sustainable investors

A Trillion Dollar Call for Best Practices in Fracking Operations

alecfossilfuelfunders-editedFifty-five institutional investment organizations representing $1 trillion in assets under management call for adoption of best practices by oil and gas companies engaged in hydraulic fracturing. — Many oil and gas companies are focusing their operations on the controversial practice of hydraulic fracturing, claiming that the reserves of natural gas available by means of the process contribute a pathway toward national energy independence.

However, concerns have been mounting rapidly over the impacts of fracking. Those concerns include the contamination of groundwater sources by the often toxic chemicals used in the process; ; and the impacts on formerly rural communities of what Mark Regier of Everence Financial described to last month as a “gold rush.”

Sustainable investors and other concerned shareowners were quick to begin addressing the environmental and social risks of fracking, and by the time of last year’s proxy season shareowner resolutions addressing the practice were already gaining an average 40% support.

At a press conference held last week, 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. The coalition of 55 investment organizations is led by Boston Common Asset Management, the Interfaith Center on Corporate Responsibility (ICCR) and the Investor Environmental Health Network (IEHN).

Citing an Investor Guide published late last year by ICCR and IEHN, the investors identified the risks to companies engaged in the practice. The risks include moratoria and outright bans on fracking; the absence of systematic reporting on risk management; and growing investor unrest over the inability to fully evaluate the practices of companies.

Richard Liroff of IEHN told at the time of the Investor Guide’s publication, “There’s a moratorium in the Delaware River Basin, there’s been a moratorium in New York State, there’s a moratorium in the Province of Quebec. There is a ban in France, there is a moratorium in South Africa, and there is a moratorium in the New South Wales state in Australia.”

The investor coalition also pointed out that Chevron’s exploration license in Bulgaria was cancelled as well. In January, legislators there overwhelmingly approved a ban on fracking.

“Investors need to have greater certainty in the marketplace as to industry practices and government regulation,” said Steven Heim of Boston Common. “The best course here for investors, the environment and human health will be if all shale gas extractors wake up, get the message, and use these tools to do it right.”

According to the Investor Guide, best practice in fracking includes 12 core goals:
• 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; and
• Disclose fines, penalties and litigation.

At the press conference, Liroff said, “We’re encouraging a corporate race to the top in adopting best practices. The best-practices guide backed by major investors offers both currently achievable goals, such as minimizing fresh water use, and more aspirational goals, such as virtually eliminating toxic chemicals from fracturing operations.”

“The guide cites practices that are already used by 17 companies,” Liroff continued. “Many companies will save money and lower risks, providing business, environmental, and community benefits.”

A second report on fracking, published earlier this year by the IRRC Institute and the Sustainable Investments Institute (Si2), stated, “How companies respond to further calls for transparency and adherence to best practices will influence whether the operating environment will improve or whether future rounds of even more stringent regulation or outright bans on drilling will ensue. Given the public scrutiny, a few bad actors may put the entire industry’s license to operate at risk.”

That a significant number of companies are now listening to investor concerns over fracking can be discerned by the fact that of the ten resolutions filed this year addressing the practice, six have been withdrawn in favor of engagement.

At last week’s press conference, Sister Nora Nash of the Sisters of St. Francis of Philadelphia, said, “Shale gas companies must earn their ‘social license’ by operating in a more responsible manner. Companies must address the community and environmental concerns prompting bans and moratoria. They must listen closely, respond sensitively, and account to both investors and communities for their actions. Otherwise, this is an uncharted process of unwanted development that deprives communities of their rights and leads to litigation and loss of investor confidence.”

Two of the fracking resolutions remaining are filed with Chevron and ExxonMobil, and shareowners will vote on them at the companies’ annual general meetings, both scheduled for May 30th.

“Chevron and ExxonMobil are emerging as laggards by failing to address investor concerns in a meaningful way,” said Larisa Ruoff, Director of Shareholder Advocacy for Green Century Capital Management, a lead filer of the Chevron proposal. “As two of the largest oil and gas companies in the US, these companies should step up and respond to a significant portion of their shareholders by providing increased disclosure on how each company is managing the risks associated with fracking operations.”


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Social Funds

Corporations Agree to Disclose Political Spending

The Center for Political Accountability announces that engagement has led to six corporations agreeing to adopt political disclosure and accountability, while a shareowner resolution at Visa gains significant support. — Last year, the Center for Political Accountability (CPA) announced that the number of public corporations agreeing to disclose their political expenditures had reached 100. More than half of the companies are listed on the S&P 100.

As reported here in late November, it now appears that the Securities and Exchange Commission (SEC) is considering a rule requiring that “public companies provide disclosure to shareholders regarding the uses of corporate resources for political activities,” according to Paula Dubberly, a Deputy Director of the Division of Corporation Finance at the SEC. However, sustainable investors and other advocates are not simply waiting for a rule to materialize; CPA reports that more than 50 resolutions were filed with corporations this proxy season, requesting that they adopt political disclosure and board oversight.

It’s also apparent companies themselves are acknowledging reality, as not only the number of resolutions but the vote totals as well continue to rise. At Visa’s annual general meeting this week, for instance, 37% of shareowners votes in support of a resolution requesting that the financial services company disclose all payments used for lobbying purposes, including payments to trade associations.

The resolution, co-filed by Boston Common Asset Management and the Unitarian Universalist Association (UUA), stated, “Public opinion is skeptical of corporate influence on Congress and public policy and questionable lobbying activity may pose risks to our company’s reputation when controversial positions are embraced.”

At Visa’s annual meeting, Meredith Benton of Boston Common said, “We commend Visa for initiating enhanced disclosure.”

“We persist, though, in bringing this proposal to ballot as the company has not yet contemplated any disclosure to shareholders on lobbying spending connected with trade associations or other tax exempt organizations,” Benton continued.

Also this week, CPA announced that six corporations avoided having resolutions on political spending come to a vote by agreeing to adopt disclosure and accountability. Boeing and Mylan, a pharmaceutical company, came to agreement after resolutions during last year’s proxy season gained significant support. KeyCorp, Harley-Davidson, Deere & Co., and AmerisourceBergen also agreed to disclosure of political expenditures.

“The companies have agreed to disclose their direct corporate political contributions, indirect political spending through trade associations and other groups such as ‘social welfare’ 501(c)(4)s and to implement board oversight,” CPA stated.

The withdrawn resolutions, which were based on the CPA model, were filed by Investor Voice, the New York State Common Retirement Fund, the Nathan Cummings Foundation, the International Brotherhood of Teamsters General Fund, and William Zessar.

“Hidden political spending soared off the charts in the 2012 elections, but a steadily increasing number of American companies are choosing an alternative, the Center’s model for disclosure and board oversight of corporate political spending,” said CPA President Bruce Freed.


Social FundsThis article was written by Robert Kropp, and is published at