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New Canadian investing rulebook would disqualify new oil and gas projects from ‘green’ tag

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Submitted to Finance Canada by the government-appointed Sustainable Finance Action Council, the document could significantly shape global markets by serving as the most credible available protection against greenwashingJeff McIntosh/The Canadian Press

A federal advisory body is proposing to disqualify any new oil and gas projects from being classified as green, and award that designation only in a limited and qualified way to projects to reduce pollution from existing fossil-fuel production.

The recommendations are included in a framework for a rulebook to define sustainable investments in this country, known as a green taxonomy, a copy of which was obtained by The Globe and Mail.

Submitted to Finance Canada this fall by the government-appointed Sustainable Finance Action Council (SFAC), the 77-page document received sign-off from all of that group’s members – including representatives of most major Canadian financial institutions, insurers and pension funds.

But it has not yet been publicly released by Ottawa, even as the European Union and other jurisdictions have taken a lead in developing such guides for growing numbers of climate-conscious investors.

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SFAC chair Kathy Bardswick declined to comment on the contents of the taxonomy roadmap before its formal release. The document’s authenticity was confirmed by two other sources who were engaged in its development, whom The Globe and Mail is not identifying because they were not authorized to speak publicly about it.

The finance ministry remains in collaboration with the council and financial-industry leaders on the taxonomy framework, said Adrienne Vaupshas, press secretary for Finance Minister Chrystia Freeland. “Our goal is to foster a sustainable finance market in Canada that will boost investor confidence, drive economic growth, and help fight climate change,” she said in an e-mail.

While taxonomies such as the one being proposed by SFAC do not prohibit financial institutions or anyone else from funding economic activities that are not deemed to be sustainable, they have the potential to significantly shape global markets by serving as the most credible available protection against greenwashing – false or exaggerated claims by companies seeking to prove their environmental bona fides.

SFAC’s effort to set the direction for a made-in-Canada approach, in recognition of this country’s resource-heavy economy, could prove contentious with both fossil-fuel companies and environmental groups, because of the way it seeks to limit but not completely exclude oil-and-gas investment from green-finance eligibility. Indeed, some activists had previously criticized the process for not bringing representatives from green groups to the table.

The proposed framework hinges on an attempt to separate the Canadian taxonomy into two categories – not just green projects, but also transitional ones – in a way that others have not done.

The more straightforward green label would be reserved for projects that have zero or low emissions both in their own operations and from the consumption of their products, and that are projected to be in high demand during the shift to a lower-carbon economy. Among the examples offered by the SFAC are green hydrogen projects, electric-vehicle manufacturing with low-emissions supply chains, clean-electricity infrastructure and tree-planting in areas where forests did not previously grow.

The transitional label is meant for projects that reduce emissions in carbon-intensive industries – including fossil-fuel production, as well as manufacturing sectors such as steel, cement and chemicals – without fully identifying them as green.

To qualify even for that category, oil-and-gas investments – such as the installation of methane-capture technology for natural gas production, and carbon-capture technology in the oil sands – would have to meet a set of criteria.

That would include the funded projects leading to “significant emissions reductions from existing assets,” and having “well-defined lifespans” that are in line with decreases in fossil-fuel consumption required to hit global climate-change mitigation targets.

The proposed requirements add up to an attempt to avoid giving any stamp of approval to investments that could either expand oil-and-gas production beyond existing levels, contribute to the lock-in of oil-and-gas infrastructure beyond the point it would otherwise cease to be viable, or create stranded assets.

And the document states that purported sustainability investments that involve “new oil and gas extraction projects” will be ineligible.

It broadly proposes a range of other criteria for investments to qualify as either green or transitional. Those include a requirement that any company issuing financial instruments under the taxonomy has a company-wide commitment to achieve net-zero emissions by 2050, and that projects meet a “do no significant harm” principle related to other environmental, social and governance (ESG) aspects such as Indigenous reconciliation.

Still, the framework leaves open to interpretation some key aspects of what might qualify for the transitional classification in particular.

One of those involves what is considered an existing fossil-fuel extraction site for which investment to minimize emissions could be eligible. The document suggests that beyond just sites already producing oil and gas, under-development sites could qualify if they have been granted production licences and significant capital expenditures have already been allocated.

Another is the proposed requirement that any qualifying investment be consistent with pathways to containing planetary warming to 1.5 Celsius above preindustrial levels – a Paris Climate Accord target currently in enough peril that many projects could be disqualified depending on how stringently it is interpreted.

The framework proposes that such decisions, on which specific projects qualify for the green and transitional labels, ultimately rest in the hands of a complex new governance structure. It would be overseen by a taxonomy council – including senior federal officials and representatives of institutional investors – who would be served by more technical staff and working groups.

Before that happens, the proposed framework, which was written by a technical experts group convened by SFAC, in partnership with the Canadian Climate Institute, is to be followed by a much more detailed document laying out greater specifics about thresholds and timelines for the green and transitional categories.

A source involved in the process said that SFAC – which plans to oversee that stage as well – had expected the next document to be released next summer, but the timeline is now unclear because of the framework’s delayed release.

For investors, SFAC’s taxonomy development has taken on extra importance since work began on it in 2021, because a pre-existing effort to develop a Canadian taxonomy by the CSA Group – the non-profit industry standards association – fell apart earlier this year amid disagreements about its contents.

Although that turn of events underscored the difficulty of settling on taxonomy principles in a resource-heavy economy, other countries with similar reliance on fossil-fuel sectors – notably Australia, which this month released a framework similar to the SFAC proposals – have recently been starting to outpace Canada in framing the discussion.

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Zacks Investment Ideas feature highlights: Alphabet, Tesla, Shopify, Amazon and Palo Alto

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For Immediate Release

Chicago, IL – February 2, 2023 – Today, Zacks Investment Ideas feature highlights Alphabet GOOGL, Tesla TSLA, Shopify SHOP, Amazon AMZN and Palo Alto Networks PANW.

Which of These Stocks Has Been the Best Buy, Post-Split?

Stock splits have been a regular occurrence in the market over the last several years, with many companies aiming to boost liquidity within shares and knock down barriers for potential investors.

Of course, it’s important to remember that a split doesn’t directly impact a company’s financial standing or performance.

In 2022, several companies performed splits, including Alphabet, Tesla, Shopify, Amazon and Palo Alto Networks. Below is a chart illustrating the performance of all five stocks over the last year, with the S&P 500 blended in as a benchmark.

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As we can see, PANW shares have been the best performers over the last year, the only to outperform the general market.

However, which has turned in a better performance post-split? Let’s take a closer look.

Tesla

We’re all familiar with Tesla, which has revolutionized the EV (electric vehicle) industry. It’s been one of the best-performing stocks over the last decade, quickly becoming a favorite among investors.

Earlier in June of 2022, the mega-popular EV manufacturer announced that its board approved a three-for-one stock split; shares began trading on a split-adjusted basis on August 25th, 2022.

Since the split, Tesla shares have lost roughly 40% in value, widely underperforming relative to the S&P 500.

Palo Alto Networks

Palo Alto Networks offers network security solutions to enterprises, service providers, and government entities worldwide.

PANW’s three-for-one stock split in mid-September seemingly flew under the radar. The company’s shares started trading on a split-adjusted basis on September 14th, 2022.

Following the split, PANW shares have struggled to gain traction, down roughly 15% compared to the S&P 500’s 3.3% gain.

Shopify

Shopify provides a multi-tenant, cloud-based, multi-channel e-commerce platform for small and medium-sized businesses.

SHOP shares started trading on a split-adjusted basis on June 29th, 2022; the company performed a 10-for-1 split.

Impressively, Shopify shares have soared for a 50% gain since the split, crushing the general market’s performance.

Alphabet

Alphabet has evolved from primarily being a search engine into a company with operations in cloud computing, ad-based video and music streaming, autonomous vehicles, and more.

Last February, the tech titan announced a 20-for-1 split, and investors cheered on the news – GOOGL shares climbed 7% the day following the announcement. Shares started trading on a split-adjusted basis on July 18th, 2022.

Alphabet shares have sailed through challenging waters since the split, down 10% and lagging behind the S&P 500.

Amazon

Amazon has evolved into an e-commerce giant with global operations. The company also enjoys a dominant position within the cloud computing space with its Amazon Web Services (AWS) operations.

AMZN’s 20-for-1 split was a bit of a surprise, as it was the company’s first split since 1999. Shares started trading on a split-adjusted basis on June 6th, 2022.

Following the split, Amazon shares have lost roughly 18% in value, well off the general market’s performance.

Bottom Line

Stock splits are typically exciting announcements that investors can receive, with companies aiming to boost liquidity within shares.

Interestingly enough, only Shopify shares reside in the green post-split of the five listed.

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Zacks Investment Research

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Past performance is no guarantee of future results. Inherent in any investment is the potential for loss. This material is being provided for informational purposes only and nothing herein constitutes investment, legal, accounting or tax advice, or a recommendation to buy, sell or hold a security. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. It should not be assumed that any investments in securities, companies, sectors or markets identified and described were or will be profitable. All information is current as of the date of herein and is subject to change without notice. Any views or opinions expressed may not reflect those of the firm as a whole. Zacks Investment Research does not engage in investment banking, market making or asset management activities of any securities. These returns are from hypothetical portfolios consisting of stocks with Zacks Rank = 1 that were rebalanced monthly with zero transaction costs. These are not the returns of actual portfolios of stocks. The S&P 500 is an unmanaged index. Visit https://www.zacks.com/performance for information about the performance numbers displayed in this press release.

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$13 million investment in Campbellford Memorial Hospital

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The Campbellford Memorial Hospital will be receiving a $13 million investment from the Ontario Government to address infrastructure concerns.

The announcement was made at the hospital by Northumberland—Peterborough South MPP David Piccini.

The $13 million is broken down as follows:

  • $9,639,900 will be going to CMH as one-time capital funding to address the HVAC and generator
  • $1,874,929 for reimbursement of CMH’s COVID-19-related capital expenses
  • $771,797 in COVID-19 incremental operating funding
  • up to $600,000 in one-time funding to support the hospital’s in-year financial and operating pressures
  • $163,600 in pandemic prevention and containment funding
  • $81,132 through the Health Infrastructure Renewal Fund
  • $46,884 in health human resources funding.

Interim President and CEO Eric Hanna welcomed the news, saying much needs to be done about the HVAC and generator.

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At the announcement, Hanna spoke of the issues with the generator.

“I’ve got the wee little generator up at the lake and then I’m thinking well, everything should be going well at the hospital,” Hanna told the audience in attendance.

“You get a call from the person in charge who says, ‘Guess what Eric? Generator didn’t start. Oh, so what does that mean? There’s no power in the hospital.’  That’s happened a couple of times in the past year and the generator is over 30 years old.”

Hanna says the solution was not as easy as replacing the generator.

“You can go buy the generator and that may be about a million dollars. But then when we found out afterwards, we came to hook up the new generator to the electrical distribution system and said it won’t work with that because your electrical distribution system is 1956. You can’t plug this generator into that. So now we’re putting close to $5 million into a whole electrical distribution system so the generator will work. It’s part of that ongoing thing and that’s why these costs continue to go up.”

The HVAC system was also something addressed by Hanna.

“It’s a contract close to $7 million to replace that. This wing, for example. There’s no fresh air in this wing. It hasn’t worked in here for 15 years. So now this is administrative areas and the concern was that in some of the patient carriers, it wasn’t working either.  So – having those discussions with David (Piccini) and saying what we have to do to correct this.”

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Chile’s Enap Set to Slash Debt Burden That Weighed on Investment

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(Bloomberg) — Enap, Chile’s state oil and gas company, plans to use near-record earnings to slash its debt burden, while increasing investment in its refineries and in exploration and production.

The company aims to reduce its debt load to about $3 billion “medium term” from the current $4.3 billion, Chief Executive Officer Julio Friedmann said in an interview. Plans include a bond sale in the first half of this year to refinance some securities.

The improved financial position — with 2022 profit surging to $575 million — comes after Enap’s oil and gas operations in Egypt, Ecuador and Argentina got a boost from high crude prices, while healthy international refining margins benefited plants in Chile. Those trends are expected to extend into this year and next, enabling the company to pre-pay some short-term obligations. About half of the current debt burden matures in the next three years.

“We are going to issue bonds,” the MIT-trained executive said Wednesday from the Aconcagua refinery in central Chile. “We are closely evaluating the local and international markets.”

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At the same time, Friedmann, who took the reins at Enap in November, plans to increase capital expenditure to about $700 million this year from $550 million last year.

The increase comes after underinvestment in the past few years because of Covid restrictions and the heavy debt load. Spending will focus on making treatment processes cleaner and upgrading infrastructure, as well as a more aggressive approach to increasing gas reserves in the far south of the country, he said.

Gas Markets

Enap plans to expand in both liquefied petroleum gas and natural gas markets in Chile, focusing on the wholesale business and eventually selling directly to large-scale consumers such as mines. Organizational changes to enable the expansion will be announced soon. There are no plans to enter the final distribution business, Friedmann said. The company wants to supply more gas to southern cities as a way of replacing dirtier fuels such as wood and diesel.

Enap and its partners are also preparing pipelines and a refinery near Concepcion to start receiving crude from Argentina’s Neuquen basin sometime this year in an arrangement that could supply as much as 30% of its needs.

While there’s plenty of potential do collaborate more with energy-rich Argentina, particularly in the Magallanes area, that would require greater long-term visibility on supplies from the neighboring country, Friedmann said.

He sees a role for Enap in the development of green hydrogen in Chile. It’s in talks with three companies to enable its facilities in Magallanes to be used to receive all the wind turbines, electrolyzers and other equipment that will be needed to make the clean fuel. Enap is also evaluating its own small pilot plants and will consider whether to take up options to enter other green hydrogen projects as an equity partner.

While the company will maintain its focus on meeting rising demand for traditional fuels, it anticipates new regulation that will require lower emissions. It’s also looking closely at clean-fuel options for aviation, Friedmann said.

(Adds clean fuel plans in last paragraph. I previous version corrected spelling of CEO’s surname.)

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