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Wall Street Bank Touts Alberta Oil Investment as Analyst Warns Against Climate Risks


An influential Wall Street investment bank is encouraging its customers to pour their dollars into Canadian tar sands/oil sands operators, largely on the strength of two new pipelines that are inching closer to completion.

To get there, analysts at Goldman Sachs had to talk themselves out of “three negative equity narratives,” the company said in an August 16 report to clients.

Those risk factors include “investor concerns about the environmental impact of Canada’s oil sands; more oil supply from OPEC, which would compete with Canadian oil; and the long-term uncertainty about oil demand amid a global shift away from fossil fuels,” DeSmog reports. But “despite these hurdles, the bank analysts were undeterred, listing three reasons why Canadian oil stocks are a good investment, including the fact that returns to shareholders are improving and the stocks are undervalued.”

The looming completion of the Line 3 and Trans Mountain pipelines was the other factor in Goldman’s investment advice, with the analysts betting that Indigenous opponents are now less likely to stop the Line 3 project. Notably absent from the assessment, DeSmog adds, was any consideration of the wildfires currently tearing through British Columbia, or the other severe climate impacts across much of Canada and much of the world.

“The investment logic becomes even more pronounced, the bank argued, once the Trans Mountain expansion, another major tar sands pipeline from Alberta to the Pacific Coast, reaches completion in 2023,” writes freelance reporter Nick Cunningham. “If built, both pipelines would allow more oil to be shipped from Alberta to the U.S. Midwest, lifting prices for the entire region, boosting returns to oil producers and their shareholders.”

While DeSmog points to Indigenous opposition to both projects, driven largely by concerns about construction “man camps” and the physical and sexual violence they bring to both areas, the Goldman analysts issued a “Buy” rating for the three biggest companies in the Canadian tar sands/oil sands—Cenovus Energy, Suncor Energy, and Canadian Natural Resources Ltd. “We continue to see attractive value to the group, with 26% upside to our revised price targets driven by improving pipeline takeaway,” they wrote.

Goldman issued its investor advisory just as a former executive with the Australian Coal Association warned that global financiers and their regulators are making the same mistake with their assessment of climate risk that they did with the housing bubble that triggered the 2008 global economic crash.

Instead of taking action to help keep average global warming to 1.5°C, as the science dictates, Ian Dunlop says major investment houses are modelling the risks they might face at warming levels of 3 or 4°C, “without properly factoring in how catastrophic they would be,” The Guardian writes. [Goldman Sachs, we’re looking at you?—Ed.]

“You’ve got to have the business world facing up to the fact that its survival now depends on serious action to get emissions down,” Dunlop said.

“As a general rule of thumb, global average warming of 4°C (covering land and ocean) is consistent with 6°C over land, and 8°C in the average warming over mid-latitude land. That risks 10°C in the summer average, or perhaps 12°C in heat waves,” the report stated.

Add that 12° to the 48°C maximum that hit western Sydney, Australia this summer and “you get summer heat waves of 60°C,” the report added. “Bank customers would be dead on the streets.”

In light of the landmark science assessment released two weeks ago by the Intergovernmental Panel on Climate Change, Dunlop concluded that “a focus on collecting more data over action could be dangerous,” The Guardian adds. “He said scenario analysis or stress testing was helpful in some cases, but many institutions were concluding they may survive a worst-case scenario.”

Just days before Goldman Sachs published its recommendations and Dunlop issued his analysis, the Corporate Mapping Project revealed that Canada’s two biggest public pension plans are still investing heavily in the fossil sector. The Canada Pension Plan has increased its fossil investments since the Paris climate agreement went into force in 2016, and the Caisse de dépôt et placement du Québec has 52% more fossil shares than the CPP, even though those holdings have decreased slightly since 2016.

“The dream of a tranquil retirement is already being interrupted by nightmares such as the wildfires raging across B.C. and Alberta this summer.” But “sadly, the Canada Pension Plan (CPP), which was designed to enhance our retirement security, is pouring fuel on the fire,” write researchers James Rowe, Jessica Dempsey, and Zoë Yunker.

“Valued at approximately half a trillion dollars, the CPP is one of Canada’s biggest investors and has an outsized capacity to obstruct or facilitate the needed energy transition,” they add. So “we were surprised to find that instead of decreasing its public equity investments in fossil fuel companies, the fund has actually increased them.”