Glocal action: Canadian tar oil fight taken to big oil AGMs

By Theo Blackwell

Here in the UK, we don’t have to go too far back to see how the City can be rocked by poor decisions around financial investment and the environment. Re-insurance giant Lloyd’s of London was humbled in the 1990s; among the key causes were the huge asbestos and pollution losses which piled up over the decades.

Today, local authority pension funds account for over £154 billion of the UK’s funds under management. How these funds are invested is critical to industry, and at the very least we can question the rationale behind unsustainable and short-termist corporate policies.

The decisions of energy and oil companies that many public sector pension funds invest in to increase operations in Canadian ‘tar sands’, highlighted by George Monbiot in the Guardian, has been challenged by a new wave of shareholder activism concerned with the ultimate cost of these decisions.

Environmentalists are concerned with tar (or oil) sands because of the damage to land, including substantial degradation in the ability to support forestry and farming, greenhouse gas emissions and extra water use. Oil sands extraction is held to be more environmentally damaging than conventional methods of extracting crude oil – with 3 times extra CO2 emissions.

The introduction of Labour’s 2006 Companies Act put a legal obligation on directors of public companies to take into account social and environmental impacts and include details in their annual reports. This means that activities such as damaging the environment can now be recognised as a danger to profits through the way they damage a company’s reputation.

The influential campaigning group Fair Pensions has pushed shareholder resolutions to BP and Shell at their 2010 Annual General Meetings, questioning the long-term rationale for corporate decisions around Canadian tar oil.

According to its own figures Royal Dutch Shell holds some 30% of its total resources in heavy oil, most of which require on-site extraction. In 2007, BP reversed its oil sands policy (originally seen at the turn of the decade as too costly) by entering into a multi-billion pound deal in Canada.

Current AGM shareholder resolutions question whether both companies have properly considered the risks associated with issues such as the carbon intensity of oil sands extraction; forecasted carbon prices; limitations and cost of emissions mitigation; local environmental issues and other factors such as oil price volatility and corporate damage to reputation.

But sadly it’s unclear at the moment where our giant pension funds are on this matter. After an initial willingness to push the issue, the Local Authority Penions Fund Forum has yet to take a clear stance.

So, those with a stake in our £154 billion local government pension pot (that means current and former local government workers and local councillors) should ask those investing our future livelihoods in these companies two questions:

* Does you local authority pension fund invest in Royal Dutch Shell or BP?

* Will your local authority pension fund ask for a risk assessment on projects like the Canadian tar oil investments, and ask what operational risks are associated with such practices?