April 01, 2014
Disclosures by Fracking Companies Still Poor
by Robert Kropp
Research commissioned by the Principles for Responsible Investment reveals that oil and gas
companies engaged in hydraulic fracturing fail to adequately disclose risks associated with the
Since 2009, when shareowners filed the first of 21 resolutions that just one year later had already
gained an unprecedented 40% support, concerns over the impacts of hydraulic fracturing, or
fracking, have gone mainstream. Risks associated with contamination by toxic chemicals of community
drinking water supplies, the disposal of massive volumes of wastewater, and increased air emissions
have been widely covered in the media, threatening the social license to operate of companies
engaged in the controversial practice.
In 2011, the Investor Environmental Health
Network (IEHN) and the Interfaith Center on
Corporate Responsibility (ICCR) produced an Investor Guide to help increase corporate
disclosure and mitigate the impacts of fracking. And in 2012, an international coalition of
institutional investors with $1 trillion in assets under management called for the adoption of best
practices by corporations engaged in hydraulic fracturing.
Despite the efforts by
investors, corporate disclosures by companies engaged in hydraulic fracturing remain inadequate,
according to a report issued last
November by IEHN, As You Sow, Boston Common Asset Management, and Green Century Capital Management.
That report, entitled Disclosing the Facts, benchmarked 24 companies against investor
requirements for disclosure, and found that “no firm succeeded in disclosing information on even
half of the selected 32 indicators related to management of toxic chemicals, water and waste, air
emissions, community impacts, and governance.”
A more recent report, published last week
by the Principles for
Responsible Investment (PRI) further reveals that there has been little if any improvement in
corporate disclosures since Disclosing the Facts was published.
Analyzing disclosures in
the key areas of governance, water quality and use, air emissions, and community impacts, 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,”
according to PRI. “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 $6 trillion, have joined the engagement with
fracking companies. “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,” PRI Managing
Director Fiona Reynolds said.
This year, a coalition of investors have filed shareowner
resolutions with five oil and gas companies, specifically targeting those “that received failing
scores in a recently released report scoring oil and gas companies on their disclosed efforts to
measure and mitigate the impacts of their hydraulic fracturing operations on communities and the
environment,” IEHN reported in February.
“It is imperative that companies engaged in
hydraulic fracturing not only disclose their safety policies, but also quantify the effect of
drilling on communities,” said New York City Comptroller Scott M. Stringer, who co-filed a
resolution at ExxonMobil. “Absent hard data on metrics such as toxic leaks and spills and community
complaints, long-term shareowners have no way to assess the effectiveness of these safety policies
and the risks associated with hydraulic fracturing.”
Chevron, EOG Resources, Occidental
Petroleum, and Pioneer Resources also received resolutions addressing the issue.