Socially Responsible Investment Firm Divests Chesapeake Energy

In times when oil prices are on the brink of huge increases and radiation leaks from Japanese nuclear reactors seem out of control, natural gas is the latest panacea of energy companies looking for cheap, quick solutions. While energy providers are jumping on the natural gas bandwagon, impact investors are jumping off just as quickly due to environmental concerns like fracking.

Harrington Investments, Inc., an investment advisory firm specializing in socially responsible investing (and my employer), announced today that it is divesting its entire holding in Chesapeake Energy Corporation (CHK) due to the corporation’s poor environmental record and its lack of accountability to shareholders.

Recently, the Pennsylvania Environmental Protection Department cited over 40 natural gas well operators more than 900 times for “environmental health and safety” violations.   Leading this unworthy group with 109 citations was Chesapeake Energy.

“We have a fiduciary duty to our clients to invest in companies that show a strong commitment to the environment.  Chesapeake clearly fails to do so,” stated John Harrington, President of Harrington Investments, Inc.  “Chesapeake obviously violates our investment criteria when it consistently and flagrantly violates environmental standards.”

David Caruso of the Associated Press stated that the problem of fracking runs rampant in Pennsylvania, where Chesapeake opperates.  In the vast underground rock formation known as the Marcellus Shale, Pennsylvania has been the only state allowing waterways to serve as the primary disposal place for the huge amounts of wastewater produced by this removal technique.  This has lead to numerous reports of contaminants in the drinking water of residents.

Perhaps the most surprising act by the board occurred in 2008, when CEO Aubrey McClendon was awarded a $77 million bonus even though the stock price of Chesapeake fell 60 percent. Shareholders filed a lawsuit against McClendon, claiming the board of directors ignored the company’s compensation policies. McClendon was able to get the suit dismissed due to a technicality.

The board at Chesapeake Energy also has one of the worst records when it comes to executive compensation,” added Harrington. “Because of their continual disregard for shareholders interests and the environment, we are divesting all 56,025 shares of our clients’ assets in Chesapeake stock, valued at approximately $1.9 million.”

Nowhere is this unabashed political activism more evident than in Pennsylvania, where Chesapeake gave $377,319 in lobbying cash to state politicians from 2007-2009.  McClendon funneled $450,000 to gubernatorial candidate Tom Corbett via the State Republican Leadership Committee. Since Corbett’s victory, Chesapeake has obtained 839 Marcellus Shale drilling permits in Pennsylvania, more than any other company, and has drilled at 126 sites, making it the second-biggest operator in the region.

Dale Wannen

Dale Wannen is President of Sustainvest Asset Management, an investment advisory firm focused on sustainable and responsible investing (SRI). Prior to Sustainvest, Dale was a portfolio manager at Harrington Investments and specialized in ESG investment strategies, securities analysis, and shareholder advocacy. Prior to this position, Dale was a financial advisor with UBS Wealth Management Services in San Francisco. He is often a guest speaker on the topic of ESG investing and shareholder advocacy.Dale has an MBA in Sustainable Management from Presidio Graduate School in San Francisco. He earned a B.A. in Economics from Rowan University and currently is a volunteer with Mentor Me Petaluma, Rebuilding Together Petaluma, and the founder of Green Drinks Petaluma.He also currently sits as Board of Director and Treasurer of San Francisco human rights organization, Global Exchange, teaches Economics for the Oakland non-profit Game Theory Academy and is a committee member for the National Resources Defense Council (NRDC) in San Francisco. Previous volunteer work has included Treasurer and Board Member for bird conservation organization, San Francisco Bay Bird Observatory (SFBBO), committee member of the Petaluma Pedestrian and Bicycle Advisory Committee (PBAC), and President of the Social Venture Finance Club at Presidio Graduate School.Dale currently holds the Series 65 FINRA license and has previously held the Series 6, 7, 63, 66 and California Life and Health Insurance Certification. He is a member of National Association of Professional Financial Advisors (NAPFA) and the Financial Planning Association (FPA).Dale lives in Petaluma, CA with his wife Lauri and their Malamute Shadow.

6 responses

  1. This company is as crooked as they come. They use the cowards at RedSky Land in Edmond, Oklahoma to set up bogus companies like Silver Lake Energy and Blanca Peak Energy, where they can take mineral leases from landowners, but then not honor them after the leases are already filed at the courthouses. They get away with it because they are powerful and politically connected. Justice is coming!

    1. People invest for any number of reasons…one of those just might be to make money…the others? Take your pick.

  2. If anyone wants to learn more about fracking, I wrote a blog post on it here:

    I’m actual a fan of natural gas as a temporary solution to cleaning up our energy supply (much cleaner burning than coal and more efficient at heating than electricity – which is mostly derived from coal), but I’m not a fan of the haphazard way fracking seems to be done. It is very logical to assume that if you are creating a bunch of crevices in the rock, then natural gas and other chemicals will eventually seep up into the water supply.

    But from an investing point of view, I think the long term approach would be to find an index fund that tracks the price of natural gas, because you would think that tighter fracking regulations would only increase the price of natural gas? This allows one to support the short term impact of cleaning up air emissions, but also to keep fighting for increased fracking regulation.

  3. I think the idea of investing in companies that “do no harm” has taken hold in mainstream investing circles so social investors have turned to impact investing to support companies that “do social good.”

  4. This is a positive step, I have worked in the industry for over 15 years and there are various options that these companies can take to ensure enviormental safety, it always comes down to bottom line. With this in mind then investors should look for enviormentally efficient companies and these are far and few between. Now that CHK is under the microscope they dont look so honest.

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