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.
Showing posts with label environment. Show all posts
Showing posts with label environment. Show all posts
Thursday, September 15, 2011
Thursday, March 12, 2009
Corporate sustainability reporting: the executive disconnect
Canada’s senior executives seem to be getting the message that sustainability issues are important to their businesses. But there’s a major gap between understanding and action, according to a survey released this week.
The study, conducted by PricewaterhouseCoopers LLP (PwC) and the Canadian Financial Executives Research Foundation, reveals that 90% of Canada’s senior financial executives believe their companies should be reporting on environmental and social impacts. However, only half said they have sustainability reporting systems in place, even though most also believe the average investor does not have enough information about the environmental and social performance of Canadian companies.
The survey suggests that most executives understood which sustainability issues were most relevant to achieving their business goals and felt it was important to communicate sustainability performance to senior managers and their boards of directors. But again, more than half admitted they did not have systems and processes in place to measure sustainability performance.
“Several forces may be working together to explain the disconnect,” says PcW partner Mike Harris. “First, a general framework does not exist for measuring and reporting, making comparisons between industries a challenge. Second, many companies have not developed robust data collection systems to make the reporting process efficient and reliable. Third, most finance executives continue to only focus on the mandatory financial disclosures and finally, the cost/benefit of optional sustainability reporting does not provide support for the types of systems and process required to effectively implement it.”
“Until sustainability reporting is mandatory, this is likely to remain the norm,” Harris concluded.
The survey found that larger companies were more likely to link the application of corporate sustainability practices to business goals. And public companies were more like to comply with external reporting standards such as the Global Reporting Initiative and the Greenhouse Gas Protocol.
Companies were also concerned about compiling data in a cost-effective manner that would accommodate a broad spectrum of stakeholders, such as employees, shareholders, customers, institutional investors, regulators and environmental activist groups. The costs associated with sustainability reporting were of particular concern to small- to medium-sized businesses.
The survey results indicate that the vast majority of financial executives believe that regulatory requirements pertaining to sustainability disclosure and reporting will increase in the years to come; nearly three-quarters said they believed that legislation relating to disclosure and reporting of sustainability performance will become more stringent over the next five years.
Nearly 350 senior executives from across Canada participated in the survey.
The study, conducted by PricewaterhouseCoopers LLP (PwC) and the Canadian Financial Executives Research Foundation, reveals that 90% of Canada’s senior financial executives believe their companies should be reporting on environmental and social impacts. However, only half said they have sustainability reporting systems in place, even though most also believe the average investor does not have enough information about the environmental and social performance of Canadian companies.
The survey suggests that most executives understood which sustainability issues were most relevant to achieving their business goals and felt it was important to communicate sustainability performance to senior managers and their boards of directors. But again, more than half admitted they did not have systems and processes in place to measure sustainability performance.
“Several forces may be working together to explain the disconnect,” says PcW partner Mike Harris. “First, a general framework does not exist for measuring and reporting, making comparisons between industries a challenge. Second, many companies have not developed robust data collection systems to make the reporting process efficient and reliable. Third, most finance executives continue to only focus on the mandatory financial disclosures and finally, the cost/benefit of optional sustainability reporting does not provide support for the types of systems and process required to effectively implement it.”
“Until sustainability reporting is mandatory, this is likely to remain the norm,” Harris concluded.
The survey found that larger companies were more likely to link the application of corporate sustainability practices to business goals. And public companies were more like to comply with external reporting standards such as the Global Reporting Initiative and the Greenhouse Gas Protocol.
Companies were also concerned about compiling data in a cost-effective manner that would accommodate a broad spectrum of stakeholders, such as employees, shareholders, customers, institutional investors, regulators and environmental activist groups. The costs associated with sustainability reporting were of particular concern to small- to medium-sized businesses.
The survey results indicate that the vast majority of financial executives believe that regulatory requirements pertaining to sustainability disclosure and reporting will increase in the years to come; nearly three-quarters said they believed that legislation relating to disclosure and reporting of sustainability performance will become more stringent over the next five years.
Nearly 350 senior executives from across Canada participated in the survey.
Wednesday, March 11, 2009
Ethical releases list of shareholder resolutions
Ethical Funds announced today that it has filed shareholder resolutions with a number of Canadian companies outlining a variety of concerns, including climate change, human rights, indigenous people’s rights and sweatshops.
Topping the list is Barrick Gold, which made headlines recently when it was expelled from the Norwegian government’s pension plan for environmental reasons. Ethical is asking Barrick’s board of directors to engage an independent third party to review the company’s engagement practices and performances, focusing on the Cortez Hill mine site in Nevada.
Ethical sent two analysts to Nevada last year to tour Barrick’s mines and meet with the indigenous Western Shoshone community. Subsequently, Ethical recommended that Barrick consider conducting a human rights impact assessment of that project, an idea rejected by Barrick.
Ethical is also asking Enbridge to provide a report assessing the costs and benefits of adopting a policy requiring the free, prior and informed consent of aboriginal communities as a necessary condition for proceeding with the construction of company projects.
Sherritt International, E-L Financial, Great West Lifeco and Saputo have all been asked to report on how they are assessing the impact of climate change on their corporations and how they plan to disclose this information to shareholders. If applicable, the four companies have also been asked to explain their rationale for not disclosing such information in the future, through reporting mechanisms such as the Carbon Disclosure Project.
Power's board of directors has been asked to issue a report describing how it evaluates investments according to its CSR statement and commitment to the Universal Declaration of Human Rights. Power has investments in countries where human rights violations are of international concern, including Burma, Sudan and China.
The board of directors at Reitmans as been asked to publicly disclose a code of conduct for the company’s suppliers, including a credible compliance program with independent monitoring. According to Reitmans’ most recent Annual Information Form, the company sources 75% of its merchandise from countries where labour and human rights abuses are known to occur.
Please click here for the full text of the Ethical resolutions.
Topping the list is Barrick Gold, which made headlines recently when it was expelled from the Norwegian government’s pension plan for environmental reasons. Ethical is asking Barrick’s board of directors to engage an independent third party to review the company’s engagement practices and performances, focusing on the Cortez Hill mine site in Nevada.
Ethical sent two analysts to Nevada last year to tour Barrick’s mines and meet with the indigenous Western Shoshone community. Subsequently, Ethical recommended that Barrick consider conducting a human rights impact assessment of that project, an idea rejected by Barrick.
Ethical is also asking Enbridge to provide a report assessing the costs and benefits of adopting a policy requiring the free, prior and informed consent of aboriginal communities as a necessary condition for proceeding with the construction of company projects.
Sherritt International, E-L Financial, Great West Lifeco and Saputo have all been asked to report on how they are assessing the impact of climate change on their corporations and how they plan to disclose this information to shareholders. If applicable, the four companies have also been asked to explain their rationale for not disclosing such information in the future, through reporting mechanisms such as the Carbon Disclosure Project.
Power's board of directors has been asked to issue a report describing how it evaluates investments according to its CSR statement and commitment to the Universal Declaration of Human Rights. Power has investments in countries where human rights violations are of international concern, including Burma, Sudan and China.
The board of directors at Reitmans as been asked to publicly disclose a code of conduct for the company’s suppliers, including a credible compliance program with independent monitoring. According to Reitmans’ most recent Annual Information Form, the company sources 75% of its merchandise from countries where labour and human rights abuses are known to occur.
Please click here for the full text of the Ethical resolutions.
Thursday, February 12, 2009
Ethical Funds maps out action plan for 2009
It looks to be another busy year for the research team at Vancouver-based Ethical Funds, with today’s release of the mutual fund company’s extensive sustainable investment program annual report.
Bob Walker, vice president, sustainability, says Ethical plans to focus on three key issues in 2009. “The first is investor risk in Canada’s oil sands. The second is how companies can assess the full range of their impacts on human rights and ensure that their activities benefit impacted communities. The third will address how investors can help restore integrity to capital markets and the publicly-traded companies that benefit from the ethical functioning of those markets.”
As well as engaging oil sands companies on climate change, Ethical will ask companies in other sectors to work on emissions reduction, including continued dialogue with real estate companies on implementing green building strategies. Oil sands companies will also be asked to address cumulative water use issues and forestry companies will be encouraged to adopt sustainable practices.
On the social side, Ethical will continue to work with companies to encourage the development and implementation of human rights policies and programs when operating in risky countries. The fund company will also work towards eliminating sweatshop conditions and make an effort to ensure companies are not inadvertently supporting the use of child or forced labour.
Respecting indigenous rights is also on the 2009 agenda, particularly in the mining sector, where Ethical will support the adoption of informed consent as the standard for project development.
Corporate governance will be Ethical’s third main focus, with the company asking companies to improve their corporate social responsibility reporting and overall quality of their disclosure. Curbing excessive compensation will remain a priority, with Ethical asking that compensation be linked to positive performance on both the financial and the non-financial side.
“We believe companies that proactively address environmental, social and governance challenges have a long-term competitive advantage over companies that choose to ignore these issues,” notes Walker.
The sustainability report also includes highlights from Ethical’s work in 2008, including encouraging more Canadian companies to participate in the Carbon Disclosure Project, encouraging Canadian banks to adopt and disclose procedures for evaluating climate change-related credit risk in their commercial lending policies and raising awareness of the risks investors face from the scale and pace of development in Alberta’s oil sands.
Bob Walker, vice president, sustainability, says Ethical plans to focus on three key issues in 2009. “The first is investor risk in Canada’s oil sands. The second is how companies can assess the full range of their impacts on human rights and ensure that their activities benefit impacted communities. The third will address how investors can help restore integrity to capital markets and the publicly-traded companies that benefit from the ethical functioning of those markets.”
As well as engaging oil sands companies on climate change, Ethical will ask companies in other sectors to work on emissions reduction, including continued dialogue with real estate companies on implementing green building strategies. Oil sands companies will also be asked to address cumulative water use issues and forestry companies will be encouraged to adopt sustainable practices.
On the social side, Ethical will continue to work with companies to encourage the development and implementation of human rights policies and programs when operating in risky countries. The fund company will also work towards eliminating sweatshop conditions and make an effort to ensure companies are not inadvertently supporting the use of child or forced labour.
Respecting indigenous rights is also on the 2009 agenda, particularly in the mining sector, where Ethical will support the adoption of informed consent as the standard for project development.
Corporate governance will be Ethical’s third main focus, with the company asking companies to improve their corporate social responsibility reporting and overall quality of their disclosure. Curbing excessive compensation will remain a priority, with Ethical asking that compensation be linked to positive performance on both the financial and the non-financial side.
“We believe companies that proactively address environmental, social and governance challenges have a long-term competitive advantage over companies that choose to ignore these issues,” notes Walker.
The sustainability report also includes highlights from Ethical’s work in 2008, including encouraging more Canadian companies to participate in the Carbon Disclosure Project, encouraging Canadian banks to adopt and disclose procedures for evaluating climate change-related credit risk in their commercial lending policies and raising awareness of the risks investors face from the scale and pace of development in Alberta’s oil sands.
Wednesday, February 11, 2009
Private equity firms adopt responsible investment guidelines
The Private Equity Council, a group representing 13 heavy-hitters in the private equity world, has agreed to adopt a set of responsible investment guidelines that they will apply before investing in companies and during ownership.
The guidelines cover environmental, health, safety, labour, governance and social issues and follow a series of talks between council members and a group of the world’s major institutional investors, all under the umbrella of the United Nations-backed Principles for Responsible Investment (PRI).
“Private equity is all about investing for growth and maximizing returns to our investors. To accomplish that today requires considering a range of environmental, governance, human capital, and social issues,” said Private Equity Council president Douglas Lowenstein. “Today’s announcement explicitly and formally affirms PEC members’ commitment to fully integrating these responsible investment guidelines into both our pre-investment and post-investment processes.”
“We signed onto PRI because we believe that encouraging policies and practices that help create a better society for this and future generations is an excellent way to maximize our investment returns,” said Ted Eliopoulous, Interim Chief Investment Officer of the California Public Employees Retirement Systems, which is a limited partner in many PEC members’ funds.
Under the terms of the guidelines, PEC members will consider environmental, public health, safety and social issues associated with target companies when evaluating whether to invest, as well as during the period of ownership. Members will also seek to improve the companies in which they invest for long-term sustainability and to benefit multiple stakeholders on environmental and social governance issues.
Council members are: Apax Partners; Apollo Global Management LLC; Bain Capital Partners; the Blackstone Group; the Carlyle Group; Hellman & Friedman LLC; Kohlberg Kravis Roberts & Co.; Madison Dearborn Partners; Permira; Providence Equity Partners; Silver Lake, THL Partners; and TPG Capital (formerly Texas Pacific Group).
The guidelines cover environmental, health, safety, labour, governance and social issues and follow a series of talks between council members and a group of the world’s major institutional investors, all under the umbrella of the United Nations-backed Principles for Responsible Investment (PRI).
“Private equity is all about investing for growth and maximizing returns to our investors. To accomplish that today requires considering a range of environmental, governance, human capital, and social issues,” said Private Equity Council president Douglas Lowenstein. “Today’s announcement explicitly and formally affirms PEC members’ commitment to fully integrating these responsible investment guidelines into both our pre-investment and post-investment processes.”
“We signed onto PRI because we believe that encouraging policies and practices that help create a better society for this and future generations is an excellent way to maximize our investment returns,” said Ted Eliopoulous, Interim Chief Investment Officer of the California Public Employees Retirement Systems, which is a limited partner in many PEC members’ funds.
Under the terms of the guidelines, PEC members will consider environmental, public health, safety and social issues associated with target companies when evaluating whether to invest, as well as during the period of ownership. Members will also seek to improve the companies in which they invest for long-term sustainability and to benefit multiple stakeholders on environmental and social governance issues.
Council members are: Apax Partners; Apollo Global Management LLC; Bain Capital Partners; the Blackstone Group; the Carlyle Group; Hellman & Friedman LLC; Kohlberg Kravis Roberts & Co.; Madison Dearborn Partners; Permira; Providence Equity Partners; Silver Lake, THL Partners; and TPG Capital (formerly Texas Pacific Group).
Monday, February 9, 2009
Canadian SRI funds closely monitoring Barrick
The Norwegian government’s decision to expel Barrick Gold from its state pension plan for environmental reasons has sparked renewed debate over whether Canadian SRI mutual funds should continue to invest in the controversial mining company.
Barrick is a top ten holding in four Canadian SRI funds: Ethical Balanced, Ethical Stock, Ethical Index and Acuity Social Values Canadian Equity.
Bob Walker, vice president, sustainability, at Ethical Funds notes that the Norwegian pension fund uses divestment as a tool to express dissatisfaction with a company’s performance, instead of engagement, which is Ethical’s preferred approach.
Walker notes that Ethical has been talking with Barrick since 2005 and has made progress in a number of areas. For instance, Barrick has established a human rights policy, joined the UN Global Compact on corporate responsibility, hired a chief medical officer to deal with HIV/AIDS and has extended the availability of antiretroviral drugs to employees and their families.
The company also established community engagement guidelines that Walker says could have improved Barrick’s performance in a number of controversial mining projects around the world. However: “In the last two years, that hasn’t happened, the controversies are continuing.”
Ethical sent two analysts to Nevada last year to tour Barrick’s mines and meet with the Western Shoshone community. Subsequently, Ethical recommended that Barrick consider conducting a human rights impact assessment of that project, an idea rejected by Barrick.
Ethical is now in the process of drafting a shareholder proposal for Barrick’s 2009 annual general meeting in an effort to get the company to improve its human rights and environmental performance, Walker says.
So what would it take for Ethical to divest in Barrick?
“We have fairly clear rules on that,” Walker says. “We make three concerted efforts at engaging a company on any given issue and if they fail to respond with sound arguments on those three occasions then we will divest.”
The rejection of [establishing a human rights impact assessment in Nevada] would represent the first strike, Walker says. But there’s still the shareholder proposal and an upcoming meeting with Barrick’s new CEO to consider. “We’ll see how things go from there. We are pretty patient around these issues and we believe that corporate change takes time.”
Over at Acuity, Social Values Funds manager Martin Grosskopf points out that for a Canadian equity fund benchmarked to the TSX, the gold sector is impossible to ignore.
Still, he concedes that Barrick, like most companies in that sector, does not come without controversy. “The reality is that all of the gold mining companies have significant issues and Barrick has had many of these issues for years, but it still ranks better than others within the space.”
“We’re not trying to avoid the issues entirely; we know we are going to own companies that have some contentious issues and Barrick is certainly one of them.”
Of course, both Walker and Grosskopf note that socially responsible investors can avoid Barrick by investing in other Canadian Ethical or Acuity products, such as Ethical’s Special Equity Fund or Acuity’s Clean Environment Equity Fund. “We don’t own gold in that fund,” Grosskopf notes. “I don’t think you can mine gold without having significant environmental impacts, that’s the nature of that sector.”
Canada’s two other SRI-focused mutual fund companies – Inhance Investment Management and Meritas Mutual Funds – do not hold Barrick.
Barrick is a top ten holding in four Canadian SRI funds: Ethical Balanced, Ethical Stock, Ethical Index and Acuity Social Values Canadian Equity.
Bob Walker, vice president, sustainability, at Ethical Funds notes that the Norwegian pension fund uses divestment as a tool to express dissatisfaction with a company’s performance, instead of engagement, which is Ethical’s preferred approach.
Walker notes that Ethical has been talking with Barrick since 2005 and has made progress in a number of areas. For instance, Barrick has established a human rights policy, joined the UN Global Compact on corporate responsibility, hired a chief medical officer to deal with HIV/AIDS and has extended the availability of antiretroviral drugs to employees and their families.
The company also established community engagement guidelines that Walker says could have improved Barrick’s performance in a number of controversial mining projects around the world. However: “In the last two years, that hasn’t happened, the controversies are continuing.”
Ethical sent two analysts to Nevada last year to tour Barrick’s mines and meet with the Western Shoshone community. Subsequently, Ethical recommended that Barrick consider conducting a human rights impact assessment of that project, an idea rejected by Barrick.
Ethical is now in the process of drafting a shareholder proposal for Barrick’s 2009 annual general meeting in an effort to get the company to improve its human rights and environmental performance, Walker says.
So what would it take for Ethical to divest in Barrick?
“We have fairly clear rules on that,” Walker says. “We make three concerted efforts at engaging a company on any given issue and if they fail to respond with sound arguments on those three occasions then we will divest.”
The rejection of [establishing a human rights impact assessment in Nevada] would represent the first strike, Walker says. But there’s still the shareholder proposal and an upcoming meeting with Barrick’s new CEO to consider. “We’ll see how things go from there. We are pretty patient around these issues and we believe that corporate change takes time.”
Over at Acuity, Social Values Funds manager Martin Grosskopf points out that for a Canadian equity fund benchmarked to the TSX, the gold sector is impossible to ignore.
Still, he concedes that Barrick, like most companies in that sector, does not come without controversy. “The reality is that all of the gold mining companies have significant issues and Barrick has had many of these issues for years, but it still ranks better than others within the space.”
“We’re not trying to avoid the issues entirely; we know we are going to own companies that have some contentious issues and Barrick is certainly one of them.”
Of course, both Walker and Grosskopf note that socially responsible investors can avoid Barrick by investing in other Canadian Ethical or Acuity products, such as Ethical’s Special Equity Fund or Acuity’s Clean Environment Equity Fund. “We don’t own gold in that fund,” Grosskopf notes. “I don’t think you can mine gold without having significant environmental impacts, that’s the nature of that sector.”
Canada’s two other SRI-focused mutual fund companies – Inhance Investment Management and Meritas Mutual Funds – do not hold Barrick.
Friday, January 30, 2009
Barrick Gold removed from Norwegian pension fund
Citing environmental concerns, Norway has expelled Canadian miner Barrick Gold from its $400 billion government pension fund.
The fund stated today that it had sold Barrick shares worth about $222 million due to reports of environmental damage at the Porgera mine in Papua New Guinea. Barrick, the world’s largest gold producer, has a 95% stake in the project.
Norway created a Council of Ethics in 2004 to monitor the pension fund’s holdings.
“In its assessment, the Council on Ethics concluded that Barrick Gold Corporation is causing severe environmental damages as a direct result of its operations. I have therefore decided to follow the Council on Ethics’ recommendation on exclusion of Barrick Gold Corporation from the investment universe of the Fund," Norway’s Minister of Finance Kristin Halvorsen said in a statement.
Norway limited its investigation to the Porgera mine, but was also critical of what the minister called a lack of openness and transparency in the company’s environmental reporting.
Barrick has not released a public statement on the expulsion. However, spokesperson Vince Borg told Bloomberg that the company disagrees with Norway’s allegations that the Porgera mine operation is damaging the environment.
Barrick is “managing and mitigating the risks,” Borg said. “We’ve made steady progress in improving the Porgera mine in any respect from providing sustainable economic development to protecting the environment.”
The CPP Investment Board, the investment arm of the Canada Pension Plan, held Barrick shares worth an estimated $519 million dollars, as of March 31, 2008.
(All figures in Canadian dollars)
The fund stated today that it had sold Barrick shares worth about $222 million due to reports of environmental damage at the Porgera mine in Papua New Guinea. Barrick, the world’s largest gold producer, has a 95% stake in the project.
Norway created a Council of Ethics in 2004 to monitor the pension fund’s holdings.
“In its assessment, the Council on Ethics concluded that Barrick Gold Corporation is causing severe environmental damages as a direct result of its operations. I have therefore decided to follow the Council on Ethics’ recommendation on exclusion of Barrick Gold Corporation from the investment universe of the Fund," Norway’s Minister of Finance Kristin Halvorsen said in a statement.
Norway limited its investigation to the Porgera mine, but was also critical of what the minister called a lack of openness and transparency in the company’s environmental reporting.
Barrick has not released a public statement on the expulsion. However, spokesperson Vince Borg told Bloomberg that the company disagrees with Norway’s allegations that the Porgera mine operation is damaging the environment.
Barrick is “managing and mitigating the risks,” Borg said. “We’ve made steady progress in improving the Porgera mine in any respect from providing sustainable economic development to protecting the environment.”
The CPP Investment Board, the investment arm of the Canada Pension Plan, held Barrick shares worth an estimated $519 million dollars, as of March 31, 2008.
(All figures in Canadian dollars)
Subscribe to:
Posts (Atom)