SRI Monitor Weekly News Update

Bill Gates backs financial transaction tax to aid poor...read more



Siemens to quit nuclear industry...read more



Oil-sands workers press MPs to oppose ‘wrongheaded’ Keystone pipeline...read more



Ikea: Stock Market Pressures Hinder Sustainability...read more

Elements of Islamic Finance...read more

compiled with the assistance of Nick Searle

Fracking Under Pressure

This new report by Dayna Linley, global energy sector lead for Sustainalytics, clearly outlines what’s going on in the world of fracking today, and what responsible investors should be aware of. Fracking is the colloquial term for hydraulic fracturing, that is, pumping fluids (usually water and chemicals) into a geologic formation at high pressure to release the natural gas (shale gas).

The report begins with some background on global energy demand, which is constantly increasing and driving the shift to unconventional oil and gas. ‘Due to restricted access to known reserves, many public companies are shifting their operations into higher risk areas and into unconventional oil and gas deposits. High-risk regions are generally characterized by social volatility or environmental sensitivity, while unconventional deposits are those that either contain heavier or more contaminated oil or gas, or that occur in less accessible reservoirs or rocks.’ This is followed by an explanation of the potential impacts of shale gas extraction on air emissions, land and water.

What should the socially responsible investor do? Investors should be aware of the risks, primarily reputational risk, regulatory risk and litigation risk, and should engage with companies to encourage the adoption and ongoing development of best practices. ‘Oil and gas companies, working with their energy service providers, should evaluate local conditions and regulatory frameworks to determine locally appropriate best practices to limit impacts to the environment, local populations and the bottom line.’

The section on best practices details some best practices: transparency, baseline water testing, use of green products, process changes regarding fluid management and minimization, GHG and air emission reduction and well integrity testing, contractor management and community engagement. Included are examples of corporate initiatives in each of these areas.

A final caveat - ‘…responsible investors should view shale gas development in the context of the broader need to shift our economy away from dependence on fossil fuels. Shale gas development, even with best practices in place, does nothing to contribute to this shift. Therefore, while pushing for best practices, responsible investors should push even harder for investment in renewable, sustainable forms of energy and for regulatory environments that incentivize such investment.’

See the sidebar for more stories on fracking.
Read the full Sustainalytics report here.

Teachers becomes UNPRI signatory

The Ontario Teachers Pension Plan has signed on to the United Nations Principles for Responsible Investment. Teachers joins a number of other major Canadian pension plans which are UNPRI signatories, including the Canada Pension Plan Investment Board, the Caisse de dépôt et placement du Québec, the British Columbia Municipal Pension Plan and OPSEU Pension Trust.

More than 200 new signatories have joined the UNPRI in the last 12 months, raising the total number of signatories to 900, managing assets worth nearly US$30 trillion.

A recent survey of UNPRI signatories found that 94% of asset owners and 93% of investment managers have a responsible investment policy, pointing to what the UNPRI calls a “growing commitment to responsible investment.”

Teachers has more than $107 billion in assets and is the largest single-profession pension plan in Canada, administering the pensions of nearly 300,000 active and retired Ontario teachers.

Video:
Dr. James Gifford, Executive Director, UN-backed Principles for Responsible Investment, in conversation with Teachers CEO Jim Leech.

What's in a name?

The SIO Board is considering options related to branding of the SIO, and of the term Socially Responsible Investment. The term SRI has been debated and discussed extensively in Canada and abroad for many years. Some members and potential members of the SIO have raised concerns about the term SRI, and have argued that SIO should move to rebrand the concept. At the same time, the name of the Social Investment Organization itself, with its brand rooted in the concept of social investment may no longer be the best label that reflects the work they do and the member companies they serve.

Over the past few years, the SIO's American sister organization has moved from being the Social Investment Forum to Forum for Sustainable and Responsible Investment. Similarly Eurosif is the European Sustainable Investment Forum and UKSIF is now promoting 'sustainable and responsible finance'.

The term 'social' is now more often used in areas like social finance, social enterprise and other types of impact investing that are not necessarily focused on publicly traded companies. But the social issues addressed by SRI have not disappeared. They are reflected in the increased use of ESG (environmental, social, governance)as a way of quantifying SRI.

The SIO is sending out a survey today to members asking them for their thoughts on the name and branding of the SIO. But I believe this is a discussion that the broader SRI community can, and should, also engage in.

What do you think of the term 'social'? Are it's connotations positive or negative? How should we sort out all these various terms? Is there something to be said for consistency?

Solutions? Ideas? Let us know what you think.