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Ian MadsenToronto-Dominion Bank announced recently it won’t loan money toward any oil and gas or related development in the Arctic.

While this may elicit joy from the woke anti-fossil-fuel global warmists, this was in reality a very easy decision for TD. So too will it be for others like investment banks, institutional investors, and financial entities conscious of the environmental, social and governance evaluation.

Environmental, social and governance scoring by outside consultants and pressure groups is now used by pension funds, mutual funds, endowment funds and sovereign wealth funds, along with other institutional investors. It’s used to determine whether a corporation, or a specific investment vehicle, is operating according to ethical and environmentally sustainable principles. In addition, it helps indicate if they’re adhering to good governance practices (shareholder democracy, performance-related executive pay, diversity of board of directors and senior management, avoiding involvement in corrupt practices or odious jurisdictions, or slavery).


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When it comes to oil and gas development, a number of things are becoming clear.

The first is that there’s no shortage of oil or gas in the world. Indeed, there’s a surplus of it, which was obvious even before the COVID-19-induced recession that dropped the internationally-traded oil futures price briefly below zero in April.

And even more oil and gas deposits are being discovered, with large reserves offshore Guyana coming online soon, along with new fields offshore West Africa and Mozambique. There are more opportunities than there are investors or major integrated oil companies willing and eager to develop them. Several oil majors have announced they’re slashing exploration and development budgets.

As well, oil and gas demand is declining, and even after a presumed rebound as the global economy recovers next year, it may no longer grow. There are a number of factors influencing this trend. According to the International Energy Agency (IEA), those factors include actions by governments to limit activities that generate greenhouse gases, the foremost of which is carbon dioxide, CO2, the product of burning oil (in the form of gasoline, diesel and jet fuel), gas, coal, wood and other organic matter.

These measures include carbon taxes, increased fuel efficiency requirements, subsidies and preferences for electric vehicles, and restrictions on motor vehicle movement (including parking).

Another factor is the realization by office-centred firms and other organizations that in-office work may be unnecessary. Most work, if not all, can be done at home. So economic growth need not lead to ever more people commuting to work, whether by car or bus or train.

The trends, then, point to declining fuel demand growth.

There’s a term for potentially attractive mineral deposits in remote places that may require significant extraction, refining or transportation efforts: stranded assets. Some oil sands deposits in northern Alberta may already qualify, as may some deep-water oil and gas around the world, and discoveries in the Arctic.

These places are expensive to exploit, and may have environmental requirements that further increase costs so that they’re very unlikely to be commercially viable.

TD and other institutions may congratulate themselves for their nobility, but they were unlikely to sign off on any far-flung petroleum adventure when even humdrum pipelines such as the Keystone XL lose legal licence.

The shale revolution in the United States has permanently changed the economics and technical structure of the oil and gas business. It effectively puts a price ceiling on oil and natural gas, and liquefied natural gas (LNG).

The Arctic, and all its alluring possibilities, is not part of the future as the energy industry sees it unfolding, despite desperate Russian projects aimed at supplying China.

The financial establishment won’t have to make any truly hard decisions on this issue now, and perhaps ever.

Ian Madsen is a senior policy analyst with the Frontier Centre for Public Policy.

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