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Thursday, March 27, 2014

Investors give oil/gas industry another "F" on disclosure of fracking risks

Investors are increasingly calling on oil and gas exploration and production companies to fully and transparently disclose the risks they face that are associated with the use of hydraulic fracturing technology.  A 2013 analysis I wrote about here gave the industry a failing grade on fracking risk disclosure. A group of investors who manage combined assets of US$6 trillion have done their own study and found the same failure.

The Principles for Responsible Investment (PRI) is an international network of investors working to incorporate sustainability issues into their investment decision making and ownership practices. They found:   
Global oil and gas production and servicing companies currently provide very limited disclosure of the risks and impacts associated with their hydraulic fracturing (fracking) activity…
The research, which was carried out in late 2013 by global standards and corporate responsibility consultancy AccountAbility, analyses the disclosure practices of 56 global publicly listed companies with exposure to fracking activity across 16 indicators in four key areas: governance and risk management, water quality and use, greenhouse gas emissions and community relations. Information on company disclosure practices were collected from publicly available sources, including annual and sustainability reports, regulatory filings, third-party disclosures and company websites.
Overall, 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. The average score across all four indicators was only 21%, leaving significant scope for improvement in disclosure and reporting practices. 

Will investors be able to drive the business case for sustainable shale gas development? Will money talk – or walk – when it comes to shale gas development? And does the oil and gas industry want to take that risk, too?  


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