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NorthAmOil COMMENTARY NorthAmOil
Social and governance
aspects of energy
production may be
more challenging to
measure than the
environmental aspect.
Other organisations’ findings also illustrate What next?
how extensive investments in Russian oil and The findings of the CIBC report have added to
gas have become. Until recently such invest- pressure on investors to reconsider how highly
ments were not widely seen as cause for concern they prioritise the environmental aspect of ESG.
– or at least not on environmental grounds when But this could come with its own challenges.
compared to the oil sands. Bloomberg said data Purpose Investments’ chief operating officer
it had compiled showed that ESG funds held at and head of product, Vlad Tasevski, was quoted
least $8.3bn in Russian assets prior to the start by Yahoo Finance as saying the ‘E’ within ESG
of the invasion of Ukraine last month. Indeed, was likely being over-emphasised because it was
the news service had recently reported that Van- more challenging to measure social and govern-
guard Group and Northern Trust had upped ance variables.
their stakes in Sberbank, Russia’s largest bank, “I think we are going to see a reassessment
through their respective index-based ESG funds both by investors, and the data providers of
in January. information for ESG factors,” he told Yahoo
Finance. “Work on the ‘S’ and ‘G’ has been
Ongoing battle around for a while, but it’s still newer. They’re
The report highlights something Canada has maybe not as straightforward as the environ-
been trying to draw attention to for years. The mental factors.”
country has long sought to emphasise its cre- Tasevski added that Canadian producers had
dentials as a Western democracy, saying that been “overwhelmingly negatively impacted by The report
its resources could be used to lessen reliance on the ESG movement”, even as the industry has
countries whose politics were perhaps not in shrunk its carbon footprint. highlights
alignment with investor views. More broadly, the challenges of ESG investing something
It appears to have been fighting a losing bat- appear to be becoming clearer. CIBC said global
tle for some time, with more and more inves- flows into ESG funds were down more than 50% Canada has been
tors of different kinds pulling back from the over the first two months of 2022, after setting
oil sands, citing the industry’s high emissions records in 2020 and 2021. Flows out of ESG trying to draw
intensity compared with other types of oil and funds have outpaced net outflows from other
gas. But now, while environmental pressure asset classes, according to CIBC. attention to for
is unlikely to go away altogether, it could be “Perhaps the recent uptick in ESG fund out- years.
eclipsed by pressure to exit Russian invest- flows is simply a reflection of investors becom-
ments, at least in the short term. ing aware that simple ‘black box’ metrics, such
And as oil importers, especially in Europe, as ESG scores, often used in security selection,
try to lessen their dependence on Russian are inadequate for a topic as multifaceted as
crude, Canadian oil could find itself better ESG,” the analysts wrote.
positioned. Indeed, the Canadian govern- This comes, however, amid a broader push to
ment has already said it would aim to ramp encourage ESG reporting. Also this week, the
up oil shipments to the US Gulf Coast, from US Securities and Exchange Commission (SEC)
where its crude can be exported to other des- proposed a new rule requiring publicly traded
tinations, including Europe. (See NorthAmOil companies to disclose their direct and indirect
Week 11) contributions to climate change.
Week 12 24•March•2022 www. NEWSBASE .com P5