The old proverb goes “a rolling stone gathers no moss.” This often refers to those who avoid taking responsibility or cultivating or advancing their own knowledge, experience or culture.
So, do you want to understand what’s really gone on behind the scenes within various US government departments leading up to the BP oil spill in the Gulf of Mexico? Curious about what various departments know versus what’s been made public? Well read on! In the June 2010, Rolling Stone magazine, there’s a shocking article called ‘The Spill, The Scandal and the President,” jam-packed with all kinds of insider’s views and assertions.
I think you’ll see that there’s more than one side to this story – it’s a BP story, it’s a US Government story and it’s also a sustainable investing story. Here’s the link: http//www.rollingstone.com/politics/news/17390/111965#
Here are some of the assertions in the article that I think an investor would be interested in (not to mention the political views can be found in the article):
1) That as early as April 22, numerous government agencies had made estimates that the worst-case scenario of the size of the flow rate of the oil spill in the Gulf of Mexico would be in the range of 64,000 to 100,000 barrels per day (BPD). These numbers are not those that were provided to the public. Those estimates began at 5,000, upped to 12,000 to 25,000, then eventually to 55,0000. And, we go on.
2) That the deep water drilling moratorium, “halts exploratory drilling at only 33 deepwater operations, shutting down less than 1% of the total wells in the Gulf. “ Quoting Obama’s new Interior Secretary that “the moratorium is not a moratorium that will affect production” – which continues at 5,106 wells in the Gulf, including 591 in deep water.
3) That even following the request of 26 congressmen calling for BP’s Atlantis rig – one of the world’s largest oil platforms, capable of drawing 200,000 bpd, located only 150 miles off Louisiana’s coast, in waters nearly 2000 feet deeper than BP drilled at Deepwater Horizon – it remains in operation. “According to the congressional documents, the platform lacks required engineering certification for as much as 90% of it’s subsea components – a flaw that internal BP documents reveal could lead to “catastrophic” errors.”
4) The Minerals Management Services (MMS) “managers were awarded cash bonuses for pushing through risky offshore leases, auditors were ordered not to investigate shady deals and safety staffers routinely accepted gifts from the industry, allegedly even allowing oil companies to fill in their own inspection reports in pencil before tracing over them in pen.”
5) There are many assertions and examples of the knowledge of both BP and the government agencies in regard to how quickly BP got its license for Deepwater Horizon. Included in this however is also assertions of the number of ways that BP was cutting corners on areas such as Employee Health and Safety. It highlights that since 2007, BP has had 760 citations for “egregious and willful” safety violations. The author asserts that “in 2005, 15 workers were killed and 170 injured after a tower filled with gasoline exploded at a BP refinery in Texas. Investigators found that the company had flouted its own safety procedures and illegally shut off a warning system before the blast. An internal cost-benefit analysis conducted at BP revealed that the oil giant had considered making buildings at the refinery blast-resistant to protect its workers from the explosion… but the company determined it would be cheaper to simply pay off the families.”
6) In referring to the Deepwater Horizon spill, “that BP shaved $500,000 off its overhead by deploying a blowout preventer without a remote-control trigger – a fail-safe measure required in many countries but not mandatory by MMS, thanks to intense industry lobbying. It opted to use cheap, single-walled piping for the well, and installed only six of the 21 cement spacers recommend by the it’s contractor… it also skimped on the critical testing that could have shown whether explosive gas was getting in to the system as it was being cemented, and began removing mud that protected the well before it was sealed with cement plugs.”
7) The author claims that under the Clean Water Act, that “BP could owe fines of as much as $4,300 for every barrel spilled, in addition to royalties for the oil it’s squandering.” At estimates of 100,000 BPD, any wonder Obama wants some assurance that there will be some money left in the company?
So what does all of this have to do with sustainable investing?
Well, what lies at the base of sustainable investing is that in addition to financial analysis one should also integrate environmental, social and governance (ESG) factors into the assessment of the entities in your investment universe. The hypothesis is that with the use of these ESG factors, one may be able to reduce potential risk to one’s portfolio. Given there are very significant levels of intangibles in today’s stock valuations, the integration of ESG factors help to better articulate certain elements that may impact that value and cause fluctuations in pricing.
Obviously the first question that comes to mind when I read this report (avoiding all of the political questions) is how much of this information would be publically available? Honestly, I’m not sure I’m able to answer that question with any level of credibility at the moment, however, it certainly does beg to ask the question “if it were available, would we have sought it out?” Is there a responsibility to look beyond the financials to assess potential risks? Do we assume that the professional asset managers look at these risks? Should we?
When it comes to our financial assets and investments, should we assess who’s rolling stones have moss?