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National Post: Consequences of ignoring green issues dire for big oil: report

Gordon Hamilton, CanWest News Service

VANCOUVER — Most Canadian oil and gas companies have failed to take action to reduce greenhouse gas emissions, putting themselves and their investors at risk of the kind of eco-campaigns that targetted forest companies or the multibillion-dollar lawsuits launched against tobacco companies, says a new sustainability report.

Head in the Oil Sands, a 25-page report by the $2.2-billion Ethical Funds Co., reveals only three of 50 publicly-traded oil and gas companies tracked by the fund have decreased greenhouse gas emissions while increasing production.

Only seven are factoring the cost of carbon into capital allocation decisions. All were Canadian companies except two, Royal Dutch Shell and BP plc.

*”Action plans to reduce emissions are the exception, not the rule,” the report states.

It calls on the oil and gas industry “to accept its responsibility and respond appropriately to this historic moment.”

The three companies singled out for cutting emissions are BP plc, Canadian Natural Resources and Talisman Energy.

Shell Canada, Royal Dutch Shell, Suncor, and BP are also singled out for having established management systems and strategies to function in a carbon-restricted environment. They’re also investing in renewable energy and have high levels of transparency.

Income trusts tended to show the poorest results.

Ethical Funds vice-president Bob Walker said in an interview that environmental issues are at the top of the agenda for the 170,000 investors who hold units in the fund, but all investors are now starting to understand the societal risks that climate change poses.

“There’s a whole host of reasons why companies need to pay attention to these issues and why investors who hold these companies in their portfolios also need to pay attention to these issues and take steps to reduce the risks by mitigating the impacts,” Mr. Walker said.

He said integrated companies could face boycotts of their products along the lines of the protests that forced forest companies to change their practices on the B.C. coast. Lawsuits are also possible, he said.

“To my knowledge, it has not happened yet but it certainly is foreseeable,” he said. “It would be wise for those companies with retail operations to take steps now to avoid the kind of pressure that forest companies did find themselves in back in the 1990s.”

Ethical Funds has included its findings on the oil and gas industry’s response to climate change in its overall corporate sustainability scorecard, which the fund uses to make investment decisions.

Walker said the fund is not necessarily going to drop companies from its portfolio as a result of the findings. Instead, it intends to discuss the findings with companies it invests in to encourage change.

However, environmental issues make up 20% of the scorecard, so a poor performance here can impact investment decisions, he said.

Delays in bringing government regulations forward are a factor in the overall poor performance of the industry in addressing climate change issues, Mr. Walker said.

But he added there has also been pressure from some companies to delay regulation, making it difficult for others that want to address the issue.

He said good environmental practices and management, action plans and performance often go hand-in-hand.

He noted, as an example, that companies reducing emissions are doing it by capturing “fugitive emissions” that escape through leaky pipes and valves.

“That’s the low hanging fruit. The next big challenge is can they continue to grow having made those production improvements and also continue on their path towards reducing absolute carbon emissions?”

Published: Tuesday, March 13, 2007

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