Support is building amongst global institutional investors for a new campaign to flag up the climate change risks of methane from shale gas drilling.
The group is being spearheaded by Scottish Widows Investment Partnership (SWIP), the asset management arm of Lloyds Banking Group with £139.9bn (€168.7bn) of assets under management.
SWIP’s Head of Sustainability, Craig Mackenzie, said there has been a lot of interest from both UK and international investors in the issue, reported by Responsible Investor last month.
Mackenzie told a briefing today: “We need the global investment community to get behind this agenda and we’re very hopeful about that in the next few months.”
He said the group is hoping to work with the Carbon Disclosure Project to develop a framework to assess progress.
Concerns about the environmental risks of methane from hydraulic fracturing (“fracking”) have only surfaced in the past year or so, following a groundbreaking study by Robert Howarth of Cornell University.
Mackenzie explained that methane has 100 times the warming effect of carbon dioxide over its first decade in the atmosphere.
And with gas increasingly taking a larger role in the global energy mix, and if the research is correct, Mackenzie argues that “we’re making the planet a lot warmer a lot faster”.
Some 20% of US global warming effects come from “fugitive” methane from shale fracking, he explained.All of which undermines claims that gas is a climate change solution. And in addition, cheap gas is leading to fewer wind farm developments in the US.
There are relatively cost-effective technological fixes, but they are not yet seen as a priority by well operators. “Fugitive methane is a strategic risk,” Mackenzie concludes.
His colleague, Global Equities Investment Director Johnny Russell, said oil and gas companies have had their “heads in the sand” over water and contamination issues relating to fracking.
Mackenzie said large pension funds were increasingly asking specific questions about environmental investment issues.
The ‘regular’ environmental risks of fracking are already under engagement by institutional investors.
“Fugitive methane is a strategic risk”
Coincidentally, the Edinburgh-based fund manager has confirmed that both Mackenzie and Russell are staying at the firm amid a cut of 23 roles and the closure of several funds.
Russell will run or co-run six funds, including the £143.3m Scottish Widows Environmental Investors fund and £65.6m Scottish Widows Ethical fund.
And, in other news, it has been reported that SWIP European equity fund manager Steven Maxwell has passed away after a long battle with cancer.