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Canadian oil sands developers must dramatically reduce the environmental and social impact of their operations, according to investors.
The developers should take steps to lower their greenhouse gas (GHG) emissions by investing in renewable energy and working with the Alberta and Canadian federal governments to set a carbon price sufficient to drive emissions reductions, among other actions, according to a group of 49 investors with $2 trillion in assets under management.
The investors were encouraged by the March formation of Canada’s Oil Sands Innovation Alliance (COSIA), an alliance of oil sand producers focused on improving the industry’s environmental performance. But they called on COSIA to set goals and timelines for reducing the GHG intensity of oil sands production to at least that of conventional oil production, while also providing greater disclosure on research and development efforts.
The investors also asked the developers to manage water risk by setting goals and timelines for minimising net surface and groundwater withdrawals and keeping withdrawals within science-based ecosystem limits.
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“Oil sands companies cannot ignore these performance improvements in the name of unmitigated growth,” said Matthias Beer, senior analyst of governance and sustainable investment at F&C Asset Management, a UK-based investment firm.
“The risks to their industry and investors are simply too great. This statement of expectations asks oil sands companies to hold themselves to reasonable standards, which we believe is a necessary step in protecting the long-term financial viability of this resource.”
Canadian oil sands production is already at 1.6 million barrels per day, the vast majority of which is exported to the US, with production projected to grow to 4.2 million barrels per day by 2025. But development of the oil sands is significantly more resource-intensive than traditional oil development.
In addition, controversy about the sector’s environmental and social impacts, along with recent developments such as the US delay of the Keystone XL pipeline and the classification of oil sands fuel under California’s low-carbon fuel standard have raised concerns about its associated financial risks, according to a report released on Monday by Boston-based investor and environmental coalition Ceres.
Gloria is a writer for Environmental Finance.Environmental Finance is the leading global publication covering the ever-increasing impact of environmental issues on the lending, insurance, investment…