Canada's biggest public pensions heavily investing in fossil fuels, new report suggests
Pension funds say oil and gas investments can be leveraged in transition to cleaner energy
Canada's biggest public pensions continue to invest heavily in fossil fuels despite rising concerns about climate change, according to a new report.
The Canada 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.
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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.
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 investments of $674.04 million in TC Energy, formerly known as TransCanada, the Canadian pipeline company — $329.9 million from CPP Investments, and $344.14 million from CDPQ.
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.
- A previous version of this story stated that CPP Investments had invested $674.04 million in TC Energy. In fact, that amount was from investments by both CPP Investments and CDPQ.Aug 13, 2021 12:17 PM ET