Chesapeake Energy fails to disclose fracturing risks to shareholders
Corporation to face shareholder vote on gas drilling at annual meeting
June 10, 2010 — After remarkably high shareholder votes on resolutions requesting improved disclosure on hydraulic fracturing operations at Williams Companies, Inc* (42% support**) and Cabot Oil and Gas* (36% support**), shareholders of Chesapeake Energy Corporation* will challenge the company at its annual meeting tomorrow to be more transparent about this controversial method of gas drilling.
There is increasing public concern about the environmental impacts of hydraulic fracturing, a process that injects huge amounts of water and chemicals deep underground to extract natural gas from unconventional sources. According to the industry, fracturing has been used in roughly 90 percent of wells in operation today and 60 to 80 percent of new wells will require fracturing to remain viable.
According to a recent Chesapeake filing with the SEC, its recent ascent to the position of second-largest natural gas producer in the U.S. is largely due to its “success in finding and developing unconventional natural gas assets.” Chesapeake shareholders, including the Green Century Equity Fund, point to the company’s dependence on hydraulic fracturing as a significant risk factor that the company currently fails to fully disclose. The Green Century Equity Fund, the New York State Common Retirement Fund, Miller Howard Investments, and the Sisters of St. Francis of Philadelphia filed the shareholder resolution at Chesapeake that will be voted on tomorrow.
According to Larisa Ruoff, Director of Shareholder Advocacy for Green Century Capital Management, “The astonishing 42% vote at Williams is one of the highest on record for a first-year environmental proposal. We believe this vote sends a strong message not only to Williams but to Chesapeake and others in the sector that shareholders are deeply concerned about this issue and require more information on how companies are managing the risks associated with their fracturing operations.”
As the use of hydraulic fracturing skyrockets, communities, regulators and investors are growing increasingly concerned about the environmental impacts of the process. Regulation at the state or federal level could have dramatic implications for all companies engaged in hydraulic fracturing by subjecting them to EPA and/or state oversight, potentially restricting areas in which hydraulic fracturing may be performed, limiting materials that may be used, or otherwise increasing costs. In the face of high-profile public controversy about Chesapeake’s plans to engage in hydraulic fracturing near the New York City watershed in October 2009, the company announced it would voluntarily refrain from drilling within the watershed’s boundary. “Corporate policies for the management of environmental issues related to hydraulic fracturing may ultimately play a key role in determining each company’s ability to maintain or expand its operations in this promising area of growth,” said Richard Liroff, Executive Director of the Investor Environmental Health Network. “In the absence of meaningful disclosure, investors have no way of fully assessing the risks and rewards from investing in various companies in the energy sector, and are concerned about shocks to shareholder value,” he continued.
Green Century and the Investor Environmental Health Network are leading the investor effort to ensure that natural gas drilling is done in a way that protects investor interests by avoiding unnecessary risks to human health and the environment. Numerous investors and investor advisors including As You Sow, Boston Common Asset Management, Catholic Healthcare West, First Affirmative Financial Network, Green Century Capital Management, MMA Praxis Mutual Funds, the Mercy Investment Program, Miller/Howard Investments, the New York State Common Retirement Fund, the Shareholder Association for Research and Education, the Sisters of St. Francis of Philadelphia, the Sustainability Group, and Trillium Asset Management have engaged over 20 companies in efforts to encourage increased transparency and disclosures of the risks associated with this process.
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Green Century Capital Management is an investment advisory firm focused on environmentally responsible investing. Founded by a partnership of non-profit environmental advocacy organizations in 1991, Green Century's mission is to provide people who care about a clean, healthy planet the opportunity to use the clout of their investment dollars to encourage environmentally responsible corporate behavior. Green Century believes that shareholder advocacy is a critical component of responsible investing and actively advocates for greater corporate environmental accountability. Green Century manages two environmentally responsible mutual funds, the Green Century Balanced Fund and the Green Century Equity Fund.
The Investor Environmental Health Network is a collaborative partnership of investment managers, advised by nongovernmental organizations, concerned about the financial and public health risks associated with corporate toxic chemicals policies. IEHN, through dialogue and shareholder resolutions, encourages companies to adopt policies to continually and systematically reduce and eliminate the toxic chemicals in their products and their activities.
*As of March 31, 2010, Williams Companies, Inc. was not held by the Green Century Balanced Fund and comprised 0.25% of the Green Century Equity Fund; Cabot Oil & Gas was not held by the Green Century Balanced Fund or the Green Century Equity Fund; Chesapeake Energy Corporation was not held by the Green Century Balanced Fund and comprised 0.28% of the Green Century Equity Fund. Portfolio composition will change due to ongoing management of the Funds. Please refer to the Green Century Funds website for current information regarding the Funds' portfolio holdings. These holdings are subject to risk as described in the Funds' prospectus. References to specific investments should not be construed as a recommendation of the securities by the Funds, their administrator, or their distributor.
** The percentage in favor was calculated by (i) dividing the number of votes in support of the proposal by (ii) the sum of the number of votes voted in support of and against the proposal. Abstentions and broker non-votes were not included in the calculation.
You should consider the Funds' investment objectives, risks, charges, and expenses carefully before investing. For a prospectus that contains this and other information about the Funds, call 1-800-93-GREEN, visit www.greencentury.com or email info@greencentury.com. Please read the prospectus carefully before investing. Investments are not FDIC insured, nor are they deposits of or guaranteed by a bank or any other entity, so they may lose value.
The Green Century Funds are distributed by UMB Distribution Services, LLC. 6/10
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