NETHERLANDS - Three of the Netherlands largest asset managers are engaging oil giant Shell in the environmental and social impact of its exploitation of tar sands in Canada.
APG and PGGM - acting for ABP and PfZW - as well as Mn Services are in discussions with the oil giant as Dutch pension funds have indicated they might vote on a shareholder resolution concerning their extraction of energy from tar sands, as investors are worried about the environmental impact of the practice.
A resolution has been tabled by FairPensions, a UK-based lobbying organisation focused on responsible investment and corporate governance, about the issue and will be heard during Shell's general shareholders meeting on 18 May.
The case is of particular interest to the ABP and PfZW pension funds as the parties secured compensation from Shell following legal action in an Amsterdam court last year after Shell overstated the firm's oil reserves in 2004
So far, 142 institutional investors have signed the FairPensions resolution calling on Shell to investigate the possible investment risks of oil extraction from tar sands, as rising oil prices have increased the focus on the issue.
According to FairPensions, the extraction process requires large amounts of energy, emits three times more greenhouse gases than conventional oil extraction, causes deforestation and has a negative impact on wildlife as well as on the traditional way of life of indigenous people.
Commenting on the action being taken, Erik-Jan Stork, senior sustainability specialist at APG - asset manager of the €200bn civil service scheme ABP - said: "In our opinion, the resolution is properly underpinned. We think that the exploitation of tar sands will only be viable if the industry will come up with sustainable solutions, which could be very expensive."
"Storing the emitted CO2 underground could raise the oil price by $10 (€7.07) a barrel, and the costs of clearing the 140 km2 ponds of tailings are unclear," Stork explained.
"We have therefore already asked the oil producers to increase transparency on the way they are tackling these problems as well as the costs involved," he added.
That said, APG has no direct role to play in the resolution. "And because we are confident Shell will address our concerns, we do not see much added value to an independent investigation at the moment," said Stork.
Shell was the third-largest holding among APG's equity investments in 2008, only surpassed by its investments in oil firm Exxon and electronics company Philips.
PGGM, the asset manager for the €86bn healthcare pension fund PFZW and the €60bn metal schemes' asset manager Mn Services, are in a similar position to APG.
"At the moment, we prefer to continue the process of engagement that we initiated last year with Shell. However, we will certainly scrutinise the resolution and the company's feedback, and take a position on the resolution accordingly if it is put to a vote," stated Marcel Jeucken, head of responsible investment at PGGM.
Kris Douma, head of responsible investment and active ownership at Mn Services, also added: "We have been engaging with Shell for years and, given the urgency of the issue, we expect the company to be addressing the investors' concerns by promising an investigation."
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