As the field of responsible investing (RI) matures, it is worthwhile to consider the environmental, social and governance risks and opportunities related to nuclear energy and other debatable issues.
For example, the United Nations cites 17 Sustainable Development Goals (SDGs)—one of these goals is ‘Zero Hunger’. In our research on a company such as Nutrien, which produces fertilizers, we could certainly categorize it as a company that solves for this goal. However, Nutrien fails or receives a negative score for other SDGs such as ‘Clean Water and Sanitation’ and ‘Life on Land’. In those areas, fertilizers and fertilizer companies are part of the pollution problem.
Nuclear energy occupies a similar grey area for the RI community—this is why we believe it’s important to debate its merits through an ESG lens. Nuclear has great potential as an energy source but is controversial for many investors.
The Nuclear Downside
Nuclear energy, which uses uranium as fuel, produces waste that remains radioactive for very long periods of time.
Long-term storage and management of radioactive waste remain central concerns. In Canada, we have our own proprietary technology called CANDU (Canada Deuterium Uranium) that requires fuel rods to be replaced every 18 months or so. These rods are stored in large swimming pools and must be continually monitored for safety and to safeguard against their reuse. Some research suggests that, in the wrong hands, this radioactive waste can be reused to create and proliferate nuclear arms.
In addition, there have been several high-profile accidents involving nuclear energy, most recently in Fukushima, Japan. Unfortunately, it is impossible to handicap the odds of a reoccurrence of a similarly high impact but low-probability event. The Canadian Nuclear Safety Commission (CNSC) has established a four-year action plan to ensure that the lessons learned from the Fukushima accident are applied in Canada to enhance the safety of our nuclear facilities. The good news is that the CNSC Task Force confirmed that nuclear facilities in Canada are able to withstand and respond to credible external events, such as earthquakes.
The Upside of Nuclear Energy
Nuclear energy produces electricity from uranium, a natural resource that is mined. The benefits of nuclear energy are low greenhouse gas emissions, low operating cost (the cost of fuel is practically zero per kWh) and high reliability as a fuel source.
Nuclear energy creates a number of high-paying jobs in the community where a nuclear plant is located and produces emission-free electricity under a highly regulated regime.
The Elusive Search for a Perfect Energy Source
As we look to a future of transportation that will be predominantly powered by electricity, a clean source of electricity will become paramount. Natural gas is less carbon intensive than coal or oil, but it does produce greenhouse gases, as well as other nasty emissions such as nitrogen oxides.
Solar panels, too, contain toxic elements such as cadmium, which is used in thin-film solar, a fact not often discussed as the industry continues to expand. Cadmium is one of the top six deadliest and toxic materials known. The cadmium in solar panels (CdTe or cadmium telluride) appears to be less toxic than elemental cadmium, but its precise level of toxicity remains unclear. Although a regulated disposal program could emerge, the long-term safety of cadmium telluride solar panels is an issue for the solar industry.
Weighing the Pros and Cons of Nuclear Energy
In our view, the main issue with nuclear energy is the disposal of used nuclear fuel—but the waste management challenge is not unique to the nuclear sector. In the solar panel industry, there are different techniques to physically immobilize heavy metals such as cadmium in a way that can be securely disposed of in a hazardous waste landfill site. Unfortunately, there are no effective similar methods for used nuclear fuel.
Having said that, it’s important to recognize the fact that used nuclear fuel is heavily guarded and regulated. While the long-term storage of nuclear waste requires physical space, the relative amount of energy produced is very high. For example, the spent fuel for all of Ontario’s 20 nuclear reactors is stored at Bruce Power’s site, in a pool the size of a 14-foot deep but otherwise typical swimming pool. It is stored there for 10 to 20 years, after which it is reprocessed or put into dry cask storage. Since the 1960s, the entire Canadian spent fuel would fit in seven hockey rinks, stacked to the top of the boards.1
Tying this back to the United Nations Sustainable Development Goals of ‘Affordable and Clean Energy’, ‘Industry, Innovation and Infrastructure’, and ‘Climate Action’, it seems that an argument could be made to consider nuclear as an investment in ESG portfolios. Even better, engineering companies that provide leading nuclear decommissioning services2 would fit very well in an ESG portfolio.
2 Nuclear decommissioning is the administrative and technical process whereby a nuclear facility such as a nuclear power plant, a research reactor, an isotope production plant, a particle accelerator, or uranium mine is dismantled to the point that it no longer requires measures for radiation protection.