Digging Into Oil Sands Divestment
The Canada Letter speaks with a Times reporter who has looked into large investors who have turned away from the oil sands.
By
Another energy story was somewhat lost this week among turmoil from protests over the natural gas pipeline construction in Wet’suwet’en territory in British Columbia. On Wednesday, BlackRock, the world’s largest asset manager, announced one of its fast-growing green-oriented funds would no longer put money into companies that get revenue from the oil sands in Alberta.
My colleague Christopher Flavelle, who follows how people, governments and industries are coping with the effects of global warming, reported on the decision as part of his in-depth look at investors who are divesting oil sands-related holdings.
[Read: Global Financial Giants Swear Off Funding an Especially Dirty Fuel.]
Christopher, by the way, was born and raised in Toronto, obtained a B.A. in political science at McGill University and once worked at The Walrus magazine.
I asked him to expand on some of the points from his article in which the head of a fund at BlackRock describes the oils sands as being “the worst offenders, if you want, from a climate perspective.”
Some of the investors you spoke with said that they are taking their money out of the oil sands for environmental reasons. But is the current oil glut and the prospect of continued low oil prices also influencing their decisions?
I spoke with equity analysts, economists and fund managers for this story, and they all made a version of that point: The recent low rate of return on oil has made it easier for investors to pull out of the oil sands, because it means they’re not sacrificing a lucrative investment. That’s especially true for the oil sands, which have been hurt by the lack of new pipelines that would make it cheaper to get more of that oil to market.
Other people took that argument a step further, predicting that when, or if, oil in general and the oil sands in particular become a more attractive investment, some of the investors who left will come back. And that seems like a valid point: One test of these divestment policies will be whether investors stick to them over time.
Alberta has responded by attempting to embarrass some financial services companies for pulling out of the oil sands and by threatening to no longer do business with them. Has anybody noticed any of that effort outside Alberta or Canada?
The investors and insurance companies that have been the targets of that pressure have certainly noticed. But I couldn’t find evidence that the pressure from Alberta has caused any of those companies to change their policies.
The closest might be HSBC, which seemed to get more attention from Premier Jason Kenney than any other company. HSBC softened the language in its policy statement on the oil sands last year, its spokeswoman told me, removing what she called “the suggestion that our exposure to the oil sands industry would diminish.” But it didn’t shift its pledge to stop funding new oil sands projects.
The bigger question that came up during my reporting is whether lenders that might otherwise want to invest in oil sands projects will decide not to as a result of the Alberta government’s willingness to publicly criticize foreign investors it disagrees with. That’s a much harder question to answer.
Have some oil sands companies made significant progress on reducing carbon emissions, as Alberta’s government has said?
It depends how you define ‘significant.’ Joule Bergerson, a professor in the chemical and petroleum engineering department at the University of Calgary, told me that she’s seen reductions in carbon intensity — the amount of greenhouse gas emitted per unit of energy extracted — in the range of 15 percent to 20 percent.
The companies themselves report having made significant reductions. Cenovus told me in a statement that its greenhouse gas intensity had fallen 30 percent in 15 years. Suncor said in a statement that emissions intensity at its oil sands base plant was down more than 60 percent since 1990.
But Dr. Bergerson added that reductions on the scale we’ve seen so far aren’t necessarily going to change investors’ minds about quitting the oil sands because they still leave most of those projects well above the global average for carbon intensity. As she put it, those companies “are really trying, and putting their money where their mouth is in terms of developing new technologies.” Still, she said, it remains unclear whether they’ll be able to cut emissions enough to persuade other investors not to leave.
How willing were people in the industry and the Canadian financial community to speak with you?
I was surprised by how difficult it was to get Canadian investors and oil sands companies to talk to me. Aside from the Caisse de dépôt et placement du Québec, none of the large pension funds agreed to my requests for interviews. The biggest oil sands companies likewise declined my requests for interviews, though some agreed to respond to written questions.
When I mentioned that to the people I spoke with, many of whom asked not to be identified, the explanation was that nobody wants to be the next one to get targeted by the premier’s office. I would have asked Mr. Kenney about that, but his office declined my request for an interview.
Trans Canada
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A native of Windsor, Ontario, Ian Austen was educated in Toronto, lives in Ottawa and has reported about Canada for The New York Times for the past 16 years. Follow him on Twitter at @ianrausten.
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