Does Nuclear Power Belong in ESG Funds?

Dustyn Lanz, Senior Advisor with ESG Global Advisors, wrote a column for Investment Executive to address the question of whether nuclear power belongs in ESG investment funds. Lanz concludes that it depends on the stated objective of the fund, and he further argues that nuclear represents an important transition fuel. Below is an excerpt from the column.

Russia’s invasion of Ukraine and related sanctions have sent fuel prices soaring, threatening energy insecurity around the world. Canada’s economy now faces a two-pronged conundrum: a heightened need for energy security alongside an urgent need to transition away from fossil fuels.

The latest report from the Intergovernmental Panel on Climate Change shows we’re running out of time to transition: Global greenhouse gas emissions must peak and begin a permanent decline by 2025 to keep warming below the Paris Agreement­­–aligned target of 1.5°C. There’s no room to build new fossil fuel infrastructure because existing infrastructure already puts us on track to exceed the target.

This raises questions about the role of nuclear power: Can it help us achieve energy security while also driving down emissions? And, for investors interested in sustainability, does nuclear belong in a fund that incorporates ESG issues?

While Europe’s Sustainable Finance Disclosure Regulation allows for nuclear power to be included in funds that are marketed as sustainable, there is no comparable regulation here in Canada. So, it’s up to the market to decide whether nuclear belongs in a Canadian ESG fund.

Nuclear Exposure in Canadian ESG Funds

An analysis of a small sample of Canadian ESG funds suggests at first glance that the industry is split on nuclear. The table in the article lists six Canadian equity ETFs that are marketed with an ESG or sustainability focus. Since they’re all Canadian equity funds, the S&P/TSX 60 is a reasonable benchmark, and that index happens to include Cameco, one of the world’s largest producers of uranium used for nuclear power. I scanned each fund’s holdings to see if it includes the Saskatoon, Sask.­–based company, and I also checked for an explicit exclusion of companies involved with nuclear power. The findings are in the table in the article.

Continue reading the full article via Investment Executive here.

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