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Canada's Oil Sands: More Questions Than Answers For Investors

Company actions to manage and disclose environmental and social risks from vast oil extraction undertaking fall short of what investors want

Oil and gas companies spending billions of dollars per year to extract petroleum from Canada’s oil sands region are doing a poor job disclosing to investors on environmental, social and governance (ESG) issues that could threaten the companies’ long-term financial performance.
VANCOUVER, BC Nov 30, 2009

Oil and gas companies spending billions of dollars per year to extract petroleum from Canada’s oil sands region are doing a poor job disclosing to investors on environmental, social and governance (ESG) issues that could threaten the companies’ long-term financial performance.

That's the conclusion of Lines in the Sands, a comprehensive new benchmarking reportannounced today by the Sustainable Investing team at Northwest & Ethical Investments L.P. that analyzed ESG policies and practices of 13 publicly-traded U.S., Canadian and other international companies with major oil sands operations in Northern Alberta. The US investor coalition Ceres and the National Union of Public and General Employees supported the research on how companies are handling environmental and social impacts from the project producing more than 1.3 million barrels of oil a day, much of it for use in the United States.

"Almost every major oil company is either involved in developing the oil sands resource already, or plans to be," said Bob Walker, Vice President of Sustainability with Northwest & Ethical Investments L.P. "We know that oil-sands production creates a range of social and environmental impacts that companies need to address. Institutional investors can make a difference by engaging the companies they own on improving policy and practice – but to do so effectively, they need to understand how different companies are exposed in different ways to oil sands risk."

"Investors are concerned that many companies seem to be moving ahead without a well-articulated plan to manage the environmental and social risks associated with the oil sands," said Mindy S. Lubber, president of Ceres and director of the $8 trillion Investor Network on Climate Risk (INCR). "Given the extra-long investment horizons of oil sands projects, it is especially important for companies to invest in solutions to these challenges upfront.”

The report examined each company’s risk exposure on the topics of disclosure, aboriginal engagement, climate change and air pollution, water, land use and biodiversity -- and the companies' actions to respond to these risks. Companies evaluated include Canadian Natural Resources, Canadian Oil Sands Trust (the largest partner in Syncrude), Connacher Oil and Gas, ConocoPhillips, Devon Energy, EnCana, Husky Energy, Imperial Oil, Nexen, Shell, Suncor Energy and Petro-Canada (now merged), and Total.

Collecting data for the report proved to be challenging. While a few companies stood out for the transparency of their reporting, in other cases even the most basic statistics were buried in obscure regulatory filings, amalgamated with other information, or simply not disclosed. While Nexen, Suncor and ConocoPhillips stood out for the relative quality and completeness of their public disclosure, Imperial and Husky had weaker disclosure, and did not consider many of the issues raised to be of 'material' financial significance.

"It begins with disclosure. Investors have a right to clear and comprehensive disclosure on material environmental, social and governance issues," said Larry Brown, National Secretary-Treasurer of the National Union of Public and General Employees, one of Canada's largest unions which manages over C$100 billion in assets for its 340,000 members. “We will be working with Northwest & Ethical to promote change using the tools of shareholder engagement."

Among the other key report findings:

  • Aboriginal Rights: While all of the oil sands companies operate in areas that overlap with Aboriginal traditional territories, only a handful acknowledge the risk from aboriginal rights litigation in their public disclosure and only a third recognize treaty rights in their Aboriginal policies. More than a third of operators could not tell the report authors if they had negotiated even basic agreements with any impacted communities.
  • Carbon Emissions/Other Air Pollutants: All oil sands operations are highly exposed to climate risk -- in particular, regulations that will require major emitters to reduce carbon emissions from their operations. While Shell is the relative performance leader on carbon emissions intensity, most firms lack even greenhouse gas emissions intensity targets for reducing exposure to costs associated with current Alberta regulations. Although a few companies are taking steps to pursue carbon capture and storage, half the companies display a "credibility gap" between their pronouncements and action. Lost in the focus on carbon emissions is absence of targets and weak performance across the industry on reducing health-impacting air pollutants. Only Syncrude—and by extension Canadian Oil Sands Trust— and Petro-Canada displayed steady reduction in the intensity of these emissions.
  • Water: Half the companies failed to provide data on water usage, or presented the information in an ambiguous way that made comparisons difficult. Fewer than a quarter of the companies disclosed any kind of water-management targets. Most in situ operators are already compliant with draft regulatory requirements on water recycling, and the use of saline in place of fresh groundwater seems to be on the rise. The report shows that some companies appear better placed than others to mitigate the wide-ranging ESG risks.

“It’s not a uniform picture. We need to encourage the leaders, and push the laggards to catch up,” said Walker, adding that Northwest & Ethical is already engaging the sector and has concluded a first round of follow-up meetings with the companies to discuss the report findings. “So far, the firms are acknowledging the need to do more to mitigate environmental, social, and governance risks. We welcome that. But given the scope and scale of the issues, more effort is needed. We will continue our engagement, and we invite global investment institutions to join us.”

Download the full report from

About Northwest and Ethical Investments L.P.

Northwest & Ethical Investments L.P. has $4.5 billion in assets under management. Through its Ethical Funds division, it is Canada's largest provider of socially responsible mutual funds. The Ethical Funds approach to investing is based on the thesis that companies integrating best environmental, social and governance (ESG) practices into their strategy and operations will provide higher risk-adjusted returns over the long term.

About the National Union of Public and General Employees

The 340,000-member National Union of Public and General Employees (NUPGE) is a family of 11 component unions. Taken together, it is one of the largest unions in Canada. NUPGE is committed to a joint trusteeship governance model for all its members’ pension plans. Currently, the components of NUPGE have trustees on 10 of the largest public sector pension plans in four provinces in Canada. Together, those jointly-trusteed pension plans have over C$100 billion in assets. Within the joint trusteeship model, NUPGE promotes investment strategies that recognize the importance of ESG issues in protecting the broad and long-term interests of its members.

About Ceres and INCR

Ceres is a leading coalition of investors, environmental groups and other public interest organizations working with companies to address sustainability challenges such as climate change. Ceres directs the Investor Network on Climate Risk, a network of 80 institutional investors with collective assets totaling $8 trillion focused on the business impacts from climate change. For more information, visit or