Canada’s Largest Pension Funds Stick To Profitable Oil Sands Bets
Canada’s oil sands trade is just too carbon-intensive for the environmental, social, and governance (ESG) targets of a few of the world’s largest institutional buyers. However not for Canada’s personal pension funds.
The 5 largest Canadian pension funds, which handle US$1.2 trillion in complete belongings, noticed their mixed funding within the U.S.-listed shares of the key oil sands producer surge by 147 % within the first quarter of 2021, to a complete of US$2.4 billion, in keeping with a Reuters evaluation of filings to the SEC.
A lot of the soar within the worth of investments of the pension funds merely mirrored the rise in share costs of inventory already held. But, the funds additionally purchased extra shares within the largest Canadian oil sands producers, in keeping with the Reuters evaluation.
Whatever the approach through which the pension funds boosted funding in oil sands within the first quarter, the very fact stays that not like different pension funds and a few of the world’s largest sovereign wealth funds, Canada’s pension funds haven’t pledged or made divestments in probably the most emissions-heavy approach of manufacturing oil.
The funds, Canada Pension Plan Funding Board (CPPIB), Caisse de dépôt et placement du Québec (CDPQ), Ontario Academics’ Pension Plan (OTPP), British Columbia Funding Administration Corp (BCI), and the Public Sector Pension Funding Board (PSP) collectively elevated the worth of their investments in Canadian Pure Assets, Suncor Power, Cenovus Power, and Imperial Oil, in keeping with the Reuters evaluation.
A few of Canada’s pension funds have dedicated to carbon-neutral portfolios by 2050. Commenting on the evaluation for Reuters, a PSP Investments spokeswoman stated lots of the fund’s investments have been in passive portfolios monitoring inventory indexes. Representatives of different funds advised Reuters that their publicity to fossil fuels as a complete is a tiny share of complete belongings held.
Nonetheless, the funds have been criticized by activists for not doing sufficient to account for local weather threat of their portfolios by divesting from the oil sands enterprise.
Commenting on this week’s high-profile case through which a Dutch court docket ordered Shell to slash emissions, holding it straight accountable for contributing to local weather change, pension activist group Shift stated: “Pension funds take observe: This case highlights the rising climate-related authorized dangers confronted by oil and fuel firms amidst a wave of litigation towards the fossil gasoline producers most accountable for the local weather disaster.”
“We’ve a giant downside with pension funds saying we imagine in engagement, not divestment, however there’s no signal of this engagement,” Shift’s director Adam Scott advised Reuters.
Different institutional buyers and pension funds have already dumped their stakes in oil sands firms.
In Might final yr, Norway’s Authorities Pension Fund International, the world’s largest sovereign fund which has amassed its monumental wealth from Norway’s oil, determined to exclude Canadian Pure Assets, Cenovus Power, Suncor Power, and Imperial Oil over “unacceptable greenhouse fuel emissions.” Even the Public Funding Fund (PIF), the sovereign wealth fund of the world’s largest oil exporter Saudi Arabia, has lately bought all of the 51 million shares it held in Suncor.
Amongst pension funds, the New York State Frequent Retirement Fund stated final month it will divest its US$7-million funding in Canadian oil sands corporations after figuring out that seven firms “failed to point out they’re transitioning out of oil sands manufacturing.”
The analysis of the fund’s oil sands holdings are a part of a broader overview of local weather threat in vitality investments, and the fund will subsequent consider shale oil and fuel firms, it stated.
The Financial institution of Canada additionally warned in its newest Monetary System Evaluate (FSR) from earlier this month that climate-related vulnerabilities are first amongst “ongoing points that all of us have to take significantly now to guard our monetary system and financial system sooner or later.”
“The potential influence of local weather dangers is usually underappreciated, and they don’t seem to be effectively priced. Which means the transition to a low-carbon financial system might depart some buyers and monetary establishments uncovered to massive losses sooner or later,” Financial institution of Canada Governor Tiff Macklem stated.
By Tsvetana Paraskova for Oilprice.com
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