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Market News

 April 12, 2007
Climate Change Risks in Canada's Oil and Gas Sector

 This latest report from The Ethical Funds Company evaluates how Canada's oil and gas companies are responding to the challenges of climate change. The analysis is designed to assist these companies, as well as investors, in their efforts to reduce the risks associated with climate change.

Given the level of scientific certainty concerning the man-made causes of climate change, and the range of threats posed to the environment, human health, and the global economy, oil and gas companies in future will operate under more risky and possibly hostile business conditions, notes Ethical Funds.

These risks to oil and gas companies bring risks to the institutions that invest in them. To that end, companies need to take immediate steps to reduce their risk exposure, and investors need to support companies taking these steps - and provide appropriate incentives to those that have yet to take action, asserts the report.

Among the findings of the study is that only two of the 48 Canadian companies assessed are responding appropriately to the risks presented by climate change in the view of Ethical Funds. Among Canadian firms, only Shell Canada and Suncor are well-positioned to function in a more carbon-constrained environment, having established comprehensive management systems, strategies, carbon pricing, renewable energy investments, and high levels of transparency, says the report.

Other main findings of the report include:

  • A majority of companies have begun to put in place management systems necessary to assess the risks of climate change and take action.

  • Three companies - BP plc, Canadian Natural Resources, and Talisman - have been able to achieve absolute emissions reductions while still increasing production. Four companies have reduced their absolute emissions but have also seen a decline in production over the same period.

  • Just seven companies of 48 - ARC, BP plc, Imperial Oil, Nexen, Petro-Canada, Shell, and Suncor - are factoring the cost of carbon into capital allocation decisions.

  • Outside of the top performers, companies have failed to conduct inventories of greenhouse gas emissions.

  • Action plans to reduce emissions are the exception, not the rule.

  • Emissions intensity rather than absolute emissions reduction is the preferred measurement for success across the entire sector.

  • Thirteen of 48 Canadian companies are developing carbon capture and storage (CCS) technologies.

  • Just three Canadian oil and gas companies have made significant commercial investments in renewable energy currently resulting in energy production: Suncor with wind projects, Nexen with a wind project, and Husky with biofuels.

  • Public disclosure of greenhouse gas (GHG) emissions is underwhelming, with just 13 of 48 companies publicly disclosing their emissions.

  • The energy trusts as a group perform very poorly across all indicators. ARC Energy Trust is the exception to this rule.

Read the full report from The Ethical Funds Company, Head in the Oil Sands? Climate Change Risks in Canada's Oil and Gas Sector (PDF).



Source: Ethical Funds Company.