Investor engagement on fracking: Governance

Good corporate governance is indicative of a responsible, transparent and accountable company, and allows risks to be correctly identified, managed and reported.

Engagement questions

1. Does the company have appropriate governance arrangements in place on fracking practices?

Basic expectation

The company has an independent policy statement on sustainability and fracking where exposure to shale is significant. This statement should reflect the company’s recognition of the risks associated with fracking operations and the intent to monitor and manage them.

Follow up questions

Is there a senior executive or committee reporting directly to the Board who is accountable and has oversight of environmental and social impacts of fracking across the company’s portfolio?
Is senior executive compensation linked to sustainability metrics such as air emissions and freshwater withdrawal reduction targets?

2. How does the company manage fracking-related risks?

Basic expectation

The company identifies and reports on ESG risks specifically related to fracking through the company’s sustainability reporting or 10-K filings, for example.

Follow up questions

Is the company setting goals related to frackingspecific risks and monitoring the progress to achieve these? For example, a company may set a goal to reduce methane emissions by 45% within a specified time.
Is the company using independent third party standards such as ISO or the AA1000l?

3. Does the company report legal infractions and controversies?

Basic expectation: The company acknowledges/reports legal infractions and controversies related to fracking.

Follow up questions

What is the nature of the infraction(s)?
What is the company fs risk exposure (financial or other) related to this?

4. Does the company pursue technology and innovation related to fracking?

Basic expectation

The company is able to describe the investment and deployment of the best available technology (BAT) in addition to maintaining a policy to use BAT for fracking.

Follow up question

Can the company explain the return on investment from best practice research and development so that investors can understand the effectiveness and impact of the investment?