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August 23, 2012
Investor group reports on O&G disclosure

Based on criteria developed by Ceres, 10 large oil and gas (O&G) companies are doing an average job at best in disclosing to investors the financial risks they are carrying because of climate change and deepwater drilling.

Ceres describes its mission as "changing capital market practices to incorporate long-term environmental and social risks instead of merely relying on short-term returns as a measure of economic health." For years, the organization has been pressing publicly traded industrial companies to provide investors with hard details on how their financial health is intersecting with environmental risk, particularly regarding climate change. That effort was aided in 2010 by the Securities and Exchange Commission (SEC), which issued guidance indicating that companies must inform investors about how climate change will have a "material" effect on their financial condition. The current Ceres report adds the effects of deepwater drilling to the disclosure equation in light of the dangers of this activity brought to worldwide attention by the 2010 Macondo well blowout in the Gulf of Mexico.

Rating criteria

For climate change, Ceres rated the O&G companies based on regulatory risks, physical risks, indirect risks and opportunities, GHG emissions, emissions management, and climate governance. For deepwater drilling, the rating criteria were safety and environmental statistics, drilling risk management, spill response, safety research and development (R&D), and corporate governance on drilling. For each criterion, each company's disclosure was rated good, fair, poor, or no disclosure. There was no excellent rating because no company provided reporting of this quality on its risks and opportunities, according to Ceres.

Climate change

Among the report’s key findings:

  • BP, Eni, and Suncor provided relatively better climate risk disclosure than other companies reviewed.
  • Of 60 climate disclosure ratings, only 5 were good while 34 were poor or no disclosure.
  • Physical risks got short shrift in most filings, with 6 companies providing no disclosure and 3 providing poor disclosure.
  • Only BP and Eni provided specific data on GHG emissions.

  • Seven companies had poor or no disclosure of their corporate governance related to climate change.

Deepwater drilling

Ceres reported that:

  • Of 50 deepwater drilling risk disclosure ratings, 4 were good and 29 were poor or no disclosure.
  • Eight of 10 companies provided minimal or no information about safety or environmental statistics; similarly, 8 of 10 provided minimal or no information about investments in safety-related R&D.
  • Eight of 10 companies provided at least fair disclosure of their corporate governance concerning safety and drilling risks.

Challenge to O&G

According to Ceres, O&G companies need to better align their climate and deepwater drilling risk disclosures with SEC rules and investor expectations. Ceres also believes investors should push for better quality disclosure, and securities regulators should review the quality of disclosure on an ongoing basis and notify companies when their reporting is inadequate.

Check Ceres for imformation about the report.

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