News From Green Century Capital Management
1/7/09 >> Alberta's Tar Sands: A sticky situation for investors and ducks alike
Emily Stone & Shelley Alpern
Emily is the Shareholder Advocate at Green Century Capital Management. Shelley is the Director of Social Research and Advocacy at Trillium Asset Management Corporation, subadviser to the Green Century Balanced Fund.
What could beat Amazonian deforestation, massive coal plants next to elementary schools, factory farming and mountaintop removal for the title of "the most destructive project on Earth"?
Cue the tar sands, a vast expanse of the Albertan province opened up to rampant drilling, surface mining and pipelines through what was once a strikingly beautiful section of the Canadian Boreal forest. Canada’s Environmental Defence deemed it "the most destructive project on Earth" last February.
While this region holds immense ecological and aesthetic value on the planetary exterior (it is one of the largest remaining unspoiled forest and wetland ecosystems and one of the most biodiverse carbon sinks on Earth), its subterranean layers are rich with oil that is deeply embedded in an earth and sand mixture called bitumen. Starting to imagine what this project might look like?
Some have likened it to Mordor, the fictional land ravaged by the Dark Lord in the "Lord of the Rings" trilogy. Huge swathes of forest have been leveled to mine the earth, make way for processing facilities, and provide space for tailing ponds. The projects strain the freshwater capacity from the Athabasca River, and the downstream pollution is linked, some believe, to rising cancer rates in indigenous communities.
The world's leading oil and gas companies have been salivating over Alberta's tar sands, estimated to be home to over fifty percent of the world’s more easily accessed oil reserves.
The pipe dream of North American oil independence has spurred a gold rush to this fossil fuel playground. A who's who of Western oil companies comprises the all-star line-up of tar sands players - Chevron Corporation*, ConocoPhillips Company*, Imperial Oil Limited*, Royal Dutch Shell plc*, BP plc*, Syncrude Canada Ltd*, StatoilHydro*, and Petro-Canada*, for example.
Unfortunately, tar sands drilling and mining has only just begun. Before the price of crude dropped, companies planned to double production over the next 10 to 15 years. While some of those plans for expansion have been nixed, other arrangements continue to advance. And neither the federal nor provincial governments have stepped up to the challenge of planning for the cumulative impact of all the development.
Alongside environmental watchdogs, shareholders are raising red flags and demanding that drillers move slowly and cautiously. In the U.S., our firms, Green Century Capital Management ("Green Century") and Trillium Asset Management Corporation ("Trillium"), two socially responsible investment companies, have been mobilizing shareholders at Chevron Corporation and ConocoPhillips Company. The Canadian mutual funds company Ethical Funds has engaged a number of Canadian oil and gas firms and produced several useful reports on the tar sands. Investors in the U.K. and Europe have approached BP plc and Royal Dutch Shell plc over their investments in tar sands operations well.
Green Century and Trillium filed shareholder resolutions in 2008 at Chevron Corporation and ConocoPhillips Company, outlining key risks and asking the companies to report on environmental damage resulting from their expanding tar sands operations, including the implications of discontinuing expansion plans.
Companies operating in the tar sands face numerous potential risks including: proposed costly regulations on carbon emissions in both Canada and the U.S. (the tar sands' largest customer); declining operational water availability; reputational damage due to environmental impacts; and litigation risks from aboriginal peoples.
Green Century and Trillium noted that tailing ponds from mining operations, acutely toxic pools of sludge that cover almost 50 square miles of forest and bogs, are a particularly worrisome hazard. Last year, these nasty puddles were splashed across international headlines when an entire flock of 500 migrating ducks was found dead in one of Syncrude’s massive tailing ponds.
Nearly 28.6%** of Chevron Corporation’s shareholders that participated in the annual meaning by voting supported the proposal presented by Green Century. We believe that this is a very high vote in the rarefied world of shareholder proposals and is a strong signal to executives that a critical minority of stockowners is not on board with the program.
Green Century has met with the Chevron Corporation to discuss last year's resolution and the company's plan to address investor concerns, and will continue to engage the company on the issue. Both Green Century and Trillium have refiled their resolutions at Chevron Corporation and ConocoPhillips Company, respectively, to maintain shareholder pressure.
In the end, we at Green Century believe the tar sands are a textbook example of our failure as human beings to look beyond short-term profit maximization. We believe that if we lived in a rational global economy capable of looking to long-term rewards, we would now be enjoying the economic, political and environmental benefits of two decades of aggressive efficiency measures, phased-down fossil-fuel use, and the mass distribution of renewable energy technologies.
Instead, we have new financial maelstroms threatening our economy every week, the "most destructive project on Earth" annihilating one of our planet’s most valuable ecological resources… and hundreds of unnecessarily dead ducks.
*As of December 31, 2008, neither of the Green Century Funds was invested in Chevron Corporation, ConocoPhillips Company, Imperial Oil Limited, Royal Dutch Shell plc, BP plc, Syncrude Canada Ltd, StatoilHydro, or Petro-Canada. Portfolio composition will change due to ongoing management of the Funds. Please refer to the Green Century Funds website for current information regarding the Funds’ portfolio holdings. These holdings are subject to risk as described in the Funds’ prospectus. References to specific investments should not be construed as a recommendation of the securities by the Funds, their administrator, or their distributor.
** Calculated by (i) dividing the number of votes in support of the proposal by (ii) the sum of the number of votes voted in support of and against the proposal. Abstentions and broker non-votes were not included in the calculation.
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Green Century Capital Management is an investment advisory firm focused on environmentally responsible investing. Founded by a partnership of non-profit environmental advocacy organizations in 1991, Green Century’s mission is to provide people who care about a clean, healthy planet the opportunity to use the clout of their investment dollars to encourage environmentally responsible corporate behavior. Green Century believes that shareholder advocacy is a critical component of responsible investing and actively advocates for greater corporate environmental accountability.
You should consider the Funds' investment objectives, risks, charges, and expenses carefully before investing. For a prospectus that contains this and other information about the Funds, call 1-800-93-GREEN, visit www.greencentury.com or email info@greencentury.com. Please read the prospectus carefully before investing.
Distributed by UMB Distribution Services, LLC 1/09
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