Use case example: Aliso Canyon

In October 2015, Sempra Energy’s (SRE) Aliso Canyon field near Los Angeles leaked nearly 100,000 tonnes of methane – the second largest methane leak in US history. By the end of the following year many industry experts estimated the total cost of the leak attributable to SRE mounted to several billion dollars¹.

Source: Journal of Environmental Investing 8, no 1 (2017)

But what happened to Sempra Energy’s share price shortly after the leak? Surprisingly, at the same time the size and scope of the accident was reported, SRE’s stock price actually went up. One assumes this was because the expected impact of the company’s assets (lost gas) was not in itself financially material while the environmental implications were not (and could not be) vividly portrayed by the news media. Only when the potential consequences of the event for Los Angeles County¹ – and, by implication, Sempra’s liabilities as the responsible party, did SRE’s stock price underperform its Utilities Index benchmark.

Below: Stock price of Sempra Energy (SRE, owner of Socal Gas) during the 2015 Aliso Canyon methane blowout.