April 5, 2018 Read More →

Big Investors Continue to Press for Climate-Risk Transparency Across Oil and Gas Industry

S&P Global Market Intelligence ($):

Investors concerned about environmental issues hope big fund managers, such as Vanguard Group Inc. and BlackRock Inc., will continue to push oil and gas companies to make plans for a carbon-constrained future, even after a decision by SEC staff that has dampened the momentum of such shareholder motions.

Sixteen oil and gas companies face a total of 33 resolutions, almost half of which concern environmental or climate change issues, when annual meetings begin later in April, according to data compiled from shareholder advocates and S&P Global Market Intelligence.

The November 2017 SEC bulletin said the agency would take no action against companies that toss proxies because they either deal with the “day to day business” of a firm or, in contrast, have little direct connection to the business.

Similar resolutions in 2017 drew votes from the big index funds, and a recent study indicated that those funds will swing even more votes against oil and gas managers who do not acknowledge a low-carbon future.

Shareholders in oil and gas companies including independent producers Devon Energy Corp. and Chesapeake Energy Corp. and pipeline giant Kinder Morgan Inc. are all proposing their companies report on plans for business in a world where carbon is limited.

Tom Sanzillo, director of finance for the Institute for Energy Economics and Financial Analysis and a former manager of New York state’s $150 billion pension fund, said the world economy is in a fundamental shift away from fossil fuels and advises investors to drop oil and gas companies from their portfolios as poor performers, having trailed the benchmark S&P 500 for most of the past five years. “[Oil and gas companies] used to lead the world economy. Now they are last. An effective fiduciary would drop fossil fuels from their index.”

Moreover, Sanzillo said, the SEC is helping pave the way by ruling out fundamental business questions as micromanagement. “The SEC proxy rules are designed to squeeze the meaning out of shareholder rights,” he said. “Simple question for shareholders: What remedial strategies are the companies now taking that allows them to conclude that more drilling is the answer to company financial problems when they just destroyed some $200 billion plus of share value by increasing drilling? This would probably be ruled out of order.”

“Shareholder dialogue with companies only works if there is a real potential for change,” he said.

More ($): US oil, gas companies face new shareholder push for climate change reports

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