Performance and disclosure need to improve, corporate engagement by investors required
Oil and gas companies operating in Alberta’s oil sands are doing a poor job disclosing to investors on material environmental, social and governance (ESG) issues that could threaten the companies’ long-term value.
That's the conclusion of Lines in the Sands, a comprehensive new benchmarking report announced today by the Sustainable Investing team at Northwest & Ethical Investments L.P. that analyzed ESG policies and practices of 13 publicly-traded Canadian, American, and international companies with commercial oil sands operations in Northern Alberta. The National Union of Public and General Employees and Ceres supported the research.
"Almost every major oil company is either involved in developing the oil sands resource already, or plans to be," says 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," said Walker.
The report examined each company’s exposure to risk on the themes of disclosure, aboriginal engagement, climate change and air pollution, water, land use and biodiversity, and corporate strategy for change.
Data-collection proved a daunting task. 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.
"It begins with disclosure. Investors have a right to clear and comprehensive disclosure on material environmental, social and governance issues," added Larry Brown, National Secretary-Treasurer of the National Union of Public and General Employees. “We will be working with Northwest & Ethical to promote change using the tools of shareholder engagement."
"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.”
Some companies appear better placed than others to mitigate the 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 fromhttp://www.ethicalfunds.com/SiteCollectionDocuments/docs/lines_in_the_sands_full.pdf
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.
Ceres is a leading coalition of investors, environmental groups and other public interest organizations working with companies to address sustainability challenges, such as global climate change. Ceres coordinates the Investor Network on Climate Risk (INCR), a group of 80 institutional investors and investment firms with collective assets totalling more than US $8 trillion.