Institutional investors urged to join forces to stop unconventional fossil fuels extraction

The Co-operative Asset Management is urging more than 20 Institutional investors to join forces to exert pressure on the oil companies leading the rush to exploit unconventional oils.

Meeting in London on Tuesday 16 September, members of the United Kingdom Social Investment Forum (UKSIF) will be asked to use their combined investment might to influence companies exposed to social and environmental risks through the expansion of extracting oil from sand and shale - and protect their investments, in the process.

In July, The Co-operative Financial Services, and WWF produced a report entitled ‘Unconventional Oil: Scraping the bottom of the barrel?' which highlighted the financial and reputational risks facing oil companies involved in the development of unconventional oils.

Worries over reserves and unstable oil prices has led to massive development plans for unconventional oils such as the Canadian oil sands, with Shell, BP and ExxonMobil all investing significantly. Oil sands are up to three times more carbon intensive to extract than normal oil and create dangerous legacy issues for the local environment.

Ian Jones, Head of Responsible Investment says: "As investors, we understand the challenges global energy companies face in terms of geo-political pressures, scarcity and resource nationalism. However, the days when oil companies can escape their environmental responsibilities and payment for carbon emissions are increasingly numbered.

"Existing and impending regulations are placing a price on greenhouse gas emissions and this will hit unconventionals hard due to their carbon intensity. Companies point to technological solutions such as carbon capture and storage, but this is years from being available on a commercial scale. In the meantime, companies may continue to attract high levels of public criticism."

The Co-operative Asset Management will tell the other investors that oil majors risk both financial and reputational damage by failing to properly account for future legislation over carbon emissions, spiralling operational costs and of cleaning up the local environment. Investors will also hear from WWF Canada on the local ecological impacts and The Tyndall Centre for Climate Change Research on the climate change implications of exploiting unconventional oils.

The Co-operative Asset Management has an interest in protecting long term shareholder value by ensuring companies in which it invests fully address their risks and opportunities. It will now alert other investors to the risks of expansion in unconventional oils projects and engage with companies involved to seek forward-looking approaches that take account of the issues.

Ian Jones added: "From a regulatory perspective, there are parallels with the rush into biofuels. Early movers in first generation biofuel technology were not sufficiently mindful of emerging political and consumer anxiety over the social and environmental impacts of biofuel production. As a result, they were not ready when national targets were scaled back by EU regulators, thereby shrinking demand for their products."