Canada’s second-largest pension fund manager has announced plans to sell off its oil investments by the end of next year, en route to a zero-emissions portfolio by 2050, while pouring C$10 billion into a green investment fund for large emitters.
Caisse de dépôt et placement du Québec (CDPQ) says it will sell its remaining oil stocks as part of its climate strategy, but won’t part with its stake in pipelines, The Canadian Press reports.
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The $390-billion fund said its remaining oil production assets make up 1% of its portfolio, or about $4 billion, spread over “a dozen” companies. CDPQ made the announcement as it released its new plan to fight climate change, CP writes.
The $10-billion transition envelope will help companies reduce their carbon intensity in heavy-emitting sectors like mining, transport, and agriculture.
The Caisse also bumped up its carbon intensity target after surpassing its 2017 goal of reducing its emissions per dollar invested by 25%. It wants that to fall another 60% by 2030. The fund also aims to increase its portfolio of low-carbon assets to $54 billion by 2025, triple the total in 2017 and up from $36 billion today.
Since the Caisse released the original version of its strategy in 2017, “the world has changed profoundly and rapidly,” President and CEO Charles Emond told media Tuesday, adding that the state of the global climate “is deteriorating more quickly than anticipated.”
That means “there is more than ever an urgency to act,” he said. “We must therefore accelerate our commitment against climate change, go further, and above all, immediately tackle the source of the problem.”
The pension fund manager’s move positions it as a climate leader among Canada’s major financial institutions, said Toronto-based Shift Action for Pension Wealth and Planet Health.
“It is amazing that it took until 2021 for a Canadian pension fund to finally recognize that protecting our retirement savings from the worsening climate crisis inevitably requires abandoning market exposure to high-risk fossil fuels,” Shift said in a release.
“However, it should be acknowledged that if oil is too risky for the climate and Quebecers’ pensions, then so are ongoing investments in fossil gas,” which “remains a major source of climate pollution across the production supply chain. To achieve climate safety, investment in fossil gas production and infrastructure must also be urgently phased out.”
With “massive fossil gas infrastructure investments” still on the books, Shift added, CDPQ “has not yet reckoned with this reality.”
Still, Shift said the Caisse’s commitment to cut its carbon emissions intensity is eclipsed in Canada only by a pledge from the Ontario Teachers’ Pension Plan, which announced plans earlier this month to cut the emissions intensity of its investments 45% by 2025 and 67% by 2030—but wouldn’t say how it would phase out its financial interest in fossil fuels.
“Although the OTPP doesn’t make this clear, a two-thirds reduction in portfolio emissions intensity by 2030 will require significant restrictions on high-carbon investments in oil, gas, and coal,” Shift responded at the time. “A further tightening of these commitments, and a focus on absolute emissions reductions, is required.”
But “the CDPQ’s progress stands in stark contrast to the Canada Pension Plan, whose CEO said earlier this year that the Canada Pension Plan has no plans to institute a blanket screen on oil and gas during his tenure,” the organization said this week.
Beyond its climate impacts, investing in oil has cost the CDPQ money, the Sortons la Caisse du carbon Coalition concluded in an analysis released in February. The report showed the value of the Caisse’s 50 main fossil investments depreciating 57.6% between 2011 and 2020, CP writes—meaning that the Caisse could have generated $16.2 billion more for its depositors by investing in a stock portfolio that excluded oil.
Emond said it would have been irresponsible to follow public demands for fossil fuel divestment last year, but the recent rise in oil prices opens a favourable window to sell off assets. Crude prices stood at US$75.45 per barrel on Monday, CP says, up from US$18.84 in April 2020.
The Caisse plans to retain, but not increase, its $8 billion in investments in pipelines, amounting to about 2% of its total portfolio. Emond said the vast majority of its pipelines transport natural gas rather than oil, and the Caisse will not finance the construction of new pipelines.
“The economy needs them,” he said. “You can’t shut them down overnight and drag the economy down.”
But Shift and Sortons la Caisse both pointed to the need to bring down natural gas as well as oil production, with Sortons citing the International Energy Agency’s conclusion in May that no new oil and natural gas fields are necessary on the path to a net-zero economy. The IEA’s 1.5°C pathway shows oil demand falling 75% by mid-century, natural gas demand by 55%.
“After getting rid of oil production, the Caisse will have to quickly do the same with the pipelines that transport it and with fossil gas,” the coalition said yesterday in a release. “The Caisse recently became the largest majority shareholder in Énergir, Quebec’s largest gas distributor. We look forward to seeing how the Caisse can demonstrate that Énergir will meet the targets set by science, including for gas distribution volumes.”
The Canadian Association of Petroleum Producers criticized the Caisse’s divestment decision, noting that global energy demand is rising at the moment and the consequences are being felt in Europe. Divestment “will do nothing to impact global demand and only serve to drive investment away from responsible energy developing countries like Canada,” said CAPP President and CEO Tim McMillan.
The main body of this report was first published by The Canadian Press on September 28, 2021.