Wednesday, 15 December 2010

How Ethical Are Ethical Funds?

"Conscientious" investments and the tar sands connection 
by Larry Powell
ROBLIN, Manitoba, CA: I doubt that few investors with a social conscience would assume that the ethical funds they hold would be helping pay for such projects as the Alberta oil sands.

I certainly didn't - turns out, I was wrong!

All five of Canada's major banks lend money to tar sands operators. And all five are actually included in the portfolios of the many ethical investment funds in this country. As if that isn't enough, so too is at least one major corporation, Suncor Energy, which actually extracts the tar from the sands!

Ethical Funds lists Scotiabank, the Royal Bank of Canada (RBC) and Suncor Energy among its top ten holdings. The investment company adds, RBC, for one, "provides significant capital to the oil and gas and other smokestack industries."


Suncor describes itself as a "pioneer" and one of the biggest players in the development and upgrading of the Alberta oil sands. So far this year, the company has been producing, on average, more than a-quarter-of-a-million barrels of oil per day. 



Last spring, a US-based environmental group, Rainforest Action Network, (RAN), listed the five major Canadian banks; RBC, Toronto Dominion (TD), Canadian Imperial Bank of Commerce (CIBC), Scotiabank and Bank of Montreal (BMO) as investors. At that time, RAN reported that investment totalled almost $50 billion (correct).

In a letter to RAN about a year ago, RBC confirmed it was "a financier of oil sands activity, although, at almost $17 billion, (correct) not currently the largest."

So just what is the concern here?

For years, critics have been pointing out the profound impact which development of the sands is having on the environment and the health of people, both regionally and globally. Some even describe it as the "dirtiest project on earth!" 

The Alberta-based Pembina Institute says, of all the provinces, Alberta was responsible for over half of the increase in all greenhouse gas emissions between 1990 and 2008 - about 52%! (The tar sands, of course, were operating, full-bore, during that period.) Pembina predicts that, given the projected growth of the sands, their already substantial emissions will nearly triple by 2020! The 25 year-old Institute researches and advocates for "sustainable energy solutions that will protect the earth's living systems - air, land and water."


Meanwhile, millions of hectares of pristine boreal forest are being bulldozed to make way for more and more tar sands plants. According to Greenpeace, this could soon amount to an area twice the size of New Brunswick!


 The National Academy of Sciences in the US reports that oil sands development has been contaminating  the Athabasca River watershed, downstream of the sands, to a greater degree than earlier thought. It warned that oil sands development was elevating levels of poisons in the Athabasca River and its tributaries that were "likely toxic to fish embryos."

Fish with large lesion caught in the Athabasca watershed.
Meanwhile, people living downstream of the oil sands, in the community of Fort Chipewyan, have been reporting high rates of cancer and other illness. George Poitras, a member of Mikisew Cree indigenous First Nation says, "My people are dying," and blames oil sands development.


What does the ethical investment community have to say?

I contacted Robert Walker, Vice President of ESG Services of Vancouver, to comment on this story. His firm manages several "sustainable" or "social investment" companies, including Ethical Funds.

As he puts it, "Every major bank in Canada has exposure to oil sands."


Ethical Funds lists "respect for the environment" and a pledge that "disadvantaged communities should not bear the brunt of adverse environmental impacts" among its "core values."


So just how does it justify this state of affairs?

In Walker's words, "Note that we do not describe the companies in our Funds as ‘ethical’. This is not our claim."

Walker recognizes that the companies in question have a chequered reputation in managing their social and environmental responsibilities. But he says his industry is constantly "engaging" and "pressuring" them to do better. It even hands out and publishes report cards on their performances in this regard. All this, he believes, will gradually help convince them to change their ways.

Walker believes banks like RBC can play "a pivotal role in encouraging their clients to tackle climate change."


He concludes, "We are at least partially responsible for progress that banks like RBC are making in this space." 

Despite these reassurances, it's not clear just what "progress" Walker can point to; whether his industry is, in fact convincing the banks to become better corporate citizens; or why, as he suggests, it would not be logical for the average investor to conclude - if these companies are embraced within ethical funds' portfolios - that they are, in fact, ethical!


In its defense, RBC does sponsor the "Blue Water Project," through which it promises millions of dollars to help protect watersheds and ensure access to clean drinking water. It's doubtful, however, any of that money has gone toward protecting the Athabasca watershed, the deterioration of which the bank has surely played a part, albeit indirect. 


So is the Blue Water Project an example of the bank's good intentions? Or hypocrisy?


If tar sands investment can be considered "ethical," I find it rather hard to imagine what would not!


If you believe, as I do, that our investment money should be going to less harmful and less polluting ventures than this, I'd urge you to do something about it, also. 


As a result of all of this, I have chosen to shift my modest investments away from those involving the tar sands and, into less harmful ventures.


I'd invite you to consider something similar!
           l.p.
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Please also read: "Is Fracking Appropriate for Ethical Investing?"

2 comments:

Ron Robins said...

Ron Robins 
The best thing for these investors is to study the funds prospectus before they invest to see that the funds investments marry with their values. Investors, who are able to, can also construct an individual portfolio of shares to fully match with their values.

I got interested in ethical investing some forty years ago as I believed that when we invest in a company we share in the responsibility for the activities of the company as well as participate in the outcomes of the company's activities. Therefore anyone valuing their personal or spiritual growth has to take these things into account when investing.

I also believe that if everyone does invest according to their personal values, then, since so many of core values are alike -- and are supportive of higher ideals -- that in the long run, only companies employing these higher values will truly prosper.

For anyone interested I have a Canadian site that covers the latest global news and research on ethical investing. It's at http://investingforthesoul.com/

Best wishes, Ron Robins

Dear Ron,

PLT said...

It would seem you take a more charitable approach toward the ethical investment industry than I. Call me crazy, but I expect an industry that hangs out a shingle as "ethical" should be so in fact, as well as in name! Larry