies. Importantly, it is a resource for companies to respond to the Securities and Exchange Commission’s growing interest in the environmental risks from fracturing operations, and will also help companies seeking to implement a U.S. Department of Energy recommendation that companies “adopt a more visible commitment to using quantitative measures as a means of achieving best practice”.
“As questions about hydraulic fracturing mounted from investors, the public, local municipalities, and federal regulators, companies called for greater clarity around what to measure and what to report,” said Steven Heim from Boston Common Asset Management. “The Guide is an attempt to streamline these requests and provide a comprehensive reporting framework."
Heim continued, “Since 2009, shareholders have filed 21 resolutions at 16 different companies including Cabot Oil & Gas Corp*, Chesapeake Energy Corp*, Chevron Corp*, ExxonMobil Corp* and Range Resources Corp* to address the risks of hydraulic fracturing. The votes have been remarkably strong and signal significant and growing investor concern about companies’ management of shale gas risks.”
“While industry often claims business risks are minimal and community concerns are unfounded, explosions, contamination incidents, and millions of dollars in fines are clear evidence that many things can and will go wrong until the proper safeguards are put in place,” said Larisa Ruoff of Green Century Capital Management. “This systematic reporting will provide essential information for investors to distinguish leaders from laggards in the sector and will help companies directly respond to legitimate community concerns.”
“There is some evidence that natural gas is a cleaner, less expensive energy source, but recent experience underscores the need for hyper vigilance around extractives operations,” said Laura Berry, Executive Director of the Interfaith Center on Corporate Responsibility. “The Guide addresses our obligation as investors to extract the facts now, lest we and communities pay the price later.”
The investor Guide is supported by asset owners, investment managers and advisors responsible for $50 billion in assets under management, many of which are actively engaging energy companies on their fracking operations. For a list of supporters, visit www.iccr.org or www.iehn.org. The guide will be updated to reflect technological innovations and regulatory changes.
Green Century Capital Management is an investment advisory firm focused on environmentally responsible investing. Founded by a partnership of non-profit environmental advocacy organizations in 1991, Green Century's mission is to provide people who care about a clean, healthy planet the opportunity to use the clout of their investment dollars to encourage environmentally responsible corporate behavior. Green Century believes that shareholder advocacy is a critical component of responsible investing and actively advocates for greater corporate environmental accountability. Green Century manages the Green Century Balanced Fund and the Green Century Equity Fund, two environmentally responsible mutual funds.
* Neither the Green Century Balanced Fund nor the Green Century Equity Fund held Cabot Oil & Gas, Chevron Corp., ExxonMobil Corp., or Range Resources as of September 30, 2011. As of the same date, the Balanced Fund did not hold Chesapeake Energy and Chesapeake Energy comprised 0.35% of the Equity Fund.
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