Addressing oil sands risks

By Doug Watt | June 16, 2009 | Last updated on June 16, 2009
2 min read

Alberta’s oil sands are a controversial topic for Canada’s socially responsible investing (SRI) community. The 140,000-square-kilometre region has become a front-line issue for investors concerned about climate change. Yet, Canadian SRI mutual funds can’t afford to ignore energy companies working in the sector, since energy makes up approximately 30% of the TSX.

“It’s difficult to avoid that sector and provide competitive rates of return,” says Bob Walker, vice-president, sustainability, with Ethical Funds. “Eighty percent of our investors care most about financial performance, and most Canadian energy companies are involved in the oil sands,” he said during a breakout session at the Canadian Responsible Investment Conference in Winnipeg.

Still, that doesn’t mean Ethical Funds is ignoring the issue — quite the opposite, in fact. The Vancouver-based firm is currently conducting an extensive study of operating projects in Alberta’s oil sands.

“We’re going to establish a benchmarking tool to find out which companies are mitigating risks,” Walker said. “And we’ll establish some rules around acceptable and unacceptable risk.”

In the meantime, Walker says companies working in the oil sands could have change forced upon them — thanks, in part, to U.S. President Barack Obama’s promise to cut greenhouse gas emissions and reduce American dependence on “dirty” oil.

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    “We’ve seen a slowdown in new [project] approvals,” Walker said. “We’ve seen projects rejected because of objections from First Nations groups,” he added, noting that aside from climate change, the more acute risks from oil sands projects are health-related, particularly among First Nations.

    “There is the potential for the industry to slow down and rethink, perhaps consider ESG [environmental social and governance] issues,” he added.

    The Ethical Funds research is being conducted in partnership with the National Union of Public and Government Employees and Ceres, and will be published in the fall of 2009.

    Doug Watt is an Ottawa-based writer and editor and co-founder of SRI Monitor, a blog on socially responsible investing.


    Doug Watt