Selected sector summaries
Is it possible to responsibly invest in mining?
The mining sector along with oil and gas until recently represented 30% of the value of the FTSE All-Share. Looking back over Socially Responsible Investment's (SRI) 30 years mining has a controversial history for unacceptable environmental and social impacts. Accordingly, Ethical/Green/Responsibility funds have before now avoided the sector. But just as there is a catalogue of bad practice in the past, there are examples of where mining companies have been, on balance, positive for their host communities and countries.
The biggest companies have learned from accusations and now subscribe to internationally recognised standards on the environment and human rights. There's also no escaping that modern life is highly dependent upon the raw materials mining provides. Some mining companies can help create a greener world. Platinum and related metals, for instance, are used in catalytic converters and fuel cells. This and the resurgence of commodities prices (though now falling back in the global downturn) has led many investors with 'ethical' or 'responsible' mandates to reconsider whether the cons still outweigh the pros.
Is there such a thing as a responsible mining company? Should investors support companies that provide materials that end up in environmentally beneficial technologies? Some ethics-conscious customers may accept investing in only the mining companies with the best records on responsibility or who supply materials with environmental benefits. Asset managers also have to consider their customers' willingness to accept certain company activities as at least acceptable - if not 'ethical'. For others, investing in mining will always be beyond the pale (however attractive the returns). The fact is that no one knows for sure how much attitudes among the ethical investing public have changed towards mining. If you would like to share your views with us, email: responsible.shareholding@cfs.coop
Green Chemistry
The chemicals industry suffers from a poor reputation due to peoples' belief that chemicals are bad for your health. It is true that the chemical industry uses and produces some chemicals that are toxic, persistent and bio-accumulative and that most chemicals have never been properly registered because they arrived on the market before 1981 when the current regulations came into force (an issue recently addressed by The European Commission by introducing the Registration, Evaluation and Authorisation of Chemicals (REACH) legislation). However, it is also the case that the development of chemical products over the past 100 years has made important contributions to people's quality of life and the economy: most of the materials and technical advances that modern life is based on, from pharmaceuticals to silicon chips to cosmetics and clothes dyes, all rely on chemistry.
Indeed, many of the solutions required to help us adapt to a more sustainable lifestyle are coming from the chemicals industry - solar panels, fuel cells and catalytic converters to name but a few. There are sizeable opportunities for companies that develop innovative alternatives or new technologies that serve to reduce environmental impacts or benefit the environment.
Unconventional Fossil Fuels: Scraping the bottom of the barrel?
'Unconventional Fossil Fuels', the oil sands/tar sands of Canada and the shale oil of the US are probably the largest sources of oil in the world. Until oil prices went above $60 a barrel and developing countries began asserting more control over their resources, oil sands, a bituminous mess of clay, oil and water requiring prodigious amounts of energy, water and money to upgrade were too expensive to produce. Although the oil price has dropped back to $60 levels, it is expected to go higher again. What may be gained in 'energy security' pales in comparison to the disastrous environmental impacts that large-scale exploitation of unconventionals will incur. The high energy input to get the fuel to a usable state means the carbon emissions are 2.5 to 8 times higher than for conventional oil (that's before the fuel is burned in vehicles). The consequent effects on climate change, along with a host of other environmental and social impacts, are further examined a report we recently produced with WWF.
In short, exploiting unconventionals on a large scale will by itself eat up the carbon budget the planet has left to avoid dangerous climate change - and then some. Host governments and oil companies hope that Carbon & Capture and Storage (CCS) will solve the carbon problem but it may be decades before CCS can catch up with expanded production. In the mean time, the CO2 will escape into the atmosphere. And it's not simply an environmental issue: it's a political and financial one that promises to hurt companies that operate improvidently. In years to come, tougher climate change regulation, costs of environmental compliance, litigation from affected communities are some of the challenges that could render unconventionals too expensive, once more. By then hundreds of billions of dollars will have been invested. So far, the companies involved have failed to answer how they will cope with these risks and costs.
