Authored by: Robin Wehbé, CFA, CMT & Laura D. Kunkemueller
Momentum is Building
During the Summer of 2017, we sent 21 letters to the largest publicly traded U.S. exploration & production (E&P) and refining companies requesting investment-useful, peer-comparable environmental and safety information. Specifically, we asked that this data, which is largely already available, be more prominently displayed in investor decks. The response has been strong.
Investors like ourselves are beginning to evaluate externalities that may impact their analyses of financial-only data. Company managements and investors both need to dedicate more time to discussing these key risks and opportunities and their impacts on a company's operations. We use this data in our valuation processes, including our estimations of risks and liabilities, and expect others to join us.
Showcasing environmental and safety performance in investor decks highlights its importance in preserving and creating enterprise value. Sustainability and corporate citizenship reports are wonderful but target varying, often non-investor, audiences. Consequently, investment-useful, peer-comparable investor data are frequently hard to locate.
Results are Trending Positively
We grouped the responses to our letter into four categories:
Initial responses spurred conversations and visits with corporate attorneys, sustainability officers, engineers, board members, CEOs and, of course, investor relations representatives. The call to action is widely acknowledged, but the sense of urgency remains with a few. We expect leaders in this area to begin attracting more capital—if not for superior environmental and safety performance then for these data's signals about corporate culture and operational efficiency.
Data comparable across companies and through time will enable us to gauge specific and relative performance. We expect "cleaner," safer and more efficient companies will stand out and post better-than-peer returns, ultimately improving the industry's environmental and safety footprint.