Firms look to green image

Saudi Arabia is continuing to pump oil even though the price is dropping. PHOTO/FILE

Earlier this year, Exxon Mobil, as the Economist put it, "surely the world's least tree-hugging company", became the first oil giant to say it would publish details of its "stranded assets" -- the value of the oil and gas they would be unable to sell if the bottom fell out of the oil market or if tough rules about greenhouse gas emissions or carbon pricing were adopted.

This is not a Road to Damascus revelation.

Exxon is not yet a paid-up green activist, but a sizeable number of its influential shareholders are. They appear to feel that limiting their possible exposure to losses from these sorts of scenarios is worth doing. Several large shareholders have demanded explanations and actions on environmental threats.

Until recently, the corporate world treated the environment as either irrelevant or a nuisance. Now, there are local, national and international regulations to protect the environment and independent watchdogs to report on company compliance with these regulations.

Shareholders generally are beginning to organise and react. There is a network of investors called Principles for Responsible Investment, which has more than 1000 members and $34 trillion to play with. Their main concern is that climate change, or the efforts spent in trying to avert it, will damage the firms they invest in. To make proper and reasonable decisions, companies need information and so far they are not getting it.

Ceres, another network of green investors, has looked for reportable data. So far, there is little. Only three-quarters of the insurance companies in the United States make any climate related disclosures, and these are flimsy. This is surprising, as they must know they will be in the front line if climate change kicks in, with increased bad weather, rising water and flooding.

It isn't hard to collect this data. Much of it is routinely collected anyway, but it doesn't seem to be used. This is odd. Harvard Business School recently did an in-depth study of 180 firms over 18 years and found those which paid attention to environmental matters also did best when measured by share prices and earnings. This may be because well-run companies pay attention to all facets of their business.

However, the above analysis has recently been overtaken by an event beyond most firms' control. The Rockefeller Foundation has recently announced that it will divest itself of its oil and coal investments, a considerable sum.

Before we chalk one up for the planet, a little more information and thought points to another explanation. Fracking is relatively cheap and is forcing down the price of oil. Usually when that happens, Saudi Arabia cuts production until the price returns to its previous level. This time, spotting an opportunity to maintain control of oil production, the Saudis have kept pumping and kept the price down. They appear to be trying to put the frackers out of business, as they are the big threat to Saudi Arabia's control of the world's oil supply.

Economics, environmental concerns and international politics butt heads.

 Ian Sutherland is a retired pathologist who has lived and worked in many, predominantly warm countries and has always had an interest in conservation and environmental matters.