GES Newsletter
April 27, 2010

In Mid-March, GES and its clients Folksam, KLP and PFA went to Canada to learn more about environmental and social risks of oil sands operations. All participants believe the experience is instrumental in gaining a deeper understanding of the controversial issues.

As oil sands mining is raising increasing investor concern and is the subject for a number of resolutions at this year’s annual meetings, e.g. at BP and Royal Dutch Shell, a group of Nordic investors conducted a study tour in Mid-March to Canada, where the activities are mostly concentrated.

The tour was initiated by Greenpeace and WWF in order to increase investors’ awareness of the environmental and social impacts of such operations. To broaden the scope of the tour, GES assisted participating clients – Folksam from Sweden, KLP from Norway and PFA from Denmark – by arranging meetings with companies and authorities, which were also appreciated by the other participants.

“In PFA we very much welcome these joint initiatives. We decided to take part in the Nordic investor tour together with GES, because we believe it is a great opportunity to meet the different stakeholders and demonstrate active ownership together as a Nordic group of like-minded investors. The tour provided us with a better understanding of the impact of oil sand and the many risks and consequences of the extraction”, says Kristin Parello-Plesner, CSR Manager at PFA Pension.

“By participating in the tour we were given a unique chance to meet with different stakeholders affected by the oil sands operations. The impressions from the tour will be fruitful for our future understanding and evaluation of the questions related to oil sands operations as well as in contacts with companies involved”, says Richard Torgerson, Senior Analyst Corporate Governance at Folksam Group.

”As a shareholder it is important for us to follow the developments of the oil sands operations. Having met with various stakeholders and having visited the area ourselves, will be valuable in our assessments of the industry and future discussions with companies operating in Alberta”, says Heidi Finskas, Advisor for Responsible Investments at KLP.

The Nordic investor visit included a helicopter overflight of exploitation areas in order to gain an understanding of the large scale of the operations. The investors met with the first company to develop the oil sands in Canada, Suncor Energy, as well as Nexen, which together represent the two prevailing methods of oil sands recovery, open-pit mining and underground in situ extraction, and learned about their respective impacts.

The concerns about oil sands extraction are due to the large consumption of water and energy, air and water pollution and the impacts on biodiversity and land rights of the indigenous people, which imply litigation and regulatory risks to the oil sands companies. Of great concern to institutional investors is also the carbon intensity of oil sands production, which requires more energy than the production of conventional oil, and the anticipated regulation and pricing of greenhouse gas emissions.

“This tour gave important insight into the different perspectives of the industry, authorities, environmental and social experts and NGOs as well as the impacted communities. Oil sands extraction presents a complex set of challenges through the environmental and social impacts related to it and getting these perspectives first hand enhances GES’ future engagement activities on oil sands”, says Linda Björk, Research Analyst at GES Investment Services who facilitated the company meetings and joined the tour.