A new report analyzing hydraulic fracturing and horizontal drilling companies has found that some firms, like BHP Billiton Ltd., Hess Corp. and Apache Corp., have begun sharing more and increasingly detailed information with investors about their environmental practices compared to what they did in recent years.
Yet the report, which three investment groups published yesterday, concluded that the majority of oil and gas companies provide general and at times vague information to the investment community, rather than granular details.
"Most of the industry — 70 percent of the companies assessed — continue to leave investors substantially in the dark about their policies, practices, and impacts, especially on a quantitative play-by-play basis," the report reads.
"There is insufficient voluntary disclosure [being done] correctly," said Danielle Fugere, president of As You Sow, a nonprofit shareholder advocacy group that studies environmental and financial topics. "This is a particularly important issue as we move forward and the world moves forward on climate change," she said, noting that oil and gas can be as polluting as coal if drillers don’t contain methane leaks.
Of the 30 companies analyzed, five disclosed reductions they have made in their use of toxic chemicals, and 30 percent shared adequate information with investors about fracking risks, though no company has set a goal to reduce methane emissions, according to the research. Just eight firms achieved "meaningful disclosure progress" since the third such report came out in 2014, "but most are still not transparent," the authors said.
"We think it’s important for companies to take ownership," said Richard Liroff, executive director of the Investor Environmental Health Network, which, along with Boston Common Asset Management, joined As You Sow to author the report.
Pushing for transparency
Steve Heim, managing director at Boston Common Asset Management, said he’s encouraging companies to make voluntary disclosures about fracking and drilling.
"So that’s the problem that SASB’s trying to solve," Amanda Medress, communications director at the Sustainability Accounting Standards Board, said by phone.
She was referring to the board’s mission: to create and share financial accounting methods for public U.S. companies to include in common financial documents they file like the 10-K and 20-F.
SASB announced Wednesday new standards for new six industries — biofuels, forestry and logging, fuel cells and batteries, paper and pulp, solar energy, and wind energy — meant to help firms share important information that relates to environmental sustainability.
"Some industries in this sector — including solar, wind, fuel cells and industrial batteries, and biofuels — are nascent or high-growth industries," Jean Rogers, the founder and CEO of SASB, said in a statement. "[These] standards help companies in these industries identify, manage and disclose the headline issues that are most likely to impact" their business.
Modeled after the Financial Accounting Standards Board, which helps develop the standardized accounting principles in the United States, SASB works to make new trades, like the renewable energy business, easy to understand by designing new accounting practices and metrics.
Renewables vs. fossil fuel — what’s the score?
Nathan Serota, a solar analyst with Bloomberg New Energy Finance, said new standards are important to understand how the renewables sector is faring.
"Transparency will be paramount as the industry continues to move from niche to mainstream," he said.
Global climate change, according to SASB, affects 93 percent of the U.S. equity market, worth about $34 trillion.
In 2010, the Securities and Exchange Commission issued its most salient guidance on corporate disclosure and investment risks due to climate change, which, Medress said, resulted in "a lot of boilerplate disclosure" from firms that provided broad statements (ClimateWire, Dec. 4).
The World Federation of Exchanges, a trade group for 64 financial exchanges, issued new guidance last month for members to incorporate. The guidance, though voluntary, would require firms listed on a given exchange to share information about energy use, water consumption and child labor, among other subjects.
The hydraulic fracturing scorecard report assessed corporate data on toxic chemicals, water and waste management, air emissions, impacts upon local communities and management of onshore drilling operations in the United States and Canada.