Canada Pension Plan Investment Board shifting toward renewables; new study shows fossil fuel investments lose value

Canadian workers can hope that climate change awareness is finally dawning  at the Canada Pension Plan Investment Board (CPPIB), responsible for the financial health of the Canadian public pension system. On November 4, a CPPIB press release announced that the Board entered into a purchase agreement with Pattern Energy Group Inc. ; the Globe and Mail describes the deal in  “CPPIB bets on renewable energy with $2.63-billion purchase of wind-farm operator Pattern Energy” . cppib 2019 report This would demonstrate a big leap for the CPPIB, which reported in its  2019 Report on Sustainable Investing, released on November 6,  “CPPIB’s investments in global renewable energy companies more than doubled to $3 billion in the year to June 30, 2019. This is up from just $30 million in 2016.”  The annual Report includes other details, including a description of the new climate change investing framework, launched in April 2019.   Bloomberg News video channel  (Nov. 5) offers an interview with the CEO  of CPPIB discussing the CPPIB climate risk strategy, and providing the good news that the CPPIB will not participate in the expected blockbuster fossil fuel public offering by  Saudi Aramco.

Changes to public sector pensions in Alberta

One hopes that the Alberta government may also invest in that province’s growing renewable energy industries, as it has made the unilateral decision to consolidate Alberta public sector pensions under the control of the Alberta Investment Management Corporation, a crown corporation administered by the provincial government . According to an article in the Calgary Herald,  “Unions blast provincial decision to shift billions in public sector pension funds” : “(The) government intends to reverse the option of public sector pension plans leaving AIMCo as a fund manager. Moreover, the Alberta Teachers Retirement Fund, Workers’ Compensation Board and Alberta Health Services will be expected to transfer funds to AIMCo for management, reducing redundant administration.” More details appeared  in  “Government contemplates changes to management of more than 400,000 Alberta workers’ pension plans” in the Edmonton Journal (Nov. 1) which summarizes the opposition  by the Alberta public sector unions on the grounds that the decision reverses a recent change that gave more than 351,000 public sector employees joint control of their pension funds  – a joint governance model that had been authorized by 2018 legislation under the previous NDP government, and which only took effect in March 2019.  The Edmonton Journal article also states that police and firefighter pensions might also be included in their plans.  “Alberta’s public unions prep for a fight, whether in the streets or the courts” is a broader overview from CBC Calgary which discusses the pension consolidation, as well as the wage cuts and workforce reduction included in Bill 21 of the new budget under the new UCP government.

The dangers of investing pension funds to prop up the Alberta fossil fuel industry are indicated by a recent study of three major state public pension funds in California and Colorado (CalSTRS, CalPERS and PERA) . “Study Shows Pension Funds’ Refusal to Divest From Fossil Fuels Cost Retired Teachers, Firefighters, and Public Workers $19 Billion”  appeared in  Common Dreams  on November 5,  summarizing a study by Canadian publisher Corporate Knights.  Their analysis concluded that those three pension funds collectively lost over $19 billion in retirement savings for teachers, state troopers and public workers by continuing to invest in fossil fuels.  The full reports are not available yet on the Corporate Knights website, but are on Google Drive here .  A response by 350.org  also summarizes the study,  calls fossil fuel investments  “a Losing Strategy for Retirement Savings  — and the Planet” and asks “Why would any fund manager continue to invest in fossil fuels? Risky, harmful to our planet and shared future, and less profitable than many other investment opportunities, fossil fuel investments are a lose-lose choice.”

 

Calls for public banks to finance a Green New Deal and Just Transition

Two new reports in September call for a greater role for public banks to finance a Green New Deal and just transition.

A US Green Investment Bank for All: Democratized finance for a Just Transition   was published by the Next System Project in September, proposing  a new, democratically- managed  structure for financial institutions so that they function in the public interest to achieve a green and just transition.  From the report: “Of the $454 billion in climate finance invested in 2016, the private investment sector, which controls 80 percent of all banking assets, contributed $230 billion, while the public sector contributed $224 billion. That is, with only 20 percent of total assets, public banks invest nearly as much as all private banks combined. The short-term, return-maximizing horizons of private finance have failed, utterly, to drive anything like a green transition. The future of climate finance must look to the public sphere, not the private.” ….  “ The key political-economic decision in the design is the balance between concessionary lending (nonprofit and loss-making operations) and non-concessionary lending (that is, for-profit). The answers must follow from the bank’s public interest mandate and triple bottom line.” The full report is summarized in “We need a democratized Green Infrastructure Bank  for a Just Transition ” in Open Democracy.

A second report also cites the failures of the international global market-based financial system.  The 2019 Trade and Development Report: Financing a Global Green New Deal  was released by the  United Nations Conference on Trade and Development (UNCTAD) on September 25,  and states: “We can meet the UN Sustainable Development Goals (SDGs) by 2030, but only if we find the political will to change the rules of the international economic game and adopt policies that scale up the resources needed for a big investment push led by the public sector and set the global economy on an expansionary course.”

UNCTAD economists project that a net increase in global employment of at least 170 million jobs, with an overall reduction in carbon emissions by 2030, if total green investment were increased annually  by around US$1.7 trillion, which they estimate at one third of what is currently spent by governments on subsidizing fossil fuels.  Although each country will require a unique policy mix, the report calls for changes for all to include fiscal stimulus, public investment in infrastructure and green energy, and measures to boost wages. The report also contends that the 2030 Agenda goals  to eradicate poverty and meet nutrition, health and education goals will impose unsustainable financial burdens on many developing countries, also requiring reforms to the international trade, financial and monetary system.

Business responsibilities for climate change: U.S. Roundtable nods, U.N. sets a high bar

The U.S. Business Roundtable generated headlines and surprised reaction with the August 19th release of a new Statement of Purpose,  signed by 181 CEO’s of high-profile companies including Amazon, Walmart, Bank of America, Lockheed Martin, Morgan Stanley, UPS, and others. That statement redefines their shared, overarching corporate goal from “delivering value for shareholders” to  promoting “An Economy That Serves All Americans” – including by: “supporting the communities in which we work. We respect the people in our communities and protect the environment by embracing sustainable practices across our businesses.” …“Investing in our employees. This starts with compensating them fairly and providing important benefits. It also includes supporting them through training and education that help develop new skills for a rapidly changing world. We foster diversity and inclusion, dignity and respect.”

The full Business Roundtable Statement on the Purpose of a Corporation, with signatories, is here ;  case studies of member corporations’ social responsibility initiatives are outlined in Building Communities, Meeting Challenges .

A higher bar for business

In contrast to the Business Roundtable statement, scant attention was paid to an international call for human rights and climate justice, released in July. The Safe Climate Report  provides a guide to the obligations of States and the responsibilities of businesses under international agreements and law, regarding the rights to life, health, food, water and sanitation, rights of the child, right to a healthy environment, and rights of vulnerable populations.

The Safe Climate Report, as well as the June 2019 U.N. Report  on extreme poverty and climate change by Philip Alston, are the subject of a September 4 article in The Conversation Canadian edition, “Climate change, poverty and human rights: an emergency without precedent” . The authors state that “The Alston report suggests that the only way to address the human rights dimensions of climate crisis is for states to effectively regulate businesses and for those harmed by climate change to successfully sue responsible companies in court. ….  “the Safe Climate report goes further…”

Specifically, the Safe Climate Report states:

“Businesses must adopt human rights policies, conduct human rights due diligence, remedy human rights violations for which they are directly responsible, and work to influence other actors to respect human rights where relationships of leverage exist. As a first step, corporations should comply with the Guiding Principles on Business and Human Rights as they pertain to human rights and climate change…. The five main responsibilities of businesses specifically related to climate change are to reduce greenhouse gas emissions from their own activities and their subsidiaries; reduce greenhouse gas emissions from their products and services; minimize greenhouse gas emissions from their suppliers; publicly disclose their emissions, climate vulnerability and the risk of stranded assets; and ensure that people affected by business-related human rights violations have access to effective remedies.90 In addition, businesses should support, rather than oppose, public policies intended to effectively address climate change.”  (page 19/20).

Legal obligations of States:

The discussion in this report is also highly relevant to any litigation against states or companies regarding climate change, as well as for the rights of Indigenous peoples and children.  Boyd concludes:

“A failure to fulfill international climate change commitments is a prima facie violation of the State’s obligations to protect the human rights of its citizens. As global average temperatures rise, even more people’s rights will be violated, and the spectre of catastrophic runaway climate chaos increases. There is an immense gap between what is needed to seriously tackle the global climate emergency and what is being done.

A dramatic change of direction is needed. To comply with their human rights obligations, developed States and other large emitters must reduce their emissions at a rate consistent with their international commitments. To meet the Paris target of limiting warming to 1.5°C, States must submit ambitious nationally determined contributions by 2020 that will put the world on track to reducing greenhouse gas emissions by at least 45 per cent by 2030 (as calculated by the Intergovernmental Panel on Climate Change). All States should prepare rights-based deep decarbonization plans intended to achieve net zero carbon emissions by 2050, in accordance with article 4, paragraph 19, of the Paris Agreement. Four main categories of actions must be taken: addressing society’s addiction to fossil fuels; accelerating other mitigation actions; protecting vulnerable people from climate impacts; and providing unprecedented levels of financial support to least developed countries and small island developing States.”

The Safe Climate Report  (formally titled The Report of the Special Rapporteur on the issue of human rights obligations relating to the enjoyment of a safe, clean, healthy and sustainable environment)  was submitted to the U.N. General Assembly,  written by Canadian human rights scholar and U.N. Special Rapporteur David R. Boyd, whose 2012 book, The Environmental Rights Revolution: A Global Study of Constitutions, Human Rights and the Environment,  stands as a landmark study in environmental law.  The Special Rapporteur’s Report was informed by a consultation period in 2019 in which States and organizations were invited to participate – the few which did are posted here . (Neither  Canada nor the U.S. were among the countries which submitted).  Two noteworthy organizational submissions available are from Canada’s Ecojustice, and Our Children’s Trust (U.S.)  on the issue of intergenerational responsibility and youth. A separate report by Special Rapporteur John Knox discussed The Children’s Rights and the Environment in 2018, and it may be significant the  concluding sentence of the Safe Climate Report uses Greta Thunberg’s famous words,  “I want you to act as if our house is on fire. Because it is.”

FTQ shareholder resolution calls for GHG targets aligned with the Paris Agreement; corporations respond with a charge of “micromanagement”

As part of its stated Action Plan for Engaging in a Just Energy Transition , the Fonds de Solidarité des Travailleurs du Québec  (FTQ) (an investment fund controlled by Quebec trade unions) put forward the following shareholder’s resolution  at the Cenovus Energy Annual Meeting in Calgary in April.  (The text of the resolution appears on page 51, as Appendix A in the company’s Information Circular):

Resolved: That Cenovus Energy Inc. (“Cenovus”) set and publish science-based greenhouse gas (GHG) emissions reduction targets that are aligned with the goal of the Paris Agreement to limit global average temperature increase to well below 2 degrees Celsius relative to pre-industrial levels. These targets should cover the direct and indirect methane and other GHG emissions of Cenovus’ operations over medium and long-term time horizons. Such targets should be quantitative, subject to regular review, and progress against such targets should be reported to shareholders on an annual basis.

The Board’s written response and recommendation  states “…..Cenovus has always and will continue to assess our approach to climate change risk management with a view to maximizing shareholder value. ….Achieving the level of commitment contemplated by the Paris Agreement requires an integrated plan at a national and global level, with policies to guide the actions of governments, individuals and corporations to collectively work together toward the desired outcome. Our view is that it is an overly demanding request, and contrary to the best interests of shareholder value, to require an individual company to unilaterally set targets….   As such, we recommend voting against the proposal.”  And sure enough, as expected, the FTQ proposal was defeated by an  89% vote against. The news is summarized  and in The Energy Mix  and  by the CBC  .

The  Fonds de Solidarité des Travailleurs du Québec (FTQ), along with the Canadian shareholders’ non-profit  SHARE, was also part of the recent resolution to Exxon . That resolution, filed in the U.S.  by a group of investors led by the New York State Common Retirement Fund and the Church Commissioners for England, proposed that the company develop “short-, medium- and long-term greenhouse gas targets aligned with the goals established by the Paris Climate Agreement to keep the increase in global average temperature to well below 2°C and to pursue efforts to limit the increase to 1.5°C.”  In response,  ExxonMobil   applied for and received permission from the  U.S. Securities Exchange Commission (SEC), allowing it to exclude the resolution from its Proxy Circular.  In retaliation, SHARE states in a blog, Why we’ll vote against Exxon’s entire board of directors, that it is “recommending to our proxy voting clients that they withhold their support for all Exxon directors at the upcoming annual general meeting on May 29th.”

The “Micromanaging” argument:  “Investors Worried About Climate Change Run Into New SEC Roadblocks” from Inside Climate News (May 3), in addition to providing a good overview of shareholder actions, explains: “The term “micromanage” has become the linchpin to objections by companies seeking to block these resolutions. The precedent was set last year when the SEC agreed with EOG Resources, a Texas-based oil and gas exploration company, that a resolution asking the company to adopt emissions goals had sought to “micromanage” the company.”  More in  “Exxon Shareholders want action on climate change: SEC calls it micromanagement”  in the Washington Post (May 8). According to the CBC report about the FTQ resolution at  Cenovus, the corporate CEO called the proposal “overly demanding”, and said  “we had challenges with the prescriptive nature of the proposal”,  echoing the industry’s language and strategy.

To stay up to date: The U.S. non-profit As you Sow  monitors corporate environmental and social responsibility, including climate change and the energy transition  – through  press releases  , reports, and an up-to-date database of resolutions .

GM Oshawa investment will save 300 jobs; Toyota announces new production in Cambridge

GM May 2019On May 8, General Motors Canada and Unifor held a joint press conference and  issued a statement  announcing that GM will invest $170 million to save approximately 300 of the 2,600 union jobs at the Oshawa Ontario manufacturing facility, slated for closure by the end of 2019 as part of  the North American restructuring announced in November 2018.

After a vigorous and high profile union campaign against the closure, an “Oshawa Transformation Agreement” has been reached, including:

  • A $170 million investment by GM to convert the plant from vehicle assembly to stamping, related sub-assembly, and “other miscellaneous activities for GM and other auto industry customers.”
  • Part of the Oshawa Plant property will be converted into a test track for autonomous and advanced technology vehicles, to  support GM Canada’s existing  Canadian Technical Centre , in particular its Oshawa and Markham campuses where the company  develops software and hardware for Autonomous Vehicle Systems, Embedded Controls, Active Safety Systems and Infotainment.
  • The company will also donate the three-acre Fenelon Park and the 87-acre McLaughlin Bay wildlife preserve to the City of Oshawa “for the permanent benefit of all its citizens.”

But what about the workers?

A separate Jobs Transition Backgrounder states:

  • GM Canada will offer special relocations to Oshawa employees for jobs at the St. Catharines propulsion plant or the Woodstock Distribution Centre;
  • GM will offer enhanced retirement packages to retirement-eligible Oshawa Assembly employees “including vouchers toward the purchase of new GM vehicles, a benefit that will support both retiring employees and GM dealerships in Durham Region and surrounding areas.”
  • In June 2019, GM Canada, Unifor and the Ontario government will open a Jobs Action Centre in Oshawa, offering  personalized transition counselling, a skills / jobs matching database and “other supports.” Durham College, the local community college,  will support the Job Action Centre with a dedicated jobs portal and several job fairs planned for 2019.
  • Durham College, Centennial College, and Trent University Durham will offer training tailored to regional and GTA-based partner employers.
  • “GM Canada will offer training support for qualified Oshawa Assembly hourly employees.” (no further details stated in the public release).

Unifor Local 222 , which represents the workers at the Oshawa plant, have called a meeting on May 9 to inform the membership about the resolution of their grievance against the company, which sought to increase incentives and severance packages.

In better news for Ontario’s auto industry:   Starting in 2022, Toyota will begin to produce the luxury  Lexus NX at its Cambridge plant, in both gasoline and hybrid versions . ( Cambridge currently produces of the mid-size luxury Lexus RX and RX hybrid). According to a report in the  Hamilton Spectator : “Prime Minister Justin Trudeau, Deputy Ontario Premier Christine Elliott, and a host of local mayors and dignitaries were at the Fountain Street facility Monday afternoon to announce the plant had secured the right to make the company’s Lexus NX gas and hybrid compact SUVs starting in 2022. The news came almost a year after the federal government partnered with the province — at the time led by Kathleen Wynne and the Liberals — to each invest $110 million in the company as part of an overall investment of $1.4 billion by Toyota.”