|
August 23, 2000
Report Rates Environmental Record of Leading Oil Companies
A new survey by Innovest finds Royal Dutch/Shell in the lead for addressing environmental
challenges.
SocialFunds.com --
With rising concerns over global warming, air pollution, and oil spills, few investors would
classify any petroleum company as "green." But a recent report from Innovest Strategic Value
Advisors, a New York-based, specialized investment advisory firm, will help concerned investors
discriminate between environmental leaders and laggards within the petroleum industry.
 "The Petroleum Industry: hidden risks and
value potential for financiers and investors" is Innovest's latest industry sector report,
highlighting the environmentally-driven risks and opportunities found in the 13 oil companies of
the S&P 500. The survey found Royal Dutch/Shell at the top of the pile, in terms of environmental
performance, with BP Amoco placing a close second.
"Shell and BP have superior
environmental management programs, particularly the level of engagement in sustainable development
and triple bottom line issues," said Dr. Martin Whittaker, Senior Analyst at Innovest. "They were
also considered to be particularly strong with respect to renewable energy development programs,
corporate social responsibility, and climate change."
Innovest used its proprietary
EcoValue 21 environmental rating methodology to assess the relative environmental performance, or
"eco-efficiency," of the 13 companies. The rating is based on more than 60 different aspects of
environmental risk, opportunity, and management, including positions on climate change, renewable
energy, fuel cells, natural gas, emissions, and social management in international operations.
While Shell and BP Amoco's top rating may come as no surprise to investors, Innovest also
gave high marks to Exxon, considered one of the most entrenched oil companies for its patent denial
of the evidence supporting global warming. According to the report, Exxon has been motivated by the
Valdez oil spill, ten years ago, to develop a respectable environmental management framework to
reduce environmental impacts and improve performance.
At the other extreme, Unocal,
Occidental, and Canada's Imperial Oil received low ranks for their above average industry risk
exposure and a below average management capacity to control risk. Unocal's performance could
improve in the future, according to the report, due to its relatively high reliance on natural gas
production and its good position to capitalize on environmentally-driven business opportunities.
Innovest recognizes that environmental performance is a double-edged sword, combining the
challenges of environmental risk with the opportunities of environmental innovation and competitive
advantage. In the case of the oil industry, that means understanding and responding to the changing
dynamics of the global energy business, including alternative fuels and renewable energy sources.
Texaco, for example, has expertise in waste gasification that they are marketing to
others. Only BP Amoco and Shell, the leaders in Innovest's survey, have made serious commitments to
renewable energy sources. Shell plans to capture 10 percent of the estimated $1 billion solar
market by 2005, investing over $500 million over a 5-year period to achieve this.
In every
sector rated by Innovest so far, companies receiving above average ratings outperformed below
average companies by 3 to 18 percent, as measured by total stock market return, suggesting the
power of their model to project stock market performance. The oil industry is no exception, with
above average companies outperforming companies with below average ratings by more than 17 percent
over the past year.
Oil companies have particularly wide variations in environmental risk
exposure and environmental management capability, according to the report, with profound economic
implications not captured by conventional analytical models. The future stock market performance of
leaders and laggards will likely diverge further, as environmental regulations and public concerns
about the environment continue to increase.
Concerned investors will find Innovest's
report a valuable indicator of future performance in the oil industry based on environmental
criteria. "There are a whole bunch of issues relating to business risk, management quality, and
strategic opportunity that are largely unrecognized by traditional investment analytical tools but
that can and do exert influence on a company's profitability and future stock market performance,"
said Whittaker.
©
SRI World Group, Inc. All Rights Reserved.
Top
| 
