As direct contributors to global warming, it is fair to say that the oil industry struggles to attract the ethical investor.
In recent years however, even as we try to move towards a low-carbon economy, there has been a grudging acceptance that the world will remain dependent on oil for a long time. All but the most diehard of environmentalists now accept that oil companies serve a necessary, if undesirable, purpose.
But the critique of business-as-usual is gathering force, thanks in large part to the hugely expensive, dirty and carbon-intensive oil sands projects. Most of the world's oil sands are located in Alberta, in northern Canada, giving the country estimated reserves of a staggering 179 billion barrels, second only to Saudi Arabia.
Currently, Canada's oil sands produce just over a million barrels a day but could triple by 2020 if planned projects go ahead. If companies expand at the rate they say they will, the country could become one of the largest oil producers in the world.
With concerns over energy security rising, the prospect of a stable non-Opec OECD country such as Canada becoming a big oil producer is attractive to many in the West.
There are a dozen or so companies operating oil sands projects in Canada, including Shell, ConocoPhillips, Exxon and Total. A year ago BP entered into a joint venture with the US firm Husky Energy which is scheduled to start producing oil in 2012.
Conventional oil production involves drilling into rock to find reservoirs within. Because the oil is in liquid form, it's relatively easy to force to the surface. However, extraction from oil sands is more difficult, and results in a much larger carbon footprint.
Most existing oil sands projects have more in common with mining than conventional oil production. The forest is cleared, and vast pits are dug out of the clay and sand to get to the oil below. Hot water is pumped into the oily sludge to separate the oil from the sand and clay. Even then, the untreated oil is in the form of thick bitumen, with a consistency of peanut butter.
Huge upgrades are needed to treat it before it can be transported by pipeline and refined conventionally.
Analysts estimate that the resulting carbon emissions are between 2.5 and eight times higher than emissions from conventional oil production.
Canadian environmental organisation the Pembina Institute estimates that by 2030 the emissions produced by Canadian oil sands projects could total more than a quarter of the UK's current emissions.
But the environmental problems aren't restricted to carbon emissions and deforestation, serious though they are. Oil sands consume vast amounts of water, which in northern Alberta are drawn from the Athabasca river.
The industry insists that flow rates in the river are only affected slightly by the process, but many local leaders disagree.
Oil sands projects also leave behind all the by-products of the mining process: clay, sand, the recycled water used to separate the oil and the toxic chemicals used in the process. These are pumped into vast, toxic 'tailings ponds'.
According to the Pembina Institute, there are about 5.5 billion cubic metres of these tailings ponds in Canada, some as big as 13 square kilometres and visible from space.
There are concerns that these ponds will leak into the water table, polluting rivers and wildlife. More worryingly, there do not seem to be clear plans about how to treat them.
All these issues - carbon emissions, deforestation and pollution - represent serious long-term environmental and reputational liabilities for the companies involved. Ethical investors take note.
As recently as the summer, the frenzy to develop Canada's oil sands was in full swing. Soaring costs for everything from property in Fort McMurray, the nearest town to the projects, to labour, reflected the oil rush. But that was when oil prices were $147 a barrel. Today, they are less than half that peak and companies including Shell are scaling back their expansion plans.
The problem is economics. According to Goldman Sachs, oil sands developers need oil prices to be at least $70 a barrel to make a decent return.
Shell currently produces about 150,000 barrels of day - 5 per cent of its total production - from oil sands. This will soon rise by 100,000 and by 2020, it wants to get 15 per cent of its oil from these projects by 2020.
A fortnight ago Shell chief executive Jeroen van der Veer said he was delaying plans to add an extra 100,000 barrels per day from oil sands, but before ethical investors rejoice, no one is expecting prices to stay this low for long. Sooner or later, oil sands will become profitable once again.
And with a third of Shell's potential reserves made up of undeveloped oil sands, the company is unlikely to turn its back on Alberta in a hurry.
In 1999, Lord Browne, who was then running BP, decided to sell off the company's oil sands interests in Alberta, believing that the projects were too expensive.
Despite the recent slump in oil prices, BP's new-found enthusiasm for oil signs shows no signs of abating.
Oil sands projects vary vastly in terms of how much carbon they produce. According to research firm Trucost, Shell's Muskeg River Mine project in Alberta is less carbon intensive than BP's conventional exploration and production projects.
The industry and government are promoting carbon capture and storage technology, which stores emissions from power plants underground, as a way of making the projects greener.
However, the unproven and uneconomic technology, even if it works and attracts the financial support that is required, is at least a decade away from deployment.
Companies have also promised that once their operations have ceased, they will remediate the affected land so that it resembles its original state.
But local leaders say it is impossible to properly repair the land, which includes boreal forests and peat bogs.
The Canadian and Albertan governments have a poor record on reducing their emissions.
Environmental regulations governing the oil sands projects do not require absolute cuts in carbon, for example. Ethical investors should not rely on the authorities to force oil companies to clean up their act. Transparency on their environmental performance also needs to be improved.
This year Co-operative Asset Management launched a campaign to try to persuade oil sands companies to delay their investment plans until they have proved that oil sands and ecologically and financially sustainable.
The recent slump in the oil price - for as long as it lasts - has won them a reprieve.
Author: Jo Amey
