What’s happening? Campaign group ShareAction has released researchfinding that Barclays, Credit Suisse and HSBC are among the largest European investors in oil sands. The organisation found that none of Europe’s 24 biggest banks had outlined specific strategies to completely exit oil sands investments, while some allowed investments to be retained indefinitely.

Why does this matter? Oil sands are one of the most polluting fossil fuels, and one of the most capital-intensive. The nature of the substance – sand, clay and low-grade oil – means a significant amount of additional energy, and therefore emissions, is required to process it into usable fuel. One barrel of oil sands crude emits around 710 kg CO2e, compared to a North American oil average of 540 kg.

As such, the sector has been a divestment target for investors and asset managers, and represents a potential source of credit risk for lenders. Many institutions have pledged to move away from the energy source, include Deutsche Bank which said earlier this year it would no-longer finance specific projects. ShareAction, however, says such pledges are not enough.

Worldwide, banks have funnelled $101.7bn into the sector since the Paris Agreement was signed in 2015, with European banks accounting for $11bn of this. ShareAction’s report highlights that even the strongest oil sands policies among banks surveyed still allow investments to be retained.

Pressure continues to be exerted on the sector. Environmentalists scored a win earlier this year when Teck cancelled its large and controversial $16bn Frontier oil sands project in Alberta, Canada. Economics factored into the decision, but it was noted such a large new project couldn’t satiate capital markets’ increasing requirement to reconcile development with climate change. Canada’s Natural Resources Minister Seamus O’Regan has said the oil sands industry had to reduce its emissions-intensity in order to retain investment.

It’s not just the carbon-intensity of oil sands that is a problem, the sector also emits a lot of methane. Canada updated its methane measurement regulation this year to clamp down on emissions of the potent greenhouse gas, resulting in a doubling of recorded emissions. Research from earlier this year indicates human activity may be behind a larger proportion of the increase in atmospheric methane than previously thought, but there is a positive spin: this means efforts to tackle the problem by targeting fossil fuel operations will have a larger proportional impact.

Lateral thought from Curation – Oil sands are just one example of all types of fossil fuel deposits not being created equal. Established, large conventional projects will produce crude with a lower marginal carbon footprint than deep water plays or unconventional oil. Similar can be seen with coal, where hard coal, or anthracite, is less emissions-intensive than soft, low-grade lignite.

When thinking of stranded assets – left awash due to regulation such as carbon pricing, or stakeholder pressure – it’s likely these emissions-heavy facilities will be targeted first. This will be good for the climate, but it also puts their investors and lenders in an increasingly precarious position.