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.”
James Rowe, an associate professor at the University of Victoria and one of the lead researchers of the report, says the small amount of progress by pension funds isn’t enough to satisfy the global call to end investments in fossil fuels. (Submitted by James Rowe)
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.
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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.
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.
Margot Hurlbert is a University of Regina professor and the Canada Research Chair in climate change. (University of Regina Photography Department)
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.
TORONTO – Canada’s main stock index was higher in late-morning trading, helped by strength in energy stocks, while U.S. stock markets also moved up.
The S&P/TSX composite index was up 34.91 points at 23,736.98.
In New York, the Dow Jones industrial average was up 178.05 points at 41,800.13. The S&P 500 index was up 28.38 points at 5,661.47, while the Nasdaq composite was up 133.17 points at 17,725.30.
The Canadian dollar traded for 73.56 cents US compared with 73.57 cents US on Monday.
The November crude oil contract was up 68 cents at US$69.70 per barrel and the October natural gas contract was up three cents at US$2.40 per mmBTU.
The December gold contract was down US$7.80 at US$2,601.10 an ounce and the December copper contract was up a penny at US$4.28 a pound.
This report by The Canadian Press was first published Sept. 17, 2024.
TORONTO – Strength in the base metal and technology sectors helped Canada’s main stock index gain almost 100 points on Friday, while U.S. stock markets climbed to their best week of the year.
“It’s been almost a complete opposite or retracement of what we saw last week,” said Philip Petursson, chief investment strategist at IG Wealth Management.
In New York, the Dow Jones industrial average was up 297.01 points at 41,393.78. The S&P 500 index was up 30.26 points at 5,626.02, while the Nasdaq composite was up 114.30 points at 17,683.98.
The S&P/TSX composite index closed up 93.51 points at 23,568.65.
While last week saw a “healthy” pullback on weaker economic data, this week investors appeared to be buying the dip and hoping the central bank “comes to the rescue,” said Petursson.
Next week, the U.S. Federal Reserve is widely expected to cut its key interest rate for the first time in several years after it significantly hiked it to fight inflation.
But the magnitude of that first cut has been the subject of debate, and the market appears split on whether the cut will be a quarter of a percentage point or a larger half-point reduction.
Petursson thinks it’s clear the smaller cut is coming. Economic data recently hasn’t been great, but it hasn’t been that bad either, he said — and inflation may have come down significantly, but it’s not defeated just yet.
“I think they’re going to be very steady,” he said, with one small cut at each of their three decisions scheduled for the rest of 2024, and more into 2025.
“I don’t think there’s a sense of urgency on the part of the Fed that they have to do something immediately.
A larger cut could also send the wrong message to the markets, added Petursson: that the Fed made a mistake in waiting this long to cut, or that it’s seeing concerning signs in the economy.
It would also be “counter to what they’ve signaled,” he said.
More important than the cut — other than the new tone it sets — will be what Fed chair Jerome Powell has to say, according to Petursson.
“That’s going to be more important than the size of the cut itself,” he said.
In Canada, where the central bank has already cut three times, Petursson expects two more before the year is through.
“Here, the labour situation is worse than what we see in the United States,” he said.
The Canadian dollar traded for 73.61 cents US compared with 73.58 cents US on Thursday.
The October crude oil contract was down 32 cents at US$68.65 per barrel and the October natural gas contract was down five cents at US$2.31 per mmBTU.
The December gold contract was up US$30.10 at US$2,610.70 an ounce and the December copper contract was up four cents US$4.24 a pound.
— With files from The Associated Press
This report by The Canadian Press was first published Sept. 13, 2024.
TORONTO – Canada’s main stock index was down more than 200 points in late-morning trading, weighed down by losses in the technology, base metal and energy sectors, while U.S. stock markets also fell.
The S&P/TSX composite index was down 239.24 points at 22,749.04.
In New York, the Dow Jones industrial average was down 312.36 points at 40,443.39. The S&P 500 index was down 80.94 points at 5,422.47, while the Nasdaq composite was down 380.17 points at 16,747.49.
The Canadian dollar traded for 73.80 cents US compared with 74.00 cents US on Thursday.
The October crude oil contract was down US$1.07 at US$68.08 per barrel and the October natural gas contract was up less than a penny at US$2.26 per mmBTU.
The December gold contract was down US$2.10 at US$2,541.00 an ounce and the December copper contract was down four cents at US$4.10 a pound.
This report by The Canadian Press was first published Sept. 6, 2024.
