Q) When are conservationists and asset managers ever on the same side? A) More often than you’d think.
For some, the announcement on 11 June 2014 that SOCO International, a UK-listed oil and gas company, would not drill in the Virunga National Park – a designated world heritage site in the Democratic Republic of Congo (DRC) – and not conduct any future operations in any other world heritage sites, was a major breakthrough. However, it wasn’t just conservationists that welcomed this news – major investors did too.
The Virunga National Park is home to thousands of bird, plant and mammal species, including the largest concentration of hippopotami in Africa and, of course, the famous mountain gorillas[i]. The park is also protected by the World Heritage Convention that both the UK and DRC governments have ratified. Operating in such valuable protected ecosystems can be risky from a conservation perspective but also from an investment perspective.
The OECD complaint that was lodged by the World Wildlife Fund (WWF) against SOCO in October 2013[ii], the controversial documentary Virunga[iii], the three quarters of a million signatories[iv] that signed a petition to protect Virunga (all the more noteworthy given that SOCO is not a household name), statements by the UK’s Foreign & Commonwealth Office (FCO)[v], and, of course, the all-important celebrity appeal (!)[vi], all added to the pressure for SOCO to take action.
So what role did investors play?
At Aviva Investors, we are committed to the long-term financial interests of our clients, and believe that companies conducting their business in a sustainable and responsible manner are more likely to succeed over time. Indeed, we share SOCO’s often quoted view that “responsible and ethical business conduct is essential to protecting shareholder value”. The nature of operations in the Virunga National Park was putting SOCO at serious risk of falling short in its stated “responsible approach to oil and gas exploration and production”. This could be damaging for SOCO and, consequently, a serious concern for shareholders.
Given these concerns, we engaged heavily with SOCO. A key tool in this engagement was the independent report into SOCO’s activity in Block V of the DRC that we commissioned EIRIS to undertake[vii]. This report sets out six recommendations relating to the governance and remuneration of environmental, social and governance risks at board level, improving stakeholder engagement processes, strengthening the management of human rights issues, endorsing the Extractive Industry Transparency Initiative Principles and publishing a biodiversity policy with a commitment not to carry out exploration or production within world heritage sites. We presented this to the board of SOCO, which welcomed the report and its recommendations, and we shared it with other interested investors at a roundtable discussion we hosted at our offices in May. It was important for us to analyse the myriad allegations, to identify the key risks for shareholders and, crucially, the recommendations for how SOCO could address these. Our aim is to work with companies to achieve outcomes that are beneficial to the company, its investors and our clients. Increasingly, this necessitates beneficial outcomes for the company’s wider stakeholders.
Even so, it’s rare for there to be such a clear outcome from engagement. SOCO has not addressed all the recommendations, there is still clarification required regarding the commitment to maintaining the current boundaries of the Virunga National Park, and there continue to be risks associated with operating in the DRC. However, when I attended SOCO’s AGM on 13 June, I found myself in the pleasant position of welcoming SOCO’s commitment and leadership with regard to its ‘no-go’ position on world heritage sites.
So that is how we found ourselves on the same side as the WWF. Will it be the last time? Almost definitely not. There is a long history of working alongside NGOs, where our interests align, and we continue to see the benefits of different interest groups, with different perspectives, working towards the same outcome.
Stephanie Maier, Head of Responsible Investment Strategy & Research, Aviva Investors
Unless stated otherwise any opinions expressed are those of Aviva Investors Global Services Limited as at 20th June 2014. They should not be viewed as indicating any guarantee of return from an investment managed by Aviva Investors nor as advice of any nature. This material is not intended to constitute advice or recommendations of any nature.
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