Gemma James, Manager, Environmental Issues, PRI
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Fracking the investor portfolio UK Onshore Oil and Gas Conference Gemma James, PRI, 29 March 2017
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Transcript of Gemma James, Manager, Environmental Issues, PRI
Fracking the investor portfolioUK Onshore Oil and Gas Conference
Gemma James, PRI, 29 March 2017
AT A GLANCELaunched in April 2006 at the NYSE, the Principles for Responsible Investment has:
2 1700+ 61+ 6
THE SIX PRINCIPLES
WHY DO INVESTORS COLLABORATE?
SHARING
INFORMATION
AVOID
DUPLICATION
RESOURCES
ENHANCED
LEGITIMACY
INCREASED
INFLUENCE
RESEARCH, HUMAN
RESOURCES, TIME
FATIGUE,
EFFORT IN
ENGAGEMENTS
MORE SHARES, POWER
– INFORMAL AND
FORMAL
ESPECIALLY ON
COMPLEX TOPICS
IN FOREIGN
MARKETS, NEW
OPPORTUNITIES
Investor action
Shareholder resolutions
“
”2016 Proxy Resolutions and Voting Guide,Interfaith Center on Corporate Responsibility
Investor action
PRI fracking engagement
Preparation phase
Steering Committee
Expert calls and review of guidelines
Identify primary areas for
engagement focusTarget companies
Objectives:1. Understand companies’ ability to identify, manage and reduce fracking related risks and
capacity to improve practices and disclosure
2. Improve company disclosure
3. Enable investors to better assess and manage their exposure to the financial, operational and reputational impacts of the risks related to fracking operations in their portfolios
Focus areas and indicators
Assessing company exposure
First benchmark (2013)
Average disclosure score: 23%
Main finding: Minimal Fracking-specific disclosure exists
PRI fracking engagement
• 41 Global investors• Representing US $5.1 trillion AUM• 37 companies• 2 year engagement
Governance
Engagement questions
Does the company have appropriate governancearrangements in place on fracking practices?
How does the company manage fracking-relatedrisks?
Does the company report legal infractions andcontroversies?
Does the company pursue technology and innovationrelated to fracking?
Water use and quality
Engagement questions
Does the company report on water used? What is the company’s approach
to toxic chemicals use?
How does the company ensure well integrity?
How does the company manage water flowback or produced water?
Does the company monitor and report water quality?
Greenhouse gases and other air emissions
Engagement questions
Is the company monitoring air emissions from fracking?
Does the company use energy alternatives?
Has the company implemented green completionpolicies?*
Community impact and consultation
Engagement questions
Does the company identify benefit sharing and economic impacts?
Does the company undertake community consultation?
What fracking-related grievance mechanisms does the company have?
Results
Second benchmark (2016)
“Based on the 30 companies that were benchmarked in 2016, 26 companies (87%) improved their disclosure of fracking-related policies, practices and managementSystems”.
Results
Second benchmark (2016)
Governance• 90% of producers and 50% of service providers recognise fracking in sustainability policies
Water use and quality• 90% of the companies report to chemical registries such as FracFocus• 88% of producers and 75% of service providers committee to or demonstrated efforts to
reduce water use • 90% of companies committed to well integrity standards (up from just 37% in 2013)
Air emissions• 70% of companies use alternative fuel sources (eg natural gas instead of diesel) BUT only
20% report their emission reductions
Community• 81% of producers demonstrated engagement with stakeholders
Case Study
Asian oil and gas company engagement
• Engagement led by PRI signatory, Martin Currie• Challenge: finding the right contact in the company who would champion the effort• Solution: engagement at the board level• Improvements: fracking addressed in sustainability report; first ESG shale report released; most
substantial disclosure was on water.
Recommendations
Where are investors focussing their engagements next?
1. Encourage companies to reduce and report on their methane emissions
2. Encourage companies to continue to engage with stakeholders and implement grievance mechanisms
3. Encourage companies to monitor and report on water availability and quality
Next steps for PRI investors
Methane in the energy and utilities sectors
