New guidance helps investors engage with oil and gas companies on fracking
Fracking remains a contentious issue and investors need to be aware of the risks associated with fracking and be prepared to engage with companies. To help them do this, the PRI today launched Engaging with oil and gas companies on fracking: an investor guide. There is also a quick reference guide.
The investor guide addresses the fracking risks that are of concern to investors, namely: operational and physical risks; methane and other greenhouse gas emissions leaks; reputational risk and social license to operate; and policy and regulatory risks. It outlines why it is important to engage on fracking and provides investors, many of whom have oil and gas companies in their portfolios, with tried and tested questions to encourage companies to minimise risks related to fracking.
Taking these four risks into account, and through consultation with fracking experts, the PRI Fracking Steering Committee identified four areas to engage companies operating in different jurisdictions: governance; water use and quality; air emissions; and community impact and consultation. These focus areas reflect material risks and where companies could make a significant improvement in their performance and disclosure.
The guide includes case studies from some of the 41 PRI signatories, with assets under management of USD$5.1 trillion, who engaged with around 30 companies on fracking. Results showed that 87% of companies improved their disclosure of fracking-related policies, practices and management systems, signalling the progress that companies are making despite the difficult economic climate that they are operating in.
“The PRI wants to help signatories understand how ESG risks are being managed by companies, and encourage companies to improve the level of disclosure,” said managing director Fiona Reynolds. “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.”