Investors call for tougher oil, gas disclosure rules
GLOBAL – A group of international investors has called for tougher public-disclosure rules for oil, gas and mining companies listed in Canada, even as it has warned against the US rolling back its own disclosure rules in this area.
In separate letters to the US Securities and Exchange Commission and Natural Resources Canada, the investors – with a combined $5.8trn (€4.4trn) in invested assets – have urged the adoption of a consistent global standard for all significant tax and royalty payments made by extractive companies across their global operations.
Jacob de Wit, chief executive at SNS Asset Management, one of the lead sponsors of the effort, said: “We’re not suggesting investors will necessarily crunch through each of these figures to decide what stocks to buy or sell.
“Rather, the point is that putting these data in the public domain allows them to be scrutinised by local citizens.
“This will lift the veil of secrecy that has enabled corruption to flourish for so long in the world’s most resource-dependent nations – especially in the emerging economies, where extractive companies develop some of their most attractive assets.”
The move reflects a growing global trend aimed at deterring corruption in resource-dependent countries, beginning with the passage in 2010 of tough extractive sector-transparency provisions within the US Dodd Frank Act.
This was followed by equivalent requirements in the EU’s Transparency and Accounting Directives in June, following which Canadian prime minister Stephen Harper announced plans at the G8 Summit in June to follow suit with similar regulations for Canadian-listed extractive companies.
However, a July ruling in a US District Court on a suit filed by the American Petroleum Institute threatens to set back this effort by seeking to block the US regulation and raises uncertainty for companies and investors operating internationally.
Investors have therefore come together to highlight the importance of high standards of transparency, as well as consistent global regulation.
Frank Curtiss, head of corporate governance at RPMI Railpen Investments in the UK, said: “From an investor perspective, the key is reducing risk – operating risk for oil, gas and mining companies that face potential unrest – even violence – from a populace that sees little benefit from its mineral wealth; commercial risk from the threat of contracts being torn up on the back of resource nationalism; and market risk from volatility in commodities prices, which is exacerbated by social unrest.
“The less mystery there is behind these resource deals, the fewer unpleasant surprises we can expect.”
Arne Lööw, head of corporate governance at Sweden’s AP4, added: “This move by Canada is critical for achieving a consistent global transparency standard.
“As one of the world’s top listing venues for mining stocks, it needs to take its rightful place at the top table by setting a meaningful standard in line with the US and EU.
“We don’t want companies evading tough standards by shopping around for the weakest forum and picking Canada.
“The fact is, Canada’s own mining industry leaders have broken the mould by calling for this – they are the first to recognise the value to industry of transparent business practice, and we agree.”
Among the 32 institutions signing the letter to Natural Resources Canada were: Allianz Global Investors, Amundi Asset Management, AP1, AP2, AP3, AP4, AP7, APG, Aviva Investors, CAAT Pension Plan, Calvert Investment Management, Co-operative Asset Management, Element Investment Managers, ERAFP, Governance for Owners, ING IM International, Legal & General Investment Management, the Local Authority Pension Fund Forum, Kames Capital, MN Services, PGGM, Robeco, RPMI Railpen Investments and UBS Global Asset Management.