Joe Keefe (not verified) — POSTED August 11th, 2008 8:37PM
According to our portfolio manager for the Pax World Value Fund, Whiting Petroleum (WLL) is one of the better managed companies in the exploration & development space. When considering small- and mid-cap oil and natural gas producers, Pax looks at the company’s regulatory record, its acknowledgement (or lack thereof) of the impacts of climate change, and the degree of disclosure on environmental and safety topics. Whiting has a relatively clean regulatory record and provides some environmental disclosure, although we would like to see more.
According to our Sustainability Research Department, in its 2007 Form 10-K, the company acknowledges the growing consensus on climate change and the potential impact that climate change regulation could have on the company. This type of acknowledgement and discussion in a 10-K is unusual for a small drilling company in our experience, and should be encouraged. The company has an environmental, health and safety statement in its code of conduct committing it to mitigating its environmental impacts.
The environmental violation noted in your blog is likely a spill that occurred in 2005 of 42,000 gallons of saltwater that was a byproduct of oil drilling in North Dakota. Local environmental regulators stated that there was no damage, and the company flushed the area with freshwater to dilute the salt. It appears to have been an isolated incident.
Although there are no women on its board of directors, there are two women among Whiting’s eleven senior managers.
The U.S. Occupational Safety and Health Administration (OSHA) did fine Whiting Petroleum $1,500 for a safety violation in North Dakota in 2006. The company code of conduct contains a brief statement on environment, health and safety which stresses the importance of employee safety. We would like to see more safety disclosure, especially because it operates in a high risk industry.
As a side note, among the reasons Whiting is the largest holding in the fund is price appreciation: the average cost of Whiting shares in the fund was $45.73 and the current price is $92.58.
We don’t automatically exclude companies just because they are involved in the oil industry. Instead, we compare their sustainability profile to others in the industry and we try to invest in companies that aspire to and meet higher standards. SRI firms and investors are accustomed to making such assessments, i.e., distinguishing the leaders from the laggards in a particular sector. Even in industries with as many sustainability challenges as oil, mining, or heavy manufacturing, there is usually considerable distance between the performance of the leaders and that of the laggards, and we believe that we send a much clearer signal on the direction we would like all companies to take by investing in the leaders, rather than avoiding investment in problematic sectors altogether.
No company is perfect, and there will always be companies in SRI portfolios that some will find objectionable because people care about different issues and with varying degrees of intensity. That’s a fact of life in our industry, and it will always accompany this investment approach. What we do try to do, however, is to construct portfolios that integrate higher environmental, social and governance (ESG) standards, and not incidentally, we believe such portfolios provide certain long-term advantages to investors. This isn’t “marketing fluff.” We work hard at trying to get it right each every day. The SEC settlement you reference involved the 2001-2005 time period. Anyone who is interested in a full and fair explanation rather than a mischaracterization can obtain further information via the Pax World web site (www.paxworld.com).
Joe Keefe
President and CEO
Pax World Management Corp.
According to our portfolio manager for the Pax World Value Fund, Whiting Petroleum (WLL) is one of the better managed companies in the exploration & development space. When considering small- and mid-cap oil and natural gas producers, Pax looks at the company’s regulatory record, its acknowledgement (or lack thereof) of the impacts of climate change, and the degree of disclosure on environmental and safety topics. Whiting has a relatively clean regulatory record and provides some environmental disclosure, although we would like to see more.
According to our Sustainability Research Department, in its 2007 Form 10-K, the company acknowledges the growing consensus on climate change and the potential impact that climate change regulation could have on the company. This type of acknowledgement and discussion in a 10-K is unusual for a small drilling company in our experience, and should be encouraged. The company has an environmental, health and safety statement in its code of conduct committing it to mitigating its environmental impacts.
The environmental violation noted in your blog is likely a spill that occurred in 2005 of 42,000 gallons of saltwater that was a byproduct of oil drilling in North Dakota. Local environmental regulators stated that there was no damage, and the company flushed the area with freshwater to dilute the salt. It appears to have been an isolated incident.
Although there are no women on its board of directors, there are two women among Whiting’s eleven senior managers.
The U.S. Occupational Safety and Health Administration (OSHA) did fine Whiting Petroleum $1,500 for a safety violation in North Dakota in 2006. The company code of conduct contains a brief statement on environment, health and safety which stresses the importance of employee safety. We would like to see more safety disclosure, especially because it operates in a high risk industry.
As a side note, among the reasons Whiting is the largest holding in the fund is price appreciation: the average cost of Whiting shares in the fund was $45.73 and the current price is $92.58.
We don’t automatically exclude companies just because they are involved in the oil industry. Instead, we compare their sustainability profile to others in the industry and we try to invest in companies that aspire to and meet higher standards. SRI firms and investors are accustomed to making such assessments, i.e., distinguishing the leaders from the laggards in a particular sector. Even in industries with as many sustainability challenges as oil, mining, or heavy manufacturing, there is usually considerable distance between the performance of the leaders and that of the laggards, and we believe that we send a much clearer signal on the direction we would like all companies to take by investing in the leaders, rather than avoiding investment in problematic sectors altogether.
No company is perfect, and there will always be companies in SRI portfolios that some will find objectionable because people care about different issues and with varying degrees of intensity. That’s a fact of life in our industry, and it will always accompany this investment approach. What we do try to do, however, is to construct portfolios that integrate higher environmental, social and governance (ESG) standards, and not incidentally, we believe such portfolios provide certain long-term advantages to investors. This isn’t “marketing fluff.” We work hard at trying to get it right each every day. The SEC settlement you reference involved the 2001-2005 time period. Anyone who is interested in a full and fair explanation rather than a mischaracterization can obtain further information via the Pax World web site (www.paxworld.com).
Joe Keefe
President and CEO
Pax World Management Corp.