US$5.6trn investor coalition backs SEC against oil industry lobby group

Backing for SEC’s Dodd-Frank extractives disclosure rules

A group of leading global institutional investors – with a combined $5.6trn (€4.2trn) in assets under management – have backed the Securities and Exchange Commission (SEC) in its battle over extractives industry payments with oil and gas industry lobby group the American Petroleum Institute (API).

The API won a legal victory last month in its case against the SEC and relief and development organization Oxfam America. The US District Court ruled on July 2 that it was not necessary for oil and mining payment disclosures to be made public – a decision which dismayed investors (link to ruling).

Now some of the world’s largest investors have come out in support for the regulator, saying in a letter to Chair Mary Jo White that they encourage the SEC to continue its “vigorous defense” of the rules in its response to the court ruling.

“Investors depend on the SEC’s leadership and deliberate consideration of disclosure requirements that protect investors, maintain fair, orderly, and efficient markets, and facilitate capital formation,” the letter says.

The submission was sponsored by Calvert Investment Management, F&C Asset Management and SNS Asset Management and was signed by 44 institutions.

The backers of the letter include five of the Swedish ‘AP’ state funds, Dutch pension asset managers APG, PGGM and MN Services and sustainable fund management houses such as Trillium Asset Management and Clean Yield Asset Management.
Signatories also include Steve Berexa, Global Head ofResearch at Allianz Global Investors, Pascal Blanqué, Chief Investment Officer at Amundi, Jelle van der Giessen, CIO Insurance at ING IM International and Paul Clark, Global Head of Corporate Governance Services at UBS Global Asset Management.

The API had said the proposed SEC rules, which relate to Section 1504 of Dodd-Frank, would make US firms less competitive against state-owned oil companies. And it referred to SEC estimates that it would cost at least $14bn for US companies and investors. But the investor letter calls on the SEC to continue to act in their interests in its response to the ruling. The SEC is expected to announce by September 2 how it plans to respond.

The investors also call on the SEC to keep in mind the “complementary nature” of Extractives Industry Initiative (EITI) and European Union Transparency Directive standards when responding to the ruling. For its part, the API says the industry is working with civil society groups and the US government to implement the EITI.

A similar investor group has also written to Canadian mining and minerals ministry Natural Resources Canada (NRCan) calling for a consistent global standard for disclosing all significant tax and royalty payments made by the companies globally. This was sponsored by Aviva Investors, SNS and F&C and was signed by 32 institutions. It is a response to NRCan’s consultation on mandatory reporting in the extractives sector.

Prime Minister Harper announced at this year’s G8 summit that Canada would establish new mandatory reporting standards for domestic extractive companies.