Among a sample of 30 top U.S. exploration and production (E&P) companies, risk management disclosure practices have improved since 2014, but more work needs to be done to communicate how drillers are reducing their environmental impacts, according to an annual green-leaning investor report on hydraulic fracturing (fracking) transparency.
The recently released Disclosing the Facts 2015 report identifies increased efforts to communicate best management practices among “a core group of industry disclosure leaders” even in a commodity price environment where drillers “might be tempted to slow disclosure efforts and perhaps even cut corners on best practices.”
The report, a collaborative project of As You Sow, Boston Common Asset Management and Investor Environmental Health Network, is in its fourth year. The authors said the purpose of the report is to “[encourage] oil and gas companies to increase disclosure about their use of current best practices to minimize the environmental risks and community impacts” of their operations.
The authors reviewed information distributed to investors and the public to rate 30 top E&Ps based on 39 performance indicators relating to “quantitative disclosures” across five categories: toxic chemicals, water and waste management, air emissions, community impacts and management accountability.
“Hydraulic fracturing operations often use toxic chemicals and high volumes of water, release significant levels of greenhouse gases and other pollutants, and have the potential to adversely impact local communities when not properly managed. These issues translate into financial risks to companies and shareholders,” the report said.
For 2015, the report rated BHP Billiton Ltd. as a clear industry leader in risk management disclosures, giving the company 32 out of a possible 39 points. Other companies that scored above the pack included Hess Corp. (21), Apache Corp. (20), Noble Energy Inc. (19) and CONSOL Energy Inc. (19), with Southwestern Energy Co. (16), Anadarko Petroleum (15), QEP Resources Inc. (15) and EQT Corp. (14) not far behind.
“As the scoring leader, BHP Billiton has demonstrated that companies can tell their story concisely and in a fashion readily accessible to investors and other stakeholders,” the report said. “Such information is critical to investors who seek clear data on which to base investment decisions, especially in an industry that is facing tremendous challenges, including the most basic challenge of retaining a social license to operate.”
The authors noted, however, that 70% of the companies evaluated scored below 28% on the report’s transparency scale. Highlighting a number of notable practices among companies to identify and respond to risks like induced seismicity and road damage, the report recommended that companies take a more active approach to address issues frequently raised in the media and in public debates.
“Despite this leadership, a significant portion of the industry continues to miss opportunities to address issues of public concern that feature prominently in media reports and activist advocacy critical of hydraulic fracturing operations,” the report said. It went on to note that “energy markets are changing. During a time when social pressure is increasingly being applied to avoid use of fossil fuels and the costs of renewable energy are falling, more companies should follow the example of industry disclosure leaders to demonstrate that their operations are managed responsibly.”
The disclosure report comes as climate change impacts are increasingly viewed as a risk factor in investments. BlackRock Investment Institute published a report last month concluding that “climate change risk has arrived as an investment issue” (see Daily GPI, Nov. 5).
Meanwhile, New York Attorney General Eric T. Schneiderman’s office recently subpoenaed ExxonMobil Corp. to obtain financial records, emails and other documents over allegations that the company misled investors by concealing research on the climate change impacts of its operations, an assertion that the company has roundly disputed (see Daily GPI, Nov. 6).
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