Standard & Poor's highlights Ecopetrol's progress on environmental, social and corporate governance issues
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Standard & Poor's highlights Ecopetrol's progress on environmental, social and corporate governance issues
Mar 16, 2022
- The ESG assessment is the first of its kind by S&P on Ecopetrol and the first to be public in Colombia.
- Ecopetrol's assessment rating is above the industry average and the Corporate Governance rating is higher than that of its peers.
- The acquisition of a majority stake in ISA is viewed positively to contribute to the decarbonization path.
- The report notes that the independence of Ecopetrol's Board of Directors is superior to that of other Latin American state-owned companies and that the composition of the board provides adequate governance.
The rating firm Standard & Poor's (S&P) highlighted the progress Ecopetrol has made in the last four years on environmental, social and corporate governance (ESG) issues and stressed that the company is adequately prepared to face the challenges that these aspects bring in the long term.
"Ecopetrol mitigates social risks with its strong commitment to educating local communities in Colombia, with efforts to raise the social standards of its suppliers, and with its strong focus on operational safety," the firm noted in its report.
In S&P's opinion, the company's governance structure and transparency in non-financial reporting are stronger than those of its Colombian and regional peers, which is one of the practices most appreciated by investors today.
S&P's ESG assessment is the first of its kind performed by this firm on Ecopetrol and the first to be public in Colombia. Its relevance lies in the fact that it supports investment decisions given its growing emphasis on environmental, social and corporate governance issues, which are becoming increasingly important for the markets.
On the environmental theme, the assessment was positively influenced by the acquisition of 51.4% of ISA's shares, which qualifies as a low-carbon and less resource-intensive company compared to Ecopetrol's peers that are purely integrated in the oil and gas chain.
"In our view the company shows excellent awareness of disruptive risks in the face of the energy transition and the physical impacts of climate change," the document summarized.
Additionally, the analysis highlighted the 6% reduction in fresh water withdrawal in the last two years thanks to the increased reuse of the resource by the operation, in line with the Company's objectives to reduce its water footprint as set out in its 2040 strategy "Energy that transforms".
On corporate governance issues, S&P points out that the independence of Ecopetrol's Board of Directors is superior to that of other Latin American state-owned companies and even to that required by Colombian regulations. The report also noted that Ecopetrol's board members have diverse skills and experience, which results in effective oversight of the company.
"Ecopetrol's senior management and Board of Directors demonstrate an excellent understanding of long-term trends arising from regulatory, technological, environmental and social risks. The Board of Directors articulates, in depth, their views on how Ecopetrol is positioning itself in the context of the energy transition," the report noted.
Bogota, March 16, 2022
