Sixteen leading oil and gas companies were studied. They are: Amerada Hess (AHC), Apache (APA), BP (BP), Burlington Resources (BR), ChevronTexaco (CVX), ConocoPhillips (COP), Eni (E), Enterprise Oil (ETP), ExxonMobil (XOM), Occidental Petroleum (OXY), Repsol YPF (REP), Royal Dutch/Shell Group (RD), Sunoco (SUN), TotalFinaElf (TOT), Unocal (UCL), and Valero Energy (VLO). As of June 30, 2002, these companies had a combined market capitalization of nearly $1 trillion.

Occidental, Repsol and Unocal all stand to lose more than 6 percent of shareholder value as these two environmental issues unfold over the next decade. In contrast, three other companies – Burlington, Valero and Sunoco – are relatively insulated against these environmental pressures and should see little or no change to their shareholder value.

The different financial impacts are due to the unique profiles of each company. Companies are differently positioned to respond to these environmental issues, by virtue of different business concentrations, asset mixes, and geographical scope of operations.

-Investors ignore environmental issues at their own peril,” said Duncan Austin, WRI economist and co-author of the study. -A company’s environmental performance is relevant not just for shareholders wishing to invest responsibly, but for any shareholder interested in the return on their investment. Environmental issues can have a significant impact on a company’s bottom line and stock price.”

The new report is based on an award-winning shareholder valuation methodology developed and tested by WRI over the last several years. It was applied to the oil and gas industry with the help of Friends Ivory & Sime, one of the leading asset managers in the United Kingdom.

The WRI report explored several different scenarios of future action on climate change, ranging from no action to widespread adoption of the Kyoto Protocol. Overall, future climate policies could create -most likely” financial impacts for companies that range from a 5 percent loss in shareholder value to a slight gain.

-Even without U.S. participation in the Kyoto Protocol, U.S. firms will still be affected by it,” said Amanda Sauer, co-author of the report. -Changes in the single, global oil market will be felt throughout the industry, and many U.S.-based companies also have extensive assets in countries where climate policies appear likely.”

The WRI report finds that the industry also faces growing constraints in accessing oil and gas reserves, as the continual search for new sources conflicts with growing efforts to protect biodiversity and preserve ecosystems and communities.

Apache, ChevronTexaco, ConocoPhillips, TotalFinaElf, Repsol, Occidental and Unocal have a larger than average share of their upstream reserves in environmentally important areas. Burlington, Eni, ExxonMobil and Royal Dutch Shell have relatively few reserves in environmentally sensitive areas, while Shell’s recent acquisition, Enterprise, has none of its reserves lying in these areas.

-At a time when investors have significant doubts about the quality of information put out by companies, this type of objective information and analysis is exactly what investors need to make accurate judgments about the value of their investments,” said Jonathan Lash, WRI president.

Investors may not be taking such information into account when making investment decisions, because of the relatively scant disclosure by companies on these environmental risks.

Only three companies – BP, Conoco and Phillips – indicated in their annual financial reports that climate policies may have an impact on future business operations. Several other companies raise climate as an issue in a specific environmental, or supplementary, report. However, no company attempts to quantify in financial terms the potential environmental risks that it faces. There is even less disclosure about environmental and social factors that may impede access to reserves, even though such access is the key to ongoing profitability within the industry.

-Investors increasingly acknowledge that environmental factors can materially impact financial performance, but struggle to quantify the specific impact these matters can have on individual stocks,” said Karina Litvack, director of governance and socially responsible investing at Friends Ivory & Sime. -This study addresses that need. It demonstrates the relevance of environmental risk factors to financial valuation, and is a challenge to all oil and gas companies to be fully transparent about their environmentally-related business risks.”