Over the years, the emphasis on safety at the rig site first transitioned to HSE (health, safety and environment) and to QHSE (adding a quality component to the mix). Today, as renewables emerge as a significant part of the energy mix, companies are challenged to differentiate themselves from competition and be more proactive with environmental stewardship and global awareness.
At the same time, investment strategies are changing. Strong financial performance of a company was once the deciding factor for both individuals and investment groups, to invest in a company. Investors now also look at other factors to determine where to place their own or their clients’ money. A company’s environmental programs, social responsibility and corporate governance are three factors that influence investment strategy.
ESG refers to the three factors for measuring the sustainability and social impact of an investment in a company or business. These three factors, when incorporated into investment analysis and portfolio management, can offer investors potential long term financial performance of a company. In the energy industry, examples of each of these factors include:
Environmental: Decreasing natural gas flaring, managing environmental incidents, safely disposing of drill cuttings and oilfield waste, managing/recycling water during frac operations and maintaining the original environmental footprint at the rigsite once operations end.
Social: Employee safety and well-being, managing relations with employees, vendors, customers and the community, philanthropy and investing in the community.
Corporate Governance: How a company manages itself, the company’s culture, transparency, managing processes and procedures, equitable pay and diversity.
The biggest challenge for companies adjusting their focus towards ESG may be in the industrial sector, which is predominately fossil-fuel driven and will be for the foreseeable future. But that does not mean operators, service companies and vendors are off the hook. There is a big push for ESG to become part of the criteria for selecting companies to invest in and the energy sector is no different. Investors will favor companies with an emphasis on ESG as part of their strategy.
Glenn Royal, CFP®, Partner and Portfolio Manager at Royal Harbor Partners reported, “you cannot wish away fossil-based energy sources. However, companies will get left behind if they are not paying attention to this new focus on ESG. You must be forward looking. If you want capital from investors, ESG should be part of your ongoing business strategy.”
But companies will have to be smart about this transition. To maintain a strong balance sheet, it is important to protect profit margins during the energy transition. Companies will want to make sure this does not affect their profitability as the transition to cleaner energy takes place.
Royal had this to say about their portfolio of investments: “When researching a new holding for our portfolio, ESG is an important metric we consider. We find many companies today, including those in the energy sector, are already pursuing ESG strategies within their companies to make them more attractive to investors. It’s good for the community and the environment and its good for the company’s bottom line.”
While much of the industry is on board with the new benchmarks, change is slow to come in some sectors. A recent study for a Canadian investment firm stated “a majority of energy companies are on board with integrating ESG into their business, but challenges remain in moving from intentions to full integration. Almost 80% of survey respondents reported their organization is supportive of advancing ESG initiative internally.” The challenge appears to be carrying out the high-level strategic initiatives, set at the corporate level, into day-to-day operations at the mid- and lower-levels of a company.
At Panther, we provide wellsite and remote-location services to the upstream, midstream and downstream energy sectors including drilling fluid management, remote security monitoring and oilfield rental equipment.
We have continually integrated each of the ESG factors into every facet of their day-to-day operations to help clients reduce risk and environmental liability. Our ESG efforts include:
Panther Fluids Management provides complete fluids management expertise by combining drilling fluids and engineering, solids control and closed loop systems and haul off and disposal services. Customers that deploy our systems and prescribe to our unique fluid management processes reduce their overall well costs, adhere to all environmental, regulatory and compliance standards and drill better wells, faster.
Panther Security Services provide remote monitoring, entrance surveillance, controlled entry access and visitor tracking, all monitored by a fully-staffed 24/7 command center. These services are ideal for any isolated location such as drilling and production sites, transmission stations, windfarms, solar farms, equipment yards and other locations where remote monitoring or surveillance is needed.