Canada’s biggest public pensions continue to invest heavily in fossil fuels despite rising concerns about climate change, according to a new report.
The Canadian Pension Plan’s (CPP Investments) total fossil fuel investments across its entire portfolio have increased from $9.9 billion in 2016 to $11.6 billion in 2020, according to the report by Canadian Centre for Policy Alternatives, a left-leaning research group.
In the report, the researchers noted that they did not know where and how all the investments had been allocated, and instead focused on the changes in the number of shares invested in oil and gas. The researchers found that the number of shares in companies involved in oil and gas held by the CPP by the end of 2020 was 7.7 per cent higher than at the beginning of 2016.
The pension funds have said that they agree a swift transition toward a low-carbon economy has been a priority to fight climate change. The report stresses that although the pension plans have publicly stated they are climate action leaders, they have not significantly reduced investments in fossil fuels. The researchers argue that continued investment in fossil fuels by the pension plans shows they aren’t doing enough to grapple with the scale of the climate crisis.
“It is really angering,” said James Rowe, an environmental studies professor at University of Victoria and lead researcher on the report. “This fund whose goal is actually to facilitate our future security, is actually undermining it with its investments. It’s maddening.”
CPP Investments says its investment strategies are set up to mitigate the fluctuations of any single sector, including oil and gas.
“The premise of the report is misleading given that year to year exposure to any single sector is meaningfully determined by fund growth,” Frank Switzer a spokesperson for CPP Investments wrote in an email to CBC News.
Greener energy a priority for pension funds
Financial disclosures from the pension funds show they have drastically increased investments in what they consider green technology over the last five years.
CPP Investments’ renewable energy priorities in areas like wind, solar and hydro have significantly grown since the Paris Agreement, an international deal to combat climate change, from $30 million in 2016 to $9 billion in 2020, according to the report.
“We require the companies in which we invest to have viable transition strategies and we’re holding them to account,” Switzer said.
WATCH | Oil and gas industry can help in transition to low-carbon energy, exec says:
Likewise, Quebec’s pension plan, Caisse de dépôt et placement du Québec (CDPQ), reduced its investments in fossil fuel stocks by 14 per cent between 2016 and 2020. However, it does have 52 per cent more fossil fuel shares than CPP Investments, according to the report.
CDPQ has reduced its exposure to investments in oil and gas by half since 2017 and now represents about one per cent of its overall portfolio, CDPQ spokesperson Maxime Chagnon wrote in an email response.
He said the fund also has set targets to be carbon neutral by 2050.
More action, urgency needed: researchers
Despite the progress, the Canadian Centre for Policy Alternatives researchers say it’s not enough to satisfy the global call to end investments in fossil fuels.
Rowe says Canadians are being undermined by having their pension plans increasingly invested in fossil fuel companies.
“Regardless of what steps you may be taking for the climate, the CPP is undermining them with these dirty investments made on our behalf and without our consent,” he said.
Using software that analyzes real-time financial market data, the researchers took a snapshot of pension fund investments on Dec. 31, 2020, and found that the funds held $2.3 billion in investments in member companies of the Canadian Association of Petroleum Producers, a large and powerful Canadian oil and gas industry association.
The snapshot also highlighted CPP investments of $674.04 million in TC Energy, formerly known as TransCanada, the Canadian pipeline company.
The report says the pension plans do not make clear how the funds are distributed or used.
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Though both pension plans have climate change strategies in place, CPP Investments cautions against total divestment. Instead, they argue that their investment in oil and gas can be leveraged to assist other companies as they transition to cleaner energy.
“We do believe that using blanket divestment will impede the world’s ability to transition,” CPP Investments CEO John Graham said in a Canadian Club of Toronto webinar in June.
CPP Investments recently allocated $315 million for the Carbon Trunk Line, a CO2 transportation pipeline in Alberta. Its emissions reduction is equivalent to taking approximately 350,000 cars off the road, according to a media release by Enhance Energy, a Calgary-based carbon capture company.
One expert agrees there should not be total divestment of oil and gas, as some industries, including greener innovations such as electric vehicle operations, still require it to produce their products.
“Pension funds/institutional investors have a duty to address climate-related financial risks and opportunities … more advice from climate and legal experts is well warranted,” said Margot Hurlbert a University of Regina professor and Canada Research Chair in climate change.
The report calls on the Canadian government and public pension funds to disclose all pension investments to the public.
The researchers urge the pension plans to immediately design a plan for greater investments in renewable energy and align with calls by the United Nations Intergovernmental Panel on Climate Change for world governments to reduce CO2 emissions to limit warming to 1.5 C.
Canada’s third-largest pension fund beefs ups plan to cut carbon emissions
CALGARY, Alberta/TORONTO (Reuters) – Ontario Teachers’ Pension Plan Board (OTPP), Canada‘s third-largest pension fund, announced on Thursday new interim targets to cut the carbon emissions intensity of its portfolio as part of a plan to reach net-zero emissions by 2050.
OTPP, which manages C$227.7 billion ($180.11 billion) in assets, plans to reduce emissions intensity by 45% by 2025 and 67% by 2030, from 2019 levels.
Fellow pension fund Caisse de dépôt et placement du Québec also has a net-zero target by 2050, but environmental campaigners said OTPP’s interim targets are the strongest climate commitment yet from a Canadian pension fund.
Ziad Hindo, OTPP’s chief investment officer, said the fund would be looking to invest more in clean-energy companies, as well as firms offering software and services that allow other companies to transition to a lower carbon economy.
“Climate change permeates the entire investing landscape. Tackling it requires substantial effort and massive amounts of capital,” said Hindo. He compared the climate sector today with the technology sector in the 1990s, and predicted it would cause huge disruption across every industry.
OTPP is increasing staffing across various asset classes to keep up with growing investment in the climate sector, Hindo added. The fund’s portfolio currently includes more than C$30 billion in green investments such as renewable energy, energy storage, electrification, electricity transmission, energy efficiency and green real estate.
Unlike some large pension funds in the United States, OTPP is not divesting from oil and gas altogether, although it stopped actively investing in listed exploration and production companies in 2019.
“OTPP will need to go further if it wants to be considered a global leader on climate,” said Adam Scott, director of pension activist group Shift. “While this announcement describes how the OTPP will invest in solutions to the climate crisis, it makes no mention of how it will eliminate its exposure to the causes of it, namely high-risk fossil fuels.”
($1 = 1.2642 Canadian dollars)
(Reporting by Maiya Keidan and Nia Williams; Editing by Peter Cooney)
A16z in talks to back CoinSwitch Kuber in first India investment – TechCrunch
A16z is inching closer to making its first investment in a startup in India, the world’s second largest internet market that has produced over two dozen unicorns this year.
The Menlo Park-headquartered firm is in final stages of conversations to invest in Indian crypto trading startup CoinSwitch Kuber, three sources familiar with the matter told TechCrunch. The proposed deal values the Bangalore-based firm at $1.9 billion, two sources said. Coinbase is also investing in the new round, one of the sources said.
CoinSwitch Kuber was valued at over $500 million in a round in April this year when it raised $25 million from Tiger Global. If the deal with A16z materializes, it will be CoinSwitch Kuber’s third financing round this year.
TechCrunch reported last week that CoinSwitch Kuber was in talks to raise its Series C funding at up to $2 billion valuation. The report, which didn’t identify a lead investor, noted that the Indian startup had engaged with Andreessen Horowitz and Coinbase in recent weeks.
Usual caveats apply: terms of the proposed deal may change or the talks may not result in a deal. The author reported some details about the deal on Wednesday.
The startup declined to comment. Coinbase and A16z as well as existing investors Tiger Global and Sequoia Capital India did not respond to requests for comment.
The investment talks come at a time when CoinSwitch Kuber has more than doubled its user base in recent months — even as local authorities push back against crypto assets. Its eponymous app had over 10 million users in India last month, up from about 4 million in April this year, the startup said in a newspaper advertisement over the weekend.
A handful of crypto startups in India have demonstrated fast-pace growth in recent years — while impressively keeping their CAC very low — as millions of millennials in the South Asian nation kickstart their investment journeys. Several funds including those with big presence in India such as Accel, Lightspeed, WEH and Kalaari recently began working on their thesis to back crypto startups, TechCrunch reported earlier.
B Capital backed CoinDCX, a rival of CoinSwitch Kuber that has amassed 3.5 million users, last month in a $90 million round that valued CoinDCX at about $1.1 billion.
Policymakers in India have been debating on the status of digital currencies in the South Asian market for several years. India’s central bank, Reserve Bank of India, has expressed concerns about private virtual currencies though it is planning to run trial programs of its first digital currency as soon as December.
About 27 Indian startups have become a unicorn this year, up from 11 last year, as several high-profile investors — and global peers of Andreessen Horowitz — such as Tiger Global and Coatue have increased the pace of their investments in the South Asian market. Apna announced earlier on Thursday that it had raised $100 million in a round led by Tiger Global at $1.1 billion valuation, becoming the youngest Indian firm to attain the unicorn status.
Groww, an investment app for millennials, is in talks to raise a new financing round that would value it at $3 billion, TechCrunch reported on Wednesday. The startup has engaged with Coatue in recent days, the report said.
Why Canadians are still struggling to understand investment fees – The Globe and Mail
Financial advisory fees remain a confusing subject to the vast majority of Canadian investors despite a decades-long effort by the investment industry and its regulators to provide greater clarity and transparency. That means financial advisors remain in the ideal position to help close that comprehension gap.
According to the results of a survey the Mutual Fund Dealers Association of Canada (MFDA) released in June as part of a more expansive research report, fewer than one in five Canadian investors could identify correctly what types of costs are included in current fee summaries.
“The challenge we have today is that most investors don’t get a full picture of all the fees,” says Jean-Paul Bureaud, executive director of the Canadian Foundation for the Advancement of Investor Rights (FAIR Canada), “they only get a partial picture and they might not appreciate that it’s a partial picture.”
Advisors can clarify that to clients relatively easily by making clear that current fee summaries only include the fees for advice and trailing commissions on mutual funds, he says, and that other costs – such as fund management fees and operational costs – also apply.
Advisors can also ensure investors understand as much as possible by avoiding “using all kinds of fancy terms for all the different types of fees,” Mr. Bureaud says.
In fact, the MFDA’s report states, “Even experienced investors struggle to understand key terms and how their choices influence the type and amount of fees they pay.”
That means even when dealing with sophisticated clients, advisors should not assume “MER” is universally understood to stand for management expense ratio, or what it means. Breaking down jargon such as “trailing commissions” in simple terms – perhaps as an annual fee the advisor receives each year a client holds a particular investment – will also help avoid misunderstandings.
Instead of simply noting what fees are or are not included in existing disclosures, the MFDA report urges advisors to get as close to total cost reporting as possible.
London-based global firm The Behavioural Insights Team ran an experiment on behalf of the MFDA testing four formats of expanded cost reporting. Three of them specified investment fund charges while the fourth, known as the “control” option, included only a disclosure that other charges, such as fund management and operation costs, applied.
Only 23 per cent of investors exposed to the control option were able to identify their total cost of investing correctly, while between 54 per cent and 70 per cent of investors exposed to the other three options were able to do so.
Karen McGuinness, the MFDA’s senior vice president of member regulation and compliance, says part of the reason the experiment succeeded was a focus on using plain language.
“When we did the format, initially, we were using industry terminology because it was just second nature to us, but we brought in the behavioural research firm and they were the ones who said we need to set up this information in a way that’s more easily digestible for the average retail investor,” Ms. McGuinness says.
Nevertheless, the MFDA report warns that dealers and advisors shouldn’t assume sharing more cost information will always lead to better comprehension among clients as they will eventually hit a point of diminishing returns.
Rather, the report recommends they should “eliminate any information presented in the fee summary that is unlikely to be useful to investors. People have limited attention [and] this is especially significant when information is complex.”
To establish a baseline for how much any given client already understands – and therefore how much education advisors should attempt to provide – regulators have developed a number of quick and straightforward tools for that purpose.
For example, the B.C. Securities Commission runs the InvestRight website that includes fee calculators and a short quiz designed to gauge investors’ overall comprehension of investment fees.
“It only takes about five minutes to answer the questions, and a lot of people would be surprised at what they learn,” says FAIR Canada’s Mr. Bureaud.
The Ontario Securities Commission (OSC) operates a similar website – GetSmarterAboutMoney – that offers even more comprehensive tools and resources.
Meanwhile, regulators are working on a new set of disclosure rules to replace the second phase of the customer relationship model (CRM2) that has been in place since 2016. The goal of what’s being called CRM3 is to provide what the MFDA’s Ms. McGuinness calls “total cost reporting,” as it should get disclosures as close as possible to breaking down all the fees investors pay and not just those their advisor receives.
Although there’s no timeline for when CRM3 will be complete, Greg Pollock, president and chief executive of Advocis, says advisors will need to be more transparent with their clients on fees before the current bull market goes bust.
“Investors tend to look at the bottom line, and if they see that year-over-year returns are looking pretty good, they don’t get too focused on the fees simply because they’re satisfied with the overall performance,” he says. “But it does raise the question of what happens in a bear market when performance suffers. That really gets people’s attention.”
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