Environmental, social and governance (ESG) criteria is being increasingly used by investors across the globe to help them determine where to invest, and Canada should be a country of choice because of our exemplary ESG record.
Canada produces its natural resources to some of the highest standards for environment, transparency and worker’s rights in the world. We are also one of the most democratic countries in the world, providing a strong and stable governance for investors to to business in. Let's be proud of these facts!
Global Oil Demand is Growing
Bottom line is that almost all regions of the world, especially those in Asia and Africa with developing economies, have a growing thirst for oil. Current projections show oil demand will increase to more than 106 million barrels per day by 2040, about a 10% increase from current consumption.
This is from the International Energy Agency (IEA) who says that under current policies demand will continue to grow and is unlikely to peak by 2040. It’s important to note that the IEA also has a long history of underestimating such demand.
“The IEA has a long history of (oil) demand underestimation. In eight of the last nine years, they have been forced to revise global demand higher by 1.1 m b/d on average” https://t.co/vrB3lZfzWQ— Canada Action (@CanadaAction) November 21, 2019
Investors across the globe need to understand that fossil fuels are, and will be an essential part of the energy mix for decades at least.
It’s not just the IEA that predicts this, but also BP PLC in its latest Energy Outlook 2019 which projects fossil fuels will make up for 74% of global energy demand by 2040.
Canada is Part of the Solution
With increasing demand, Canada should be gearing up to take up as much market share as it can. Canada is home to the world’s third largest oil reserves, so why wouldn’t we want to sell more of it? Doing so supports the economy and generates tax revenues which are used to pay for things like schools, hospitals and roads.
Through the ingenuity and know-how of Canadian oil and gas producers, our country has delivered competitive breakeven supply costs and has done so with one of the highest environmental, social and governance scores in the world.
Canadian energy is part of the solution, not part of the problem, and it’s time that people start recognizing our country as the world-class natural resource and energy producer it is.
Here’s the proof of Canada’s excellent record on ESG criteria:
Global ESG Rankings – Major Oil Producers & Exporters
ESG Scores & Oil Reserves - Courtesy of Desjardins
Seen above is a graph showing Canada’s ESG ranking among other top oil nations of the world. The rankings were done using three reputable and long-standing indexes:
- Environmental Performance Index (EPI)
- Social Progress Index (SPI)
- World Bank Governance Index (WGI)
Canada’s ranking on the most recent version of each index:
- EPI – 25th
- SPI – 9th
- WGI – 90 to 100 percentile (top)
Notice the difference in score between Canada and some of the world’s other top oil exporting nations with the largest reserves. Canada hovers at a score of around 85, Saudi Arabia comes in at about 60, Nigeria at around 40 and so on and so forth.
The EPI was developed by Yale University and Columbia University in collaboration with the Joint Research Centre of the European Commission and the World Economic Forum.
Originally developed from the Pilot Environmental Performance Index which was first released in 2002, the EPI today is one of the most established and reputable environmental indexes in the world.
The EPI evaluates 180 nations, using several different indicators under two main categories:
- Environmental health
- Air quality, water quality, heavy metals
- Ecosystem vitality
- Biodiversity & habitat, forests, fisheries, climate & energy, air pollution, water resources, agriculture
The SPI measures the extent to which the social and environmental needs of citizens are fulfilled by nearly 150 nations world-wide.
Established by the Social Progress Imperative, instead of using economic indicators like many other indexes, the SPI observes social and environmental outcomes to determine the overall “well-being” of a nation.
The first version of the SPI was released in 2013 and since has grown to include over 54 different indicators in several main categories, including:
- Basic human needs
- Nutrition and basic medical care, water and sanitation, shelter, personal safety
- Foundations of well-being
- Access to basic knowledge, access to information and communications, health and wellness, environmental quality
- Personal rights, personal freedom and choice, inclusiveness, access to advanced education
The WGI is based on a long-standing research program developed by the World Bank. The index uses more than 40 data sources produced by more than 30 organizations across the globe to determine its rankings.
First released back in 1996, over 200 nations are evaluated on several key dimensions of governance, including:
- Voice & accountability
- Political stability and lack of violence
- Government effectiveness
- Regulatory quality
- Rule of law
- Control of corruption
Canadian Oil is in the World’s Best Interest
Canada’s top rankings on the EPI, SPI and WGI and overall aggregate ESG score means that more Canadian oil is in the world’s best interests, especially at a time where demand is projected to grow by 9.5 million barrels a day between 2019 and 2040.
Where would you want to get your oil from, a country with a strong democracy, excellent environmental / social progress and governance, or one that isn’t so much?
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