Evaluating nuclear energy through an ESG lens

For responsible investors looking to incorporate clean energy into their portfolios, nuclear companies can be particularly divisive.

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Using a small footprint to produce zero-emission energy, nuclear meets several of the United Nations’ sustainable development goals, which are a handy checklist for investors interested in environmental, social and governance (ESG) factors, said Dominique Barker, portfolio manager and senior analyst of equities at CIBC Asset Management, during a September interview.

But there are also downsides.

“Nuclear energy has been a grey area for the ESG community for some time, and I do think it deserves to be debated for its merits under an ESG lens,” Barker said.

Barker said ESG investors are likely going to pay more attention to how investments line up with the 17 goals that emerged from the 2012 UN Conference on Sustainable Development in Rio de Janeiro. The UN sustainable development goals address challenges from hunger to climate change.

Like other industries such as fertilizer and natural gas, the case for nuclear isn’t clear-cut.

With its low operating costs, nuclear energy “helps to solve for that sustainable development goal of affordable energy,” Barker said.  It also produces little pollution and provides high-paying jobs for local communities.

Nuclear companies could also meet the goals for climate action, and industry, innovation and infrastructure, she said.

The main issue, of course, is the disposal of nuclear waste. Following the 2011 tsunami and nuclear disaster at the power plant in Fukushima, Japan, public opinion in many countries turned against nuclear energy. Germany immediately shut down several nuclear plants and planned the phase-out of the remaining ones by 2022. Meanwhile, environmentalists have made cases for and against nuclear energy.

Regarding waste, Barker said there’s no “perfect energy.” Solar panels, for example, contain cadmium, which is “extremely toxic,” she said. “Nobody is talking about the disposal of that.”

She also points to the small amount of space nuclear fuel takes up, and how the industry is highly regulated.

“On balance, I believe that nuclear energy should be part of an ESG universe,” Barker said. “I know there are some who disagree with me, and I understand their arguments, but I come back to the fact that there is no perfect power source and we really have to have a balanced energy system. I don’t see any reason why nuclear shouldn’t be part of that.”

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