The pension fund that manages retirement savings for more than 21 million Canadians allowed US$100 million of those funds to be invested in industries now under the microscope after the Biden White House announced it would apply a climate test to liquefied natural gas (LNG) exports, a research and advocacy group says.
The C$576-billion Canada Pension Plan Investment Board (CPPIB) placed the investment in 2022 with Kimmeridge Fund VI, which the board describes as “a U.S.-based alternative asset manager focused exclusively on the energy sector.” Those funds flowed through to natural gas fracking operations in Texas and the proposed Commonwealth LNG terminal on the Louisiana coast, Shift Action for Pension Wealth and Planet Health said on social media last week.
Commonwealth was first put forward to U.S. regulators in July, 2017, was approved in November, 2022, and a final investment decision on the project was expected by the end of March, Offshore Technology reports. With capacity to export 9.3 million tonnes of LNG per year, Commonwealth would be almost the size of the 11.3-million-tonne Calcasieu Pass 2 project that will now be subject to a climate review, one of 17 new export terminals the U.S. gas industry is trying to bring online.
“This is an alarming example of @cppinvestments indirectly pouring Canadians’ pension savings into an oil & gas expansion project that fuels the #climatecrisis and faces escalating regulatory, reputational, legal, transition, and financial risks,” Shift wrote Friday.
“It also underscores a lack of transparency in Canada’s pension sector, with our retirement savings being quietly funneled into private equity funds with virtually no reporting from the CPPIB on how the money is eventually used for fossil fuel projects,” Shift added. “The CPPIB claims that it’s committed to climate action. But its continued investment in fossil fuel expansion projects is putting our shared climate and our pension savings at risk, while undermining the CPPIB’s own #netzero emissions commitment.”
Shift Senior Manager Patrick DeRochie said the investment in Commonwealth LNG amounts to “chump change” compared to the size of CPPIB’s fund. But it’s still enough to produce an extra 50 megatonnes of greenhouse gas emissions.
“With the amount of expertise they have, the sophistication with which they could assess climate risk, I don’t get how no one at the fund is looking at this problem,” he told The Energy Mix. CPPIB’s “finance wizards are investing a $576-billion portfolio on behalf of more than 20 million Canadians, and there’s no one there who thinks about how dumb and how risky it is to invest $100 million into dumping another 50 million tonnes of carbon pollution into the atmosphere.”
“It’s gobsmacking,” he added. “It makes me wonder what planet CPP investment managers live on.”
CPPIB’s media office did not respond to an email requesting comment on the criteria it would apply to an investment like Commonwealth LNG, how it would weigh the climate risks involved, and whether its assessment of those risks is shifting as international agencies call for an end to new fossil fuel extraction projects. DeRochie said he couldn’t comment on what they’re thinking because they haven’t been responding to his overtures, either.
“We’ve had very few conversations with CPPIB investment managers, despite numerous attempts to reach out to them,” he said. “There hasn’t been an open door.”
After seeing half of Canada on fire last year, whole cities evacuated, one town burned to the ground, and hundreds dead in heatwaves, DeRochie said CPPIB is funnelling its fossil investments through secretive private equity funds that make it very difficult to follow the dollars. “We essentially get no reporting from some pension funds in private equity, and it takes years of closely tracking where this money is going to have any idea of how it’s eventually being used,” he said. That amounts to a “serious transparency problem” that should have financial regulators like the Office of the Superintendent of Financial Institutions paying attention.
“It’s going to take regulation to require them to align their climate and energy transition plans with what the Intergovernmental Panel on Climate Change and the International Energy Agency are saying is required to avert catastrophic climate change,” DeRochie said. “Every dollar a pension fund puts into fossil fuel expansion is a dollar that’s not being used to finance the energy transition that we so badly need,” and works against a “liveable future for their own members.”
In the wake of last week’s White House decision, climate hawks have been declaring the win, while Politico points out the extensive fracking and LNG export activity still going on in the U.S. Canadian oil and gas companies are “reacting with dismay” to the news, The Canadian Press reports, while repeating industry claims that gas is a less emissions-heavy replacement for coal—a line that hasn’t stood up well in several years of studies.
“Given the highly integrated nature of the North American energy market, CAPP is disappointed in the White House decision,” Lisa Baiton, president and CEO of the Canadian Association of Petroleum Producers, told CP in an email Friday. Baiton is also a former member of CPPIB’s Global Leadership Team.
“Our immediate view is any delay in the development of U.S. liquefied natural gas is a loss for the U.S., our allies, for U.S. jobs, and for efforts to cut emissions around the world,” added Enbridge Inc. spokesperson Gina Sutherland