Alberta’s government continues to prop up oil and gas industry with new Blueprint for Jobs, penalties for protesters

As Teck Mines and other  private sector investors rush away from oil and gas investment in Alberta and the price of oil collapses, the Alberta Legislature resumed on February 24, with a  Budget  and a new economic plan: A Blueprint for Jobs: Getting Alberta Back to Work . The Blueprint is built on five pillars: “Supporting businesses; Freeing job creators from senseless red tape; Building infrastructure; Developing skills; Selling Alberta to the world.”  Announced in a March 2 press release as the first step  in the Blueprint:  a $100 million loan to the Orphan Well Association,  promising to generate up to 500 direct and indirect jobs by financing reclamation of abandoned mining sites. The press release also promises  a future “suite” of announcements “covering the entire lifecycle of wells from start to finish”.   As The Narwhal  reports in  “Alberta loans industry-funded association $100 million to ‘increase the pace’ oftes orphan well cleanup (March 2),  this latest loan follows a 2017 loan of $235 million , as the industry-levies which fund the Orphan Wells Association fail to keep pace with the environmental mess left behind by bankrupt mining companies.

The Alberta Federation of Labour  released a statement in response to the Alberta Budget ,  “Kenney’s Budget breaks promises, delivers opposite of what Albertans voted for last year” . The AFL charges that the budget will result in more than 1,400 job cuts, especially in education (244 jobs lost), agriculture (277 jobs lost), and community and social services (136 jobs lost). Further, “Today’s budget increases the deficit by $1 billion because of this government’s short-sighted overreliance on resource revenues, while cutting billions in revenue from corporations.” A similar sentiment appeared from an opposite corner:  an Opinion piece in the mainstream Toronto Globe and Mail states: “The cost of Mr. Kenney’s inaction on economic diversification will be high. Alberta has the advantage of being home to many skilled clean-tech and renewable-energy workers already, but the speed at which the world is innovating in that area means that a lagging Alberta will result in the emigration of some of our best and brightest entrepreneurs.”

Updated:  

The Alberta Federation of Labour released another statement on March 16 , condemning the Budget proposal as an “  ideological budget that does not fit the times”.  Further, it is  “no longer worth the paper it’s written on. The revenue side of the budget is in tatters because oil is now trading nearly $30 per barrel less than projected” , and because of the Covid-19 crisis, the planned cuts to health care “will hurt, not help our province.”   The AFL is demanding that the Budget be scrapped, but the CBC reported on March 16, “Alberta government plans to accelerate budget process, add $500M to health spending” , reporting that the government dramatically curtailed study and debate , and on March 17, CBC reported “Alberta legislature approves $57-billion budget in race against COVID-19 spread”.

For those concerned about the erosion of the democratic process under the threat of the pandemic, this is a worrying sign.

And not the first worrisome sign in Alberta:  the first order of business in the new Session was  Bill 1, The Critical Infrastructure Defence Act , introduced by Premier Kenney. As described in a National Observer article here  , the Bill  proposes to discourage citizen protest by making it easier for police to intervene in blockades, and proposes individual fines for protesters of up to $10,000 for a first offence, and up to $25,000 for each subsequent day a blockade or protest remained in place. The Alberta Federation of Labour released a statement on March 6 calling on the government to withdraw the Bill immediately, stating that the justification (ie protection of rail lines) is misleading, and “The legislation is clearly designed to stop or discourage all collective action that goes against the UCP agenda, including potential labour or worker action.”

 

 

Answering Mark Carney: What are the climate plans for Canada’s banks and pension funds?

On December 18, the Bank of England was widely reported  to have unveiled a new “stress test” for the financial risks of climate change. That stress test is a proposal contained in an official BoE Discussion Paper,  2021 biennial exploratory scenario (BES) on the financial risks from climate change , open for stakeholder comments until March 2020.  Mark Carney, outgoing Governor of the Bank of England, has led the BoE to a leadership position on this issue in the financial community and will continue  in his new role as United Nations special envoy on climate action and climate finance in 2020.  In a December BBC interview reviewing his legacy, he warned the world yet again about stranded assets and asked: “A question for every company, every financial institution, every asset manager, pension fund or insurer: what’s your plan?”

What are the climate plans for Canada’s pension funds ?

shift action pension report 2019In their June 2019 report, Canada’s Pension Funds and Climate Risk: A Baseline For Engagement  , ShiftAction concludes: “Canadian pension funds are already investing in climate solutions, but at levels that are far too low relative to the potential for profitable growth, consistent with levels required to solve this challenge.” The report provides an overview, and importantly, offers tips on how to engage with and influence pension fund managers.

Since then…..

The sustainability performance of  the  Canada Pension Plan Investment Board (CPPIB) continues to be unimpressive, as documented in  Fossil Futures: The Canada Pension Plan’s failure to respect the 1.5-degree Celsius limitreleased in November ccpaFossilfuture2019 by the Canadian Centre for Policy Analysis-B.C. (CCPA-BC).  According to the CPPIB Annual Report for 2019, (June 2019) the CPPIB is aiming for full adoption of the Task Force on Climate-related Financial Disclosures recommendations by the end of fiscal 2021 (page 28).

Canada’s second largest pension fund, the Caisse de dépôt et placement du Québec (CDPQ), announced in November that CEO Michael Sabia will retire in February 2020 and move to the University of Toronto Munk School of Global Affairs and Public Policy. The press release credits Sabia with leading the Caisse to a position of global leadership on climate change, beginning in 2017 with the launch of an investment strategy which aims to increase low-carbon assets and reduce the carbon intensity of investment holdings by 25%. In 2019, the Caisse announced that its portfolio would be carbon-neutral by 2050.   Ivanhoé Cambridge ,the real estate subsidiary of the Caisse de dépôt, has a stated goal to increase low-carbon investments by 50% by the year 2020 and to reduce greenhouse gas emissions by 25% by the year 2025. In December 2019, Ivanhoé Cambridge announced that it had issued a $300 million  unsecured green bond to finance green initiatives – the first real estate corporation in Canada to do so. Shawn McCarthy reviewed Sabia’s legacy in “Canada’s second largest pension fund gets deadly serious about climate crisis”, in Corporate Knights in December.

AIMCo, the Alberta Investment Management Corporation is a Crown Corporation of the Government of Alberta, with management responsibility for the public sector pensions funds in Alberta, along with other investments. In November 2019, the Alberta government passed Bill 22, which unilaterally transfers pension assets from provincial worker plans to the control of AIMCo (see a CBC summary here ). The Alberta Federation of Labour and the province’s large unions protested in a joint statement, “Union leaders tell UCP: ‘The money saved by Albertans for retirement belongs to them, not to you!’” (Nov. 20) . The unions state: “we’re worried that what you’re attempting to do is use other people’s money to create a huge slush fund to finance an agenda that has not yet been articulated to the public – and which most people would not feel comfortable using their life savings to support.” And in December 2019, those worries seem to come true as AIMCo announced  its participation in a consortium to buy a 65% equity interest in the controversial LNG Coastal GasLink Pipeline Project from TC Energy Corporation. Rabble.ca reported on the demonstrations at AIMCo’s Toronto offices regarding the Coastal Gas project in January .

On January 8, the Toronto Star published  “Toronto asks pension provider: How green are our investments?” – revealing that the city has asked for more details from the Ontario Municipal Employees Retirement fund (OMERS). OMERS, with assets of over $100 billion, manages the pension savings of a variety of Ontario public employees, including City of Toronto and Toronto Police, Fire, and Paramedics. On January 8, OMERS announced the latest consolidation of Toronto pension plans with its consolidation of the Metropolitan Toronto Pension. Its Sustainable Investment Policy statement is here .

What are the climate plans for Canada’s private Banks?  

The 10th annual edition of Banking on Climate Change: the Fossil Fuel Finance Report Card was released in October 2019 by Banktrac, Rainforest Alliance Network and others . It states that $1.9 trillion has been invested in fossil fuels by the world’s private banks since the Paris Agreement, led by JPMorgan Chase, Wells Fargo, Citi and Bank of America. Canadian banks also rank high in the world: RBC (5th), TD (8th), Scotiabank ( 9th), and Bank of Montreal (15th).  Also in October, the World Resources Institute green-targets2published Unpacking Green Targets: A Framework for Interpreting Private Sector Banks’ Sustainable Finance Commitments , which includes Canadian banks in its global analysis and provides guidance on how to understand banks’ public documents.  “How Are Banks Doing on Sustainable Finance Commitments? Not Good Enough”  is the WRI blog which summarizes the findings.

Since then….

On September 14, the Canadian Imperial Bank of Commerce announced the release of their first climate-related disclosure report aligned with the Task Force on Climate-Related Financial Disclosures. Building a Sustainable Future highlights the CIBC’s governance, strategy, and risk management approach to climate related issues. It provides specific metrics and targets, especially for its own operational footprint, but also a commitment: “to a $150 billion environmental and sustainable finance goal over 10 years (2018-2027).”

Scotiabank also announced climate-related changes in November, including “that it would “mobilize $100 billion by 2025 to support the transition to a lower-carbon and more resilient economy”; ensure robust climate-related governance and reporting; enhance integration of climate risk assessments in lending, financing and investing activities; deploy innovative solutions to decarbonize operations; and establish a Climate Change Centre of Excellence “to provide our employees with the tools and knowledge to empower them to act in support of our climate commitments. This includes training and education, promoting internal collaboration, and knowledge and information sharing.”  Their 4-page statement on climate commitment  is here. Their  2018 Sustainable Business Report (latest available) includes detailed metrics and description of the bank’s own operations, including that they use an Internal Carbon Price of CAD$15/tonne CO2, to be reviewed every two years.

RBC, ranked Canada’s worst fossil-fueling bank in the 2019 edition of Banking on Climate Change , released a 1-page statement of their Commitment to Sustainable Finance (April 2019)  and an undated Climate Blueprint  with a target of $100 billion in sustainable financing by 2025.  However, in their new research report,  Navigating the 2020’s: How Canada can thrive in a decade of change , the bank characterizes the coming decade as “Greener, Greyer, Smarter, Slower”, but offers little hope of a change in direction. For example, the report states “ Canada’s natural gas exports can also play a role in reducing emissions intensity abroad. LNG shipments to emerging economies in Asia, where energy demand is growing much faster than in Canada, can help replace coal in electricity production, just as natural gas is doing here in Canada. …As climate concerns mount, Canada’s challenge will be to better sell ourselves as a responsible, cleaner energy producer.”

Financial giants targeted by new U.S. divestment campaign; Youth challenge the Davos elites to stop investing in the fossil fuel economy immediately

stop the money pipeline targetsLaunched at Jane Fonda’s final #FireDrillFriday event in Washington D.C. on January 10, the Stop the Money Pipeline , according to a Sierra Club press release , will consolidate a number of existing divestment campaigns and target the worst climate offenders in each part of the financial sector. The first campaign round consists of three major targets: amongst banks:  JP Morgan Chase;  amongst  insurance companies: Liberty Mutual;  and amongst asset managers, BlackRock. Groups involved in Stop the Money Pipeline are: 350.org,  Rainforest Action Network (RAN), Sierra Club, Greenpeace USA, Sunrise Project, Future Coalition, Divest Ed, Divest-Invest, Native Movement, Giniw Collective, Transition U.S., Oil Change International, 350 Seattle, EarthRights International, Union of Concerned Scientists, Majority Action, The YEARS Project, and Amazon Watch.

The Stop the Money Pipeline website  has archived some of the arguments for their campaign – including Bill McKibben’s September Commentary in the New YorkerMoney Is the Oxygen on Which the Fire of Global Warming Burns”, and “Why Big Banks Are Accused Of Funding The Climate Crisis” in  HuffPost  in October 2019.  The campaign launch has been described in “Climate Movement Takes Aim at Wall Street, Because ‘Money Is Only Language Fossil Fuel Industry Speaks‘” in Common Dreams (Jan. 9);   , and  in  “Want to do something about climate change? Follow the money” in the New York Times  on Jan. 11. In that Opinion piece, Bill McKibben and Lennox Yearwood Jr.  describe their arrest at a sit- in at the Chase Bank which was part of the campaign launch. Democracy Now also covered the events in  “Stop the Money Pipeline”: 150 Arrested at Protests Exposing Wall Street’s Link to Climate Crisis  on January 13 .

Are campaigns having any effect?

Perhaps it is just coincidence, but on January 9,  BlackRock announced it is signing on to  Climate Action 100+, a global investor network formed in 2015 and which includes California Public Employees’ Retirement System (CalPERS), HSBC Global Asset Management, and Manulife Asset Management.   BlackRock also announced a new investment strategy, summarized in  “BlackRock Will Put Climate Change at Center of Investment Strategy”   in the New York Times (Jan. 14) . The NYT article emphasizes the company’s influence as the world’s largest investment fund with over $7 trillion under management, and states that “this move … could reshape how corporate America does business and put pressure on other large money managers to follow suit.”  The new strategy is outlined in two Annual Letters from BlackRock’s CEO Larry Fink:  Sustainability as BlackRock’s New Standard for Investing , the letter to corporate clients states, “Our investment conviction is that sustainability-integrated portfolios can provide better risk-adjusted returns to investors”.  The second letter, titled A Fundamental Reshaping of Finance, acknowledges that  protests have had an impact on their position: Climate change has become a defining factor in companies’ long-term prospects. Last September, when millions of people took to the streets to demand action on climate change, many of them emphasized the significant and lasting impact that it will have on economic growth and prosperity – a risk that markets to date have been slower to reflect.”   He continues: “…. awareness is rapidly changing, and I believe we are on the edge of a fundamental reshaping of finance.… climate change is almost invariably the top issue that clients around the world raise with BlackRock. ….   In the near future – and sooner than most anticipate – there will be a significant reallocation of capital.”  However, this urgency seems somewhat at odds with another statement in the Letter to CEO’s: “…. While the low-carbon transition is well underway, the technological and economic realities mean that the transition will take decades. Global economic development, particularly in emerging markets, will continue to rely on hydrocarbons for a number of years. As a result, the portfolios we manage will continue to hold exposures to the hydrocarbon economy as the transition advances.”

Other divestment developments:

Urgency is a key theme in a new public call by Greta Thunberg and other youth leaders.  “At Davos we will tell world leaders to abandon the fossil fuel economy” – an Opinion piece carried by The Guardian on January 10,  directed to the world’s economic elite scheduled to gather at the World Economic Forum in Davos at the end of January. The core message is urgent:  “We call upon the world’s leaders to stop investing in the fossil fuel economy that is at the very heart of this planetary crisis. Instead, they should invest their money in existing sustainable technologies, research and in restoring nature.. …Anything less than immediately ceasing these investments in the fossil fuel industry would be a betrayal of life itself. Today’s business as usual is turning into a crime against humanity. We demand that leaders play their part in putting an end to this madness. Our future is at stake, let that be their investment. An article in Common Dreams on January 10 highlights the youth campaign and notes that it aligns with Stop the Money Pipeline .

C40 Cities released a new toolkit on January 7:  Divesting from Fossil Fuels, Investing in Our Future: A Toolkit for Cities.   The toolkit is directed at city officials, outlining steps required to divest their pension funds from fossil fuels. It includes eight successful case studies –  from Auckland, Berlin, Copenhagen, London, MelbourneNew York City, Oslo, and Stockholm – all of whom have divestment experience and none of whose city pension funds were negatively impacted by divestment.  C40 Cities is a network of 94 municipalities with a population of over 700 million people, active in promoting climate change action at the municipal level.

European Investment Bank stops fossil funding; Bank of Canada acknowledges the dangers of stranded assets

european investment bank energy_lending_policy_enThe long-awaited decision came on November 13, when the European Investment Bank (EIB) issued a press release announcing that “ We will stop financing fossil fuels and we will launch the most ambitious climate investment strategy of any public financial institution anywhere.”  Also, “…..The EIB will work closely with the European Commission to support investment by a Just Transition Fund. The EIB will be able to finance up to 75% of the eligible project cost for new energy investment in these countries. These projects will also benefit from both advisory and financial support from the EIB.”  The Guardian summarizes the policy here ; details are in the full document, EIB Energy Lending Policy: Supporting the energy transformation.

The decision ends a long and contentious review process which received more than 149 written submissions and petitions signed by more than 30,000 people.  National members of the EU negotiated and compromised – the German government had been expected to abstain from the vote but ended by supporting the measure.  A press release from WWF-Europe  is generally supportive, stating “All public and private banks must urgently follow suit” – while pointing out that the decision postpones the end of financing for gas projects until 2021, and allows for further financing for any gas infrastructure that could potentially transport so-called “green gas”. A summary in Clean Energy Wire quotes Claudia Kemfert, climate economist at the German Institute for Economic Research, who calls the EIB decision “a game changer”, and says, “Even if there’s still a backdoor for fossil gas included, this is an important and necessary step in the right direction.”

Bank of Canada acknowledges climate change risks to the economy

On November 19, the Bank of Canada published its most complete statement to date about the transitions and risks which climate change will bring, in Researching the Economic Effects of Climate Change , a report prepared by Miguel Molico, senior research director at the bank’s Financial Stability Department.  On November 21, the Governor of the Bank of Canada followed up on this by raising the issue of climate change and the risk of stranded assets during an address to the Ontario Securities Commission .  The National Observer summarizes the development in “Bank of Canada warns of stranded assets and an abrupt transition to clean economy” (Nov. 23).

Also in Canada, on November 19, the Institute for Sustainable Finance was launched Housed at the Smith School of Business at Queen’s University, Kingston Ontario : “ The Institute for Sustainable Finance (ISF) is the first-ever cross-cutting and collaborative hub in Canada that fuses academia, the private sector, and government with the singular focus of increasing Canada’s sustainable finance capacity.” A more formal statement comes in the Institute’s launch report:  Green Finance: New Directions in Sustainable Finance Research & Policy  which states: “the Institute will span a continuum of expertise from across varying disciplines, including finance, economics, environmental studies, political science and others, in order to foster innovative research, education, external collaborations and partnerships. The Institute’s mandate is threefold:

  •  Generate innovative and relevant research on sustainable finance and effectively communicate this research to all pertinent stakeholders.
  • Serve as a platform for collaboration between government, academia and industry.
  • Provide educational opportunities and develop capacity in the field of sustainable finance.”

The Green Finance report summarizes the discussions by financial experts at a conference by the same name, held on June 14-15, 2019, following the release of the Report of the government’s Expert Panel on Sustainable Finance – Mobilizing Finance for Sustainable Growth.  To help readers who are not financial experts,  the Institute website offers useful “primers” to explain some fundamental concepts in sustainable finance, including  Climate-Related Financial Disclosures, Divestment, and Transition Bonds. Not to be confused with Just Transition funding, the primer explains that “Transition Bonds” are corporate financing tools, and the companies who issue them must use the proceeds to fund a business transition towards a reduced environmental impact or reduction in carbon emissions. ( The example given is that a coal-mining company could issue a  transition bond to finance efforts to capture and store carbon.)

Institute for sustainable financeAs one of its first actions, the ISF established the Canadian Sustainable Finance Network (CSFN)  an independent formal research and educational network for academia, industry and government to bring together a talented network of university faculty members and relevant members from industry, government and civil society.  A list of members, here , includes multiple faculty from twelve Canadian universities, one from Yale in the U.S., and other individual academics from universities which are not institutional members (including UBC, HEC Montreal, and Memorial University).

 

San Francisco Federal Reserve Bank commissions studies of climate change risks to the economy, impacts on labour productivity

In “Scared Central Banks Face Up to Threats From Climate Change”  (Sept. 23) , Bloomberg News reported that “Most major central banks — with the exception of the U.S. Federal Reserve — are joining forces to promote sustainable growth, after realizing that climate change threatens economic output and could even sow the seeds of a financial crisis.”  Now it appears that even the U.S. Federal Reserve Bank, or at least one of its components, the San Francisco Fed., is catching up to the rest of the world. Climate Change and the Federal Reserve  drew attention when it was published by the San Francisco Fed in March 2019,  and a special climate change-themed issue of the newsletter, Community Development and Innovation Review  was published by the San Francisco Fed in October , highlighting independent economic analysis it had commissioned.  The New York Times summarizes that research in  “Bank Regulators Present a Dire Warning of Financial Risks From Climate Change ”.

The economic research was also highlighted  in a conference on November 8. Host Mary Daly, President and CEO of the Federal Reserve Bank of San Francisco, introduced the event with  a speech entitled, “Why Climate Change Matters to Us ” .  Two highlighted conference papers: “Climate change: Macroeconomic impact and implications for monetary policy ” presented  by Sandra Batten from the Bank of England, which explains why central banks care about climate change, and includes the warning that “for each degree the temperature rises above a daily average temperature of 59°F, productivity declines by 1.7%”.   In “Long-Term Macroeconomic Effects of Climate Change: A Cross-Country Analysis “, six academics from the U.S., U.K. and Taiwan modelled the links between  historical levels of temperature and precipitation and changes in labour productivity. They conclude that global GDP per capita could fall 7% by 2100 in the absence of climate change mitigation effects, but that loss could be reduced to 1% by conforming to the Paris Agreement.

Of related interest:  SHARE Canada (Shareholder Association for Research and Education) summarizes the position of the major Canadian banks in an October 10 blog post “Responsible Banking – Part 2: Aligning finance with the goals of the Paris Climate Agreement .”

What if the financial sector moved away from fossil fuel investments?

On September 17, Bill McKibben, a leader of the divestment movement, wrote Money is the oxygen on which the fire of global warming burns , published in The New Yorker. The essay traces the progress of the divestment movement and asks, What if the banking, asset-management, and insurance industries moved away from fossil fuels?. On the same day came the announcement that “ University of California drops fossil fuels from its $80 billion portfolio”.   An article in Rolling Stone  quotes the UC representatives, stating “it wasn’t moral or political pressures that convinced them to phase UC’s hundreds of millions of dollars in fossil-fuel investments. Instead, they say, it was the growing realization that fossil fuel investments no longer made financial sense and weren’t a worthwhile investment.”

Investment performance of Fossil fuel companies

In what has been seen as an historical turning point, ExxonMobil lost its spot on the S&P Index list of “Top Ten Companies” in August 2019 –  the first time it had not appeared since the Index launched in 1957.  In 1980,  the energy sector as a whole represented 28% of the S&P 500 Index; as of August 2019, it represents  4.4%.  According to a summary by the Institute for Energy Economics and Financial Analysis (IEEFA), the energy sector claimed last place in the S&P rankings of sector performance in August 2019, following similar results in 2018 and 2017.“This is not some temporary aberration. The oil and gas sector is in decline, profits are shrinking and investment options problematic …. This is true even for companies like ExxonMobil that historically have deep pockets.”

The full Briefing Note,  ExxonMobil’s Fall From the S&P 500 Top Ten: A Long Time Coming (August 2019) also includes discussion of the role Canada’s oil sands have played in the decline of the industry.  Carbon Tracker Initiative provides further information in Exxon’s New Clothes – the tale of why Exxon lost its prized position in the S&P 500 .

Are the banking, asset-management, and insurance industries moving  away from fossil fuels?  

New initiatives launched at U.N. Climate Summit in New York in September point in that direction:

  1. 130 banks from 49 countries signed on to the Principles for Responsible Banking (PRBs), committing to align their business operations with the Paris Climate Agreement and the Sustainable Development Goals. Despite the fact that the Bank of Canada issued a report flagging the investment risks of climate change in May, the only signatories from Canada were the National Bank of Canada and the Desjardins Group . Hardly surprising, given the April 2019 Fossil Fuel Report Card from Banktrack , which showed that Canada’s big banks rank 5th, 8th, 9th and 15th in the world for fossil fuel invesment since the Paris Agreement in 2015. In response to the PRI pledge, civil society groups issued a statement, “No More Greenwashing: Principles must have Consequences ”  which highlights the lack of concrete plans and the slow time frame: signatory banks are allowed up to four years to demonstrate their implementation of the principles.  A thorough discussion published by Open Democracy asks “The UN banking principles are welcome – but do they go far enough to stop climate destruction?
  2. A new Net Zero Asset Owner Alliance  was launched, convened by the U.N. Environmental Program’s  Finance Initiative and the Principles for Responsible Investment, and supported by WWF as part of its Mission 2020 campaign. The Net Zero Asset Owner Alliance signatories are insurance and pension fund management companies which hold approximately $2.3 U.S. Trillion. Their commitment document  pledges to re-balance those investment portfolios to make them carbon neutral by 2050, with intermediate targets set for 2025, 2030 and 2040. Founding members include   German insurer Allianz, the California Public Employees’ Retirement System (CalPERS), Swedish pension fund Alecta, PensionDanmark, Swedish pension manager AMF, Nordea Life & Pension, Norwegian insurer Storebrand, and Swiss RE.
  3. European investment bank-logo-enThe European Investment Bank strengthened its climate commitments at the U.N. Climate Summit  pledging to “ position the EIB as an incubator for climate finance and expertise to mobilise others, helping our societies and economies transform to a low carbon future.” Specifically, the bank pledged that 50% of new investments will be for climate action and environmental sustainability by 2025 (previously the target had been 30% by 2020). Also,  “we aim to align all our financing activities with the principles and goals of the Paris agreement by the end of 2020. As an important first step, we will phase out energy projects that depend solely on fossil fuels.”
  4. financing the low carbon futureThe Climate Finance Leadership Initiative (CFLI) , chaired by Michael Bloomberg, released  Financing the Low Carbon Future  , a thorough but readable analysis of how clean energy investment works globally, with practical recommendations . The CFLI is composed of  senior executives of seven major private-sector financial institutions– Allianz Global Investors, AXA, Enel, Goldman Sachs, HSBC, Japan’s Government Pension Investment Fund (GPIF) and Macquarie.
  5. Over 500 environmental and advocacy groups from 76 countires supported the Lofoten Declaration at the U.N. Climate Action Summit. The Lofoten Declaration , (named after the Lofoten Islands of Norway where it was first drafted in 2017) states in part: “It is the urgent responsibility and moral obligation of wealthy fossil fuel producers to lead in putting an end to fossil fuel development and to manage the decline of existing production.”  Canada is one of those countries, and Catherine Abreu of Climate Action Network Canada was one of the supporters, stating: “True leadership in response to the climate emergency means having the courage to commit to ending the expansion of oil and gas production and make a plan to transition communities and workers to better opportunities.”  A summary  appears in “If a House Is on Fire, You Don’t Add Fuel’: 530 Groups Back Call to Rapidly Phase Out Fossil Fuels Worldwide” in Common Dreams (Sept. 23); Background to the Lofoten Declaration here  .

Much remains to be done:  Consider the September 2019 report by Carbon Tracker Initiative.  Breaking the HabitWhy none of the large oil companies are “Paris-aligned”, and what they need to do to get there. The report examines oil company investment activities , and concludes:

  • Last year, all of the major oil companies sanctioned projects that fall outside a “well below 2 degrees” budget on cost grounds. These will not deliver adequate returns in a low-carbon world. Examples include Shell’s $13bn LNG Canada project and BP, Total, ExxonMobil and Equinor’s Zinia 2 project in Angola.
  • No new oil sands projects fit within a Paris-compliant world. Despite this, ExxonMobil sanctioned the $2.6bn Aspen project last year – the first new oil sands project in 5 years.
  • The oil and gas in projects that have already been sanctioned will take the world past 1.5ºC, assuming carbon capture and storage remains sub-scale.

And Global Trends in Renewable Energy Investment 2019 , commissioned by the United Nations, was published in September, reporting the good news that  global investment in new renewable energy capacity, led by solar power, “ is set to have roughly quadrupled renewable energy capacity (excluding large hydro) in the decade ending in 2019. Renewables accounted for 12.9 percent of global electricity in 2018—and if hydropower is also included, the renewable’s share of global electricity production is  measured at 26.3%.  Cost-competitiveness of renewables has “risen spectacularly over the decade, as the levelised cost of electricity has been steadily decreasing, down 81 percent for solar photovoltaics and 46 per cent for onshore wind since 2009.”

Yet despite this good news, the report states: “Overall, we note that these figures represent a small share of the overall economic transition required to address climate change…. global power-sector emissions are likely to have risen by at least 10 percent between the end of 2009 and 2019.”

 

New report recommends mandatory financial disclosure of climate-related risks for Canadian companies

iisdleveraging-sustainable-financeThough written mainly for a financial audience, a new report from the International Institute for Sustainable Development (IISD) is relevant to the livelihoods and pensions of all Canadians.  Leveraging Sustainable Finance Leadership in Canada: Opportunities to align financial policies to support clean growth and a sustainable Canadian economy was released on January 16,  examining and making  recommendations for Canadian companies to disclose climate change risks to their shareholders and to the public. A press release summarizes the report.  Why is it so important?  It concludes with an analysis of financial disclosure in the oil and gas industry, (found in Annex E), and this warning about the dangers to us all of stranded assets: “When these emissions are counted via proved and probable reserves, as disclosed by Canadian oil and gas companies, a picture emerges of significant, undisclosed—and therefore unaddressed—risks to Canadian companies, financial institutions, pension beneficiaries and savers…. Once the implications of the Paris Agreement are fully priced into the market, oil and gas asset valuations will shift. If this change is sufficiently large, debt covenants may be triggered in companies. This will in turn impact financial institutions, including banks, insurance companies and pension funds. Debt downgrading could ensue, and bank capitalization thresholds could be impacted.” (And a related risk for oil and gas companies:  in December 2018, the Canadian Shareholders Association for Research and Education (SHARE) joined an international campaign for improved disclosure by oil and gas companies of the water-related risks of their operations ).

What is to be done?  Canada’s transition to a lower carbon economy requires private investment capital, and Canada’s financial markets cannot operate in isolation.  Canada has a lot of regulatory “catching up” to do regarding climate risk, (outlined in “Data Gap” in Corporate Knights magazine in May 2018) , and  evidenced by the examples given throughout the report of current practice amongst  European Union , G7 and G20 countries. The report shows the state of  Canadian regulation, with  frequent reference to the two major Canadian studies to date on the issue:  the Interim Report of the government-appointed Expert Panel on Sustainable Finance (Oct. 2018), and the Canadian Securities Association Staff Notice 51-354 (April 2018).  In Leveraging Sustainable Finance Leadership in Canada, author Celine Bak, sets out a three-year policy roadmap for Canada, calling for Canadian laws and statutes to be updated to require mandatory disclosure of climate risk by 2021. The report also calls for the Toronto Stock Exchange to  join the UN Sustainable Stock Exchanges Initiative, and that the the Canada Pension Plan Investment Board  be required to report on the climate change risks which might affect its fully-funded status.  Detailed and concise summaries are provided in the Annexes, titled:  “An Overview of the Key Reports on Corporate and Financial Sector Climate- and Environment-Related Disclosure”; “G20 and G7 Precedents for Implementation of TCFD Recommendations in Canada”; and  “Analysis of EU Sustainable Finance Proposed Actions, EU Laws and Canadian Equivalents”.

Expect more discussion and publications about sustainable finance issues, as Canada’s Expert Panel  concludes its public consultations at the end of January 2019, and releases its final report later in the year.  The European Union Technical Expert group on Sustainable Finance (TEG) is also expected to report in June 2019,  and the international  Task Force on Climate-Related Financial Disclosures Task Force will publish a Status Report in June 2019,  updating its first report,  published in September 2018, with analysis of disclosures made in 2018 financial reports .

Corporate Disclosure of climate change risks, and shareholder action by BCGEU on sustainability

The British Columbia Government and Services Employees’ Union  (BCGEU) issued a press release on April 20 to announce its partnership with the global advocacy group SumOfUs (Fighting for people over profits).  Over the summer, on behalf of BCGEU, SumOfUs will file proposals at annual general meetings of Canadian companies,  calling  for greater fairness in corporate governance and increased scrutiny around human rights and labour practices as well as of the impacts of deforestation.

BCGEU President Stephanie Smith stated “As a union, we need to make sure that funds our members count on, such as the strike fund, are financially healthy and this requires careful and responsible investment decisions. …Calling for greater corporate responsibility as a shareholder is not only financially prudent, but it allows us to pursue our values as a labour union as well.”  This is not the first time BCGEU has taken initiative  – in 2014,  the union divested its strike fund and general reserves from fossil fuel equities, and saw in increase in values.

With a similar strategy, the Fonds de Solidarité des Travailleurs du Québec (FTQ), empowered SHARE (Shareholder Association for  Research and Education), to file a shareholder proposal at the April 27 annual meeting of Imperial Oil, requesting better disclosure on its exposure to and management of water-related risks in its oil and gas operations.

Even Canada’s financial regulators are moving in the direction of increased transparency and disclosure for corporations. The Canadian Securities Administration,  concluding a process which had stretched out for over a year, issued a press release on April 5, announcing   CSA Staff Notice 51-354 Report on Climate change-related Disclosure Project.  The report announced  its intention to consider new disclosure requirements relating to material risks and opportunities and “how issuers oversee the identification, assessment and management of material risks.  This would include, for example, emerging or evolving risks and opportunities arising from climate change, potential barriers to free trade, cyber security and disruptive technologies.”

And on April 12, Minister of the Environment and Climate Change announced  the creation of an  Expert Panel on Sustainable Finance. Part of the mandate of the Expert Panel will be to  explore the issue of  voluntary standards for corporate disclosure of the financial risks associated with climate change, and to provide  recommendations to the federal government by the fall of 2018. Full Terms of Reference are here .  The Expert Panel is expected to build upon the work of the CSA Task Force, and the earlier, international Task Force on Climate-related Financial Disclosures (TCDF), led by Michael Bloomberg,  and chaired by  Mark Carney. Canada’s new Expert Panel will be chaired by Tiff Macklem, Dean of the University of Toronto’s Rotman School of Management and former Senior Deputy Governor of the Bank of Canada; the other three members are Andy Chisholm, member of the Board of Directors of the Royal Bank of Canada; Kim Thomassin, Executive Vice-President, Legal Affairs and Secretariat, Caisse de dépôt et placement du Québec; and Barbara Zvan, Chief Risk and Strategy Officer, Ontario Teachers’ Pension Plan.

For context on the issue of corporate disclosure, read “Investigation finds nearly half  of Canadian failing to  Disclose Climate-Related Risk” from the National Observer (April 5), and, in the opposite direction in the United States, In ‘Attack on Shareholder Rights,’ SEC Seeks to Sideline Activist Investors .

Clean Tech investment in Canada held back by a “fossil fuel comfort zone” and lack of financial disclosure

Canadian cleantech startups get ready for a breakout year”  appeared in the Globe and Mail on January 3, 2018 citing a 2017 report by Cleantech Group, which ranked Canada  “fourth in the world as a clean-technology innovator – and tops among Group of Twenty countries – up from seventh place in 2014.” Then on January 24, the San Francisco-based company Cleantech Group  released its ninth annual Global Cleantech 100 list for 2018 ; the List includes 13 Canadian companies, and the full Report is here (free; registration required).   Sure enough, Canada has improved its showing.  And on January 18, the Government of Canada announced that the federal government  will invest $700 million over the next five years  through the Business Development Bank of Canada (BDC) “ to grow Canada’s clean technology industry, protect the environment and create jobs “, as part of its larger Investment and Skills funding.  The same press release also announced the launch of the Clean Growth Hub, the government’s “focal point for clean technology”, which will focus on supporting companies and projects that produce clean technology, as well as coordinate existing programs and track results.

Yet in reaction to the government’s announcement,  the president of Analytica Advisors, which publishes an annual review of Canadian clean tech, had this to say in the National Post : “A $700-million investment to help clean technology firms expand and develop new products won’t turn Canada’s clean-tech industry into the “trillion dollar opportunity” the government keeps touting until we get out of our fossil-fuel comfort zone”.  She also co-authored an OpEd in the Globe and Mail, “Canada’s financial sector is missing in action on climate change” (Jan. 23)   where she berates the Canadian financial community for sitting on the sidelines amidst international initiatives for more climate-risk disclosure so that those risks can be priced into investment decisions.   For an update on the Canadian scene regarding this issue, see “Modernizing financial regulation to address climate-related risks” by Keith Stewart,  in Policy Options (Feb. 2).

 

Corporate Climate Risk Disclosure needed to protect Pensions

To protect pensions, companies should be required to come clean on climate risk” writes Keith Stewart of Greenpeace Canada in an Opinion piece in the National Observer on November 27.  Stewart reports that Greenpeace Canada has filed a formal request under Ontario’s Environmental Bill of Rights, for the Ontario government to review the need for mandatory disclosure of climate-related risks in corporations’ financial filings. The government’s response is expected by the end of 2017.  This is the latest of recent and ongoing calls for increased corporate disclosure of the risks posed by climate change,  to protect investors and financial stability.  The issue has even made it to the conservative Report on Business of the Toronto Globe and Mail newspaper, in  “Business risk from climate change now top of mind for Canada’s corporate boards” (November 22)  . The article warns that Canada’s  stock markets are  particularly vulnerable to a potential “carbon bubble” in the valuations of fossil-fuel-dependent companies, given that the Toronto Stock Exchange is so heavily weighted with energy and mining companies (20 per cent for that category, as compared with only 2 per cent for clean technology and renewable-energy companies).  And that’s not the worst:  on the TSX Venture Exchange, mining and oil and gas companies account for 68 per cent of the index.  (Such a resource sector dependency was part of the reasoning given by the Norweigian Wealth Fund for its proposal to divest oil and gas investments (Nov. 16)).

Another related Globe and Mail article provides an excuse for the current state of climate risk disclosure in Canada in  “Companies Looking to Report Environmental Data Also Navigate Inconsistent Frameworks” (Nov. 22) . The article states that “There is a dizzying number of best-practice guidelines for climate disclosures” and lists the major ones – with information drawn largely from the Carrots & Sticks database . In fact, Carrots & Sticks lists  nine sustainability reporting instruments unique to Canada, in addition to widely-recognized international ones such as the Principles for Responsible Investment (PRI) Reporting Framework  and the OECD Guidelines for Multinational Enterprises  .  (Carrots & Sticks  is an initiative begun in 2006 by KPMG International, Stichting Global Reporting Initiative, UNEP, and the Centre for Corporate Governance in Africa, with the goal of encouraging and harmonizing financial disclosure guidelines.)

Most recently, the Task Force on Climate-related Financial Disclosures, led by Marc Carney and Michael Bloomberg, released their  landmark Final Report and Recommendations in 2016. The following Canadian pension funds have, at least on paper, supported it:  Canada Pension Plan Investment Board, Ontario Teachers’ Pension Plan, OPTrust, the Caisse de dépôt et placement du Québec and the British Columbia Investment Management Corporation.  The Canadian Securities Administrators  launched a Climate Change Disclosure Review  in March 2017 to investigate and consult re Canadian practice, which will issue a report “upon completion of its review”.

And across the globe in Australia, the  Australian Prudential Regulation Authority (APRA), the  regulator of the financial industry, has  also announced an industry-wide review of climate-related disclosure practices.  On November 29, an Executive Board member of the APRA delivered a speech, “The weight of money: A business case for climate risk resilience” , in which he outlines the Australian perspective on climate-related financial risks, and states:  “So while the debate continues about the physical risks, the transition to a low carbon economy is underway, and that means the so-called transition risks are unavoidable: changes to market sentiment, new financial or environmental regulations, or the emergence of new technologies with the potential to prompt a reassessment of the value of a large range of assets, and consequently the value of capital and investments.”  The speech is summarized in The Guardian.

Pension Funds ill-prepared for the risks of Stranded Assets

A survey by Asset Owners Disclosure Project (AODP) found that only 76 of the 500 largest asset owners in the world (pension funds, insurance funds, foundations and endowments) have taken meaningful action to manage climate risk. 21 of the 32 large Canadian institutional investors in the survey scored badly, including the Alberta Heritage Savings Trust Fund and the Ontario Public Service Pension Plan. “ Risky Management ”  at Corporate Knights magazine (April 29) provides a summary of the survey results. The full report is at the AODP website .

The Asset Owners Disclosure Project (AODP) is an independent not-for-profit global organisation whose objective is to protect retirement savings and other long term investments from the risks posed by climate change. AODP and a London-based environmental law firm, ClientEarth, have announced they will work with pension fund members to challenge trustees and managers to fulfill their legal duty to protect investments from climate risk. The campaign could result in a test case to clarify the legal duties of pension fund fiduciaries.