Royal Bank of Canada – Tar Sands Financing

Outcome: Successfully Withdrawn

RBC’s 2009 Environmental Blueprint believes that “preservation of the environment is fundamental to the sustainability of our communities, our clients and our company.”
This document recognizes that “it is of vital importance that we all contribute to efforts to reduce greenhouse gas emissions” and that “the identity, cultural beliefs and economies of some indigenous peoples are intrinsically tied to their region’s history, biodiversity and natural landscapes” and that “financial institutions should play a role in supporting efforts to address global water issues.”
Notwithstanding these policy commitments, RBC is among the largest financiers of companies engaged in oil sands operations in the Canadian boreal forest region. Oil sands extraction presents a unique set of resource-intensive environmental challenges, including heavy water use, land disturbance, toxic waste storage, and emission of air pollutants. These impacts, along with their implications for local residents and wildlife, can introduce market risks and legal, regulatory and reputational problems to bank clients.
These impacts and risks include:

  • Alberta’s oil sands are Canada’s fastest growing contributor to global warming emissions, and the largest emitter of industrial pollutants. Cumulative greenhouse gas emissions (GHGs) from Alberta’s oil sands are increasing fast. They more than doubled between 1990 and 2008, and if growth proceeds as planned, will triple from 2008 levels by 2020.
  • Volatile oil prices and changing oil demand can impact operational costs, income and overall financial health.
  • Industrial logging and oil sands have reduced the boreal to less than 40% of its original size; the remaining forest is fragmented, with harmful impacts on many species. According to the Canadian Parks and Wildness Association, it will take more than 300 years before reclaimed areas become functioning forest again.
  • The industry has not proven that full reclamation of toxic tailing ponds is possible. The long-term presence of these ponds, which have been shown to leak toxic pollutants into local water sources, presents additional challenges.
  • Extracting one barrel of bitumen requires 2-5 barrels of fresh water and enough natural gas to heat a Canadian home for 1.5-5.5 days; four tons of earth are removed. While processed sand must be replaced and the site reclaimed, in 40+ years of oil sands operations, just one acre has received a reclamation certificate from the Canadian government.
  • Litigation from First Nations presents possible problems to clients engaged in oil sands extraction and related infrastructure, which may result in increased costs and restrictions on development. Even after approved, a project can be subject to lawsuits.

Shareholders request that an independent committee of the Board prepare a report (at reasonable cost and omitting proprietary information) on the financial risks associated with RBC’s financial exposure to expanding oil sands operations in the Canadian boreal forest. The report should consider the implications of a policy of discontinuing these relationships and should be available to investors by October 1, 2011.

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