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Opinion: AIMCo's stake in GasLink project a bad investment – Edmonton Journal



Jasper Avenue at 104 Street was closed to traffic for about an hour when a round dance was held by about 100 people on Friday January 10, 2020. The round dance was held to oppose the use of legal injunctions, police forces, and criminalizing state tactics against the Wet’suwet’en Nation asserting their own laws on their own lands. Wet’suwet’en Nation has been opposing the construction of Coastal GasLink, an LNG pipeline, on its unceded traditional territories since it was first proposed in 2012.


Albertans woke up on Boxing Day to discover their public pension plan had bought a gas pipeline. Unfortunately, this late Christmas gift is likely to be a liability, due to the financial, regulatory, reputational and legal risks involved with the purchase.

On Dec. 26, 2019, the Alberta Investment Management Corporation, which manages public-sector pension plans and other provincial government funds, announced a partnership to purchase a 65-per-cent stake in TC Energy’s Coastal GasLink (CGL) pipeline.

Part of the heavily-subsidized LNG Canada project, CGL is a $6.6-billion pipeline that would ship gas from fracking fields in northeastern B.C. to an export terminal in Kitimat, B.C., locking in an additional 8.6 million tonnes of carbon pollution per year by 2030 and undermining B.C’s and Canada’s insufficient emissions reduction efforts. B.C.’s gas sector is already under fire for causing earthquakes, contaminating water, and leaking methane, a potent greenhouse gas.

Many pension funds, including AIMCo, publicly recognize the financial risks of climate change and claim to screen their investments for environmental, social and governance (ESG) factors. If ever there was a project that fails a credible ESG screen, it’s CGL. The project’s environmental risks and failure to respect Indigenous rights should disqualify it for investment for any firm claiming to invest responsibly.

CGL will massively increase carbon pollution over the 30-year lifespan of the project, on top of even more emissions when the gas is burned downstream. This comes at a time when scientists have repeatedly warned that emissions must drop rapidly within this decade in order to avoid the catastrophic global impacts of a warming world.

With investors and central bankers sounding the alarm about climate risk, financing new long-lived fossil-fuel infrastructure should be seen as a foolhardy venture. Investors can reasonably assume that new measures to curb both the consumption and extraction of fossil fuels will negatively impact returns over time. Recent research reveals that technological disruption and new climate policies could strand as much as $4-trillion in fossil-fuel investment by 2035 alone, a particular risk for export-dependent countries like Canada.

CGL is also under fire for its failure to respect Indigenous rights and title. While TC Energy has signed agreements with band councils along the pipeline route, the Wet’suwet’en hereditary chiefs, who hold authority over their unceded traditional territories, have long opposed the pipeline.

Last January, TC Energy used a court injunction to enable the RCMP to violently remove Wet’suwet’en members from their lands and begin construction. Uncovered documents reveal that RCMP officers were instructed to “use as much violence … as you want” and considered using lethal force. The RCMP continues to surveil and harass Wet’suwet’en members, while CGL construction has destroyed Wet’suwet’en archaeological sites. British Columbia’s human rights commissioner called for the suspension of CGL absent the free, prior and informed consent of impacted First Nations. Wet’suwet’en hereditary chiefs issued an eviction notice to CGL on Jan. 5.

It doesn’t have to be this way. In 2020, there are numerous profitable, low-risk opportunities to invest that can help to address the climate crisis without raising red flags over human rights. A recent World Bank study estimates the opportunity for climate-smart investments in emerging markets alone in the next decade at US$23-trillion. Just last fall, the Canada Pension Plan purchased the renewable energy producer Pattern Energy, valued at US$6.1 billion, demonstrating the ability for Canadian asset managers to profit from investing in climate solutions at scale.

AIMCo has a fiduciary responsibility to invest in the best long-term interest of its beneficiaries to ensure Albertan retirees and workers can collect their pensions in a warming world undergoing a rapid energy transition. In buying a yet-to-be-built “carbon bomb” that undermines Indigenous rights, AIMCo risks rendering the term “responsible investing” meaningless.

Adam Scott is director and Patrick DeRochie is pension engagement manager for Shift: Action for Pension Wealth and Planet Health, a charitable organization that helps Canadians engage their pension funds on climate change.

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Opinion: Ottawa must aim its fiscal powers at lagging business investment in the next phase of recovery – The Globe and Mail



People navigate through Yorkdale Mall in search of Black Friday sales in Toronto on Nov. 26, 2021.Tijana Martin/The Canadian Press

In a prebudget consultation last winter, Bank of Nova Scotia chief economist Jean-François Perrault warned Finance Minister Chrystia Freeland that she was in danger of oversubsidizing labour at the expense of capital. Nine months further along an economic recovery that has become complicated by labour shortages, he’s stressing that point to her again.

“It’s certainly my view that [government policies] have favoured supporting the labour side versus the capital side in the pandemic. There’s no question,” he said in an interview this week.

“There needs to be something to turbo-charge Canadian investment.”

Mr. Perrault delivered that message to Ms. Freeland personally last week, as the Finance Minister met virtually with a panel of senior private-sector economists – the traditional consultation in advance of the government’s fall economic and fiscal update, promised for sometime in the next three weeks. This week’s third-quarter gross domestic product report from Statistics Canada underlines the point that the recovery is top-heavy on the consumer side, while business investment brings up the rear.

While real GDP (that is, excluding inflation) expanded at a brisk 5.4-per-cent annualized pace in the quarter, the main driver of that growth was household consumption, which surged nearly 18 per cent annualized. Business gross fixed capital formation, on the other hand, contracted nearly 18 per cent, its second consecutive quarterly decline. Since the start of the pandemic, household spending is up 2 per cent, in real terms; business investment in non-residential structures, machinery and equipment is down 11 per cent.

It’s not as if the private sector lacks the money. Canadian Imperial Bank of Commerce economist Benjamin Tal estimates that during the pandemic, the collective stockpile of corporate cash is about $175-billion higher than its prepandemic trend.

There are some encouraging indications – most notably, from the Bank of Canada’s fall Business Outlook Survey – that the private sector may be prepared to loosen its purse strings considerably. That quarterly report showed that capital spending intentions over the next 12 months are the highest in the 23-year history of the survey.

But the reality is that the government’s economic policies in the pandemic have done remarkably little to stimulate business investment, while delivering a great deal indeed to protect the labour market and support household incomes.

As the economy has recovered, that significantly tilted the scales in favour of hiring rather than capital spending. That may have contributed to the labour crunch many businesses and sectors are now experiencing.

“If we had somehow found a way to steer more dollars to encourage capital spending, as opposed to maintaining the labour force as it was, perhaps we wouldn’t have a million job vacancies now,” Mr. Perrault argued. “Perhaps firms would have taken the last 18 months to try and rethink, retool, invest, in a way that would make the expansion less labour-intensive.”

This certainly isn’t an issue unique to Canada. In a global economic outlook published Wednesday, the Organization for Economic Co-operation and Development worried that governments’ fiscal focus is still too much on emergency measures to lean against the impact of the pandemic, and not nearly enough on the building blocks for a strong recovery.

“We are more concerned by the use made of debt than its level,” OECD chief economist Laurence Boone wrote in the report. “It is time to refocus fiscal support on productive investment that will boost growth, including investment in education and physical infrastructure.”

For Canada, though, the solution must go beyond a refocusing of public spending over the next few years. It needs to include incentives to light a fire under business investment that was, frankly, a problem long before the pandemic came along. Crisis policies may have merely encouraged a long-standing tendency in our private sector to favour investments in labour over capital.

In the five years prior to the pandemic, total employment in this country rose 8 per cent. Over the same period, non-residential business investment, excluding inflation, fell 15 per cent.

Mr. Perrault suggested that the optimistic investment outlook in the Bank of Canada’s business survey masks the bigger picture: that Canada remains an underperformer relative to our global peers, even in this recovery.

“Canadian investment is probably going to rise less than a lot of our competitors this year; investment is rising everywhere,” he said. “The temptation is going to be to say things are improving … [but] if our relative investment continues to decline, then our competitiveness hurts, our productivity hurts.”

In a report this week, National Bank of Canada chief economist Stéfane Marion noted the country’s private non-residential capital stock – basically, all the physical structures, machinery and equipment owned by the private sector – actually declined last year, for the first time on record. While the pandemic was undoubtedly a contributing factor, growth has been generally trending downward for more than a decade.

“Whatever the cause of this lack of private investment, we must turn it around,” Mr. Marion said.

“Canada, as a small, open economy … must do a better job of growing its capital stock to take advantage of a highly successful immigration policy, and harness the productive power of a growing work force of highly skilled people.”

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Oil rises as investors focus on OPEC+ decision amid growing Omicron fears



Oil prices rose on Thursday, recouping the previous day’s losses, as investors adjusted positions ahead of an OPEC+ decision over supply policy, but gains were capped amid fears the Omicron coronavirus variant will hurt fuel demand.

Brent crude futures rose 85 cents, or 1.2%, to $69.72 by 0402 GMT, having eased 0.5% in the previous session.

U.S. West Texas Intermediate (WTI) crude futures gained 85 cents, or 1.3%, to $66.42 a barrel, after a 0.9% drop on Wednesday.

“Investors unwound their positions ahead of the OPEC+ decision as oil prices have declined so fast and so much over the past week,” said Tsuyoshi Ueno, senior economist at NLI Research Institute.

Global oil prices have lost more than $10 a barrel since last Thursday, when news of Omicron shook investors.

“Market will be watching closely the producer group’s decision as well as comments from some of key members after the meeting to suggest their future policy,” Ueno said.

The Organization of the Petroleum Exporting Countries and its allies, together known as OPEC+, will likely decide on Thursday whether to release more oil into the market as previously planned or restrain supply.

Since August, the group has been adding an additional 400,000 barrels per day (bpd) of output to global supply each month, as it gradually winds down record cuts agreed in 2020.

The new variant, though, has complicated the decision-making process, with some observers speculating OPEC+ could pause those additions in January in an attempt to slow supply growth.

“Oil prices climbed as some investors anticipate that OPEC+ will decide to maintain the current supply levels in January to cushion any damage on demand from the Omicron spread,” said Toshitaka Tazawa, an analyst at Fujitomi Securities Co Ltd.

Fears over the impact of the Omicron variant of the coronavirus rose after the first case was reported in the United States, and Japan’s central bank has warned of economic pain as countries respond with tighter containment measures.

U.S. Deputy Energy Secretary David Turk said President Joe Biden’s administration could adjust the timing of its planned release of strategic crude oil stockpiles if global energy prices drop substantially.

Gains in oil markets on Thursday were capped as the U.S. weekly inventory data showed U.S. crude stocks fell less than expected last week, while gasoline and distillate inventories rose much more than expected as demand weakened. [EIA/S]

Crude inventories fell by 910,000 barrels in the week to Nov. 26, the Energy Information Administration (EIA) said, compared with analyst expectations in a Reuters poll for a drop of 1.2 million barrels.

(Reporting by Yuka Obayashi; Editing by Tom Hogue)

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Toronto market hits 7-week low on Omicron uncertainty



Canada‘s main stock index fell on Wednesday to its lowest level in over seven weeks as the United States reported its first case of the Omicron variant that investors fear could impede economic recovery, with the index giving back its earlier gains.

The Toronto Stock Exchange’s S&P/TSX composite index ended down 195.39 points, or 0.95%, at 20,464.60, its lowest closing level since Oct. 12.

Wall Street also closed lower as the U.S. Centers for Disease Control and Prevention said the country had detected its first case of the new COVID-19 variant, which is rapidly becoming dominant in South Africa less than four weeks after being detected there and has spread to other countries.

It might take longer than expected for supply chain disruptions to abate, “especially if we have renewed shutdowns in Asia,” said Kevin Headland, senior investment strategist, Manulife Investment Management.

Still, Headland does not expect the new variant to lead to an economic recession or a bear market for stocks in 2022, saying: “Reaction to headline news provides opportunities for those that have a longer-term timeframe to add in the equity markets.”

The TSX will add to its recent record high over the coming year as the domestic economic recovery helps underpin corporate earnings, but gains are expected to slow from 2020’s breakneck pace, a Reuters poll found.

The technology sector fell 2.7%, while energy ended 1.9% lower as oil was unable to sustain an earlier rally. U.S. crude oil futures settled 0.9% lower at $65.57 a barrel

The materials group, which includes precious and base metals miners and fertilizer companies, lost 2.2%.

Financials were a bright spot, advancing 0.4%, helped by gains for Bank of Nova Scotia as some analysts raised their target price on the stock.

Bombardier Inc was among the biggest decliners. Its shares sank 10.4%.


(Reporting by Fergal Smith; Additional reporting by Amal S in Bengaluru; Editing by Peter Cooney)

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