October 8, 2010

Today Eurosif publishes a report on extractive industries authored by GES Investment Services. It highlights the sector’s major environmental, social and governance (ESG) risks, and related opportunities for businesses willing to manage these challenges in a constructive way.

The latest Eurosif (European Sustainable Investment Forum) sector report, “Extractives”, has been produced in close cooperation with GES Investment Services and Senior Research Analyst Shane Chaplin, who specialises on ESG performance of companies within the extractive industries sector. He also has inside experience from the industry by previously having worked as an HSE advisor to Australian energy company Woodside.

Shane Chaplin concluded: “What stood out most when researching and compiling this report, was how the wellbeing of the planet depends to such a large extent on the actions of the extractive industry sector. The extraction and use of resources, particularly fossil fuel burning, are the main contributors to both the global economy and global climate change. Management of these two issues will be the biggest future challenge for the sector and its stakeholders. A range of very good solutions exist for managing local “on-the-ground” impacts, but even these must continue to develop and improve as the industry moves increasingly into more challenging operating environments”.

Matt Christensen, Executive Director of Eurosif, stated: “The extractive industry continues to play a vital role in our economy, and naturally, it attracts great interest from investors. The appetite for oil, gas and other natural resources is increasingly connected to the various environmental and social stresses it can generate. The example of the BP Deepwater Horizon oil spill in the Gulf of Mexico is emblematic of the interconnection between ecological disasters and subsequent financial liabilities. Investors and communities alike share -although differently- the burden of the extractives’ risks. Eurosif’s report shows that such catastrophic scenarios are not systematic: extractive projects which adequately adapt to their local context will reap financial, social and environmental benefits.”

According to the report, the industry faces environmental challenges, not only due to GHG emissions, but also due to the sensitivity of the new environments in which they are operating. Extractive projects are also being implemented more frequently in emerging market economies, which can impact communities and lead to corruption. Nevertheless, companies may reduce their ESG risk exposure and realise opportunities through the application of international standards or best practise. The report shows how risks and challenges are interrelated, and also gives two case studies of companies that excelled in managing project ESG risks, by consulting widely and setting high standards.

Highlights from the report:

  • According to Forbes Magazine, in 2009, sales from the world’s top five listed mining companies were about €147 billion, whilst the top five oil & gas producers sold product worth nearly €1 trillion;
  • Extractive companies are increasingly operating in areas of high environmental and social sensitivity which increases the likelihood of being exposed to corruption practices and to regimes that may not share extractive revenues fairly among their populations;
  • Extractive companies that systematically address and manage environmental issues early in project lifecycles will reduce their physical impacts, rehabilitation and legacy costs.

Read the Extractives report

For more information, please contact:
Shane Chaplin, Senior Engagement Manager