The Rise of Environmental Activism in the Energy Sector
Environmental shareholder activism in the energy space continues to be a growing concern. These activists, under the guise of transparency and risk mitigation, continue to push for significant changes that would have far-reaching effects on corporate strategies and operations. During the 2012 proxy season, enviro-activists successfully used shareholder resolutions to spur action on sustainability hot-button issues such as hydraulic fracturing, water and air risks, and climate change. Expect more of the same in 2013.
The proxy season is upon us once again. Investors will be voting on a variety of important issues, including executive compensation, corporate board participation, capital usage policies, and — particularly for oil and gas companies — proposals related to environmental policy, programs and commitments. The increasing media and public policy attention given to hydraulic fracturing in the wake of films such as “Gasland” and “Promised Land” will ensure that green activism remains front and center as we head into the 2013 proxy season. Unlike traditional environmental activist organizations that protest development, entities such as Ceres, As You Sow, Green Century and many others — with their significant financial and legal resources — also are striving to undermine the oil and gas sector. The difference? This new generation of activists attacks through the corporate governance route, forcing companies to spend significant time and resources to defeat (or meet the requirements contained in) shareholder proposals.
2012 marked the third consecutive year of green shareholders launching high-profile campaigns to raise concerns about hydraulic fracturing.
2012 marked the third consecutive year of green shareholders launching high-profile campaigns to raise concerns about hydraulic fracturing. However, a new trend has emerged, as many boards of directors at top oil and gas companies opted to take the discussion offline when faced with such resolutions in an effort to appease the groups and, with some luck, convince them to withdraw their proposals.
In total, there were 10 shareholder resolutions specific to the fracturing issue filed in 2012, which was in line with the 2011 level. However, of the 10 resolutions, seven were withdrawn in response to corporate commitments — the promise of additional dialogue — representing a significant shift from 2011, when only four resolutions of this nature were withdrawn.
Voted-upon resolutions in 2012 received roughly 30 percent of shareholder approval, a percentage that — while not a winning figure — should be significant enough to send boards and management teams a loud-and-clear message. Indeed, environmental shareholder activists continued to live up to their name last year, demanding more time from investor relations and corporate communications professionals, as well as senior management and legal departments, throughout the U.S. oil and gas sector.