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Interview with Gemma James - Responsible Investment and Fracking

· Fracking,ESG,UNPRI,Natural Gas,Podcast

Fracking - hydraulic fracturing - is one of the most controversial environmental debates of recent years. If you've somehow missed all the sound and fury, the controversy has centered on concerns that the practice may cause groundwater contamination and/or earthquakes (see the New Scientist for a good recap). The raw emotion and distrust provoked by this issue has been well-documented in recent films like 'Promised Land' and documentaries like Josh Fox's 'Gasland' -

For many in the environmental sector, the solution is clear. No fracking. At all. Ever. The US 2016 Democratic Party Presidential Primaries included polarising discussions of whether fracking was (ever) appropriate.

However, the development and implementation of fracking projects is not only a matter for political debate. It is also a financial decision. And for those of us living through the current political dysfunction of the US and UK governments, it is an ideal moment to consider the influential role that the financial sector could play during the development and operation of extractive industrial projects.

Gemma James - a Manager on the ESG Engagements team at the UN-supported Principles for Responsible Investment - spoke with me last spring about their recent work on engagement with fracking projects.

Show Notes

00:00 - Background of UNPRI - an investor association representing $61 trillion in assets under management that encourages investors to use responsible investment to enhance returns and better manage risks. Read more about their mission here

03:20 - Introduction to UNPRI's recent report "Engaging with oil and gas companies on fracking: an investor guide"

07:35 - Recent fracking news in the UK (as of spring 2017)

08:55 - Does higher transparency open up companies to higher levels of criticism?

10:40 - How do investors respond when a controversy arises?

13:00 - How should an investor apply PRI's recommendations on the use of hazardous chemicals in fracking?

18:30 - Would investors use granular environmental risk data (e.g. water risk tools) to inform investment decisions?

21:00 - How does the value of environmental risks factor into investment decisions?

24:00 - On the controversial Lancashire project

31:00 - Climate impacts of natural gas from fracking and methane leaks (includes mention of 'An investors' guide to methane' by PRI and the Environmental Defense Fund)

35:45 - Natural gas as a 'bridging fuel'... when is a bridge a bridge, and when is a bridge a cul-de-sac?

37:30 - Does the geography of a fracking or energy project factor into ESG investment considerations?


40:00 - Encouraging news - Recent investor focus on sustainable fisheries including new initiatives like the Fish Tracker Initiative (from the founders of the Carbon Tracker Initiative).

43:00 - How can normal people engage on these topics?

Recent Fracking News in the UK

April & May 2011: Two earthquakes occur near the Preese Hall drilling site near Blackpool, UK (New Scientist), resulting in an 18-month ban on the technology (Reuters).

June 2015: Lancashire County Council rejects Cuadrilla’s planning application for four shale gas wells at Preston New Road (The Guardian). See Nov 2016.

July 2015: After promising a ban on fracking in Sites of Special Scientific Interest (SSSIs), National Parks, and Areas of Outstanding Natural Beauty (AONBs), the UK Government only bans drilling from the surface of protected areas (IEMA)

December 2015: Task Force on Shale Gas reports on economic & job creation potential as well as the impact on private property values & ideas on a community payments scheme (from IEMA & Task Force's Final Report)

November 2016: DCLG Secretary Sajid Javid overturns Lancashire County Council’s decision, granting Cuadrilla permission for fracking project (IEMA)

January 2017: US EPA report indicates that "activities associated with hydraulic fracturing or fracking can pollute drinking water" (IEMA)

Jan - May 2017: Scottish Government holds a public consultation on Unconventional Oil and Gas. It placed a moratorium on these projects in January 2015. Scotland's Midland Valley possesses "significant quantities of shale gas and oil, and coal bed methane".

August 2017: "Drilling starts at fracking site and firm launches £100,000 community fund (Blackpool Gazette, Financial Times)

Where are the biggest shale gas or tight oil reserves?

The graphic below is from the World Resources Institute's 2014 report "Global Shale Gas Development: Water Availability and Business Risks". This report included a great breakdown of which countries possess the top shale gas and tight oil resources. Given the report's focus, the graphic also contains water risk data which you can choose to dig into or disregard. It's worth reading the full report, I've hyperlinked the graphic below:

Shale Reserves and Water Stress

How can I do my part?

(A) Engage with your pension fund and/or investment manager -
  1. Request that the organisation backs investor statements on ESG issues. 
    (e.g. for phasing-out fossil fuel subsidies)
  2. Review your pension fund's investments.
    Are you investing in sectors that are exposed to high levels of ESG risk?

​(B) Get involved in direct shareholder activism - 

  1. UK folks - check out ShareAction. You could join their AGM Army, or at minimum use their free resources and training to prepare an informed, well-crafted question or proposal.
  2. US folks - educate yourself on shareholder proposals, including the definition, background, potential timetables. If difficult to engage as an individual, reflect on which social, political, or religious organisations you belong to & look for opportunities to encourage more ethical investment of organisational funds.

Want to take steps towards lower-impact living in your day-to-day life?

Check out the 'Take Action' section to start taking positive steps today! -

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