Canadian banks still investing in yesterday’s economy – fossil fuels

offshore oil rigBanking on Climate Change – Fossil Fuel Finance Report Card 2019 , the 10th annual report by BankTrack and a coalition of advocacy groups, has been expanded to include coal and gas investors, as well as oil, as it ranks and exposes the  investment practices of 33 of the world’s largest banks. The newly-released report for this year reveals that $1.9 trillion has been invested in these fossil fuels since the Paris Agreement, with the four biggest investors  all U.S. banks – JPMorgan Chase, Wells Fargo, Citi and Bank of America. But Canadian banks rank high: RBC ranks fifth, TD ranks 8th, Scotiabank ranks 9th, and Bank of Montreal ranks 15th.  Among those investing in tar sands oil : “five of the top six tar sands bankers between 2016 and 2018 are Canadian, with RBC and TD by far the two worst.”

In addition to the investment tallies, the report  analyzes the banks’ performance on human rights, particularly Indigenous rights, as it relates to the impacts of specific fossil fuel projects, and climate change in general.  The report also describes key themes, such as tar sands investment, Arctic oil, and fracking.

In response to the Banking on Climate Change report, SumofUs has mounted an online petition It’s time for TD, RBC and Scotiabank stop funding climate chaos.    An Opinion piece in The Tyee,  “How Citizens can stop the big five ” calls for a citizens strike on Canadian banks – particularly by young people and future mortgage investors, and points out the alternatives: credit unions, non-bank mortgage brokers, and ethical investment funds, (such as Genus Capital of Vancouver ).  But while individual Canadians can make ethical choices, that doesn’t seem to be the path of our public pension plan, the Canada Pension Plan Investment Board, which manages $356.1 billion of our savings.  On March 19, Reuters reported that the CPPIB  will invest $1.34 billion to obtain a 35% share in  a $3.8 billion joint venture with U.S. energy firm Williams to finance gas pipeline assets in the Marcellus and Utica shale basins.

Investment attitudes are shifting away from fossils:  The Norwegian Sovereign Wealth Fund continues to lead the way: In March, it announced it would divest almost $8 billion in investments in 134 companies that explore for oil and gas; in April, it  announced it will  invest in renewable energy projects that are not listed on stock markets – a huge marekt and a significant signal to the investment community, as described in   “Historic breakthrough’: Norway’s giant oil fund dives into renewables” in The Guardian (April 5) .

In Canada, with the Expert Panel on Sustainable Finance   scheduled to report shortly, the Bank of Canada announced on March 27 that it has joined the  Central Banks’ and Supervisors’ Network for Greening the Financial System (NGFS), an international body established in December 2017 to promote best practices in climate risk management for the financial sector.  (This is despite the fact that Bank of Canada Governor Stephen Poloz discussed the vulnerabilities and risks in Canada’s financial system in his year-end progress report in December  2018   – without ever mentioning climate change. )  In the U.S., on March 25, the head of the  Federal Reserve Bank of San Francisco released Climate Change and the Federal Reserve  , which states: “In this century, three key forces are transforming the economy: a demographic shift toward an older population, rapid advances in technology, and climate change.”  A discussion of both these developments appears in “Bank of Canada commits to probing climate liabilities” in The National Observer (March 27) .

And if we needed more proof that coal is a dying industry:  The Institute for Energy Economics and Financial Analysis released Over 100 Global Financial Institutions Are Exiting Coal, With More to Come  in February, drawing on the ongoing and growing  list of banks which have stopped investing in new coal development, as maintained by BankTrack.   The detailed IEEFA report states that “34 coal divestment/restriction policy announcements have been made by globally significant financial institutions since the start of 2018. In the first nine weeks of 2019, there have been five new announcements of banks and insurers divesting from coal. Global capital is fleeing the thermal coal sector.”  Proof: global mining giant Glencore announced on February 20 that it would cap its coal production at current levels in  “Furthering Our Commitment to the Transition to a Low-Carbon Economy. “

Scrap the Infrastructure Bank, says CUPE

GO transit stationThe federal government first announced its plans for an Infrastructure Bank in the Fall 2016 Economic Statement, and fleshed out an implementation schedule and funding in the Budget released in March 2017   .  The  Infrastructure Bank website here  describes: “If approved by Parliament, the Bank would invest $35 billion from the federal government into transformative infrastructure projects.  $15 billion would be sourced from the over $180 billion Investing in Canada infrastructure plan, including: $5 billion for public transit systems; $5 billion for trade and transportation corridors; and, $5 billion for green infrastructure projects, including those that reduce greenhouse gas emissions, deliver clean air and safe water systems, and promote renewable power.”  It will function as an arms-length Crown corporation “and would work with provincial, territorial, municipal, Indigenous, and private sector investment partners to attract pension funds and other institutional investors to new revenue-generating infrastructure projects that are in the public interest.”  A May 13 press release from the responsible Minister of Infrastructure and Communities announces that the selection process for senior management positions has begun, and the goal is to launch the Bank in 2017. The enabling legislation is buried deep in the enormous Bill C-44, the Budget Implementation Act  (as Division 18 of Part 4) . Bill C-44 is now in 2nd reading in the House of Commons, and the Finance Committee began a clause-by-clause review of the legislation in the week of May 29.

There is no shortage of criticism and critics of the Infrastructure Bank, from across the political spectrum.  In “Where Were They Going Without Ever Knowing the Way? Assessing the Risks and Opportunities of the Canada Infrastructure Bank”,  (May 4) economists at the University of Ottawa Institute of Fiscal Studies and Democracy argue that the case for the infrastructure bank is weak since Canada doesn’t yet have a comprehensive inventory of the status of existing infrastructure. (The May 18 report  submitted to Canada’s Climate Change Adaptation platform may answer some of those objections) .

The Canadian Union of Public Employees (CUPE) is leading the union charge of criticism , mostly on the grounds that the infrastructure bank encourages and enables privatization of public projects. Even before the March budget was delivered, CUPE Economist Toby Sanger wrote  Creating a Canadian infrastructure bank in the public interest  , published by the Canadian Centre for Policy Alternatives.  After the budget was delivered,  CUPE’s initial response  was published in April .  In May, CUPE compiled expert criticisms here   , and on May 29, the union issued the call to  “Scrap bank of privatization, build infrastructure for Canadians” . CUPE also presented a detailed brief  to government committees in May, with ten points of criticism and recommendations for change so that public bridges, roads and waterways remain under public control.

A New tool for Responsible Investing and Divesting in Canada

As it does every year to coincide with the World Economic Fund Meetings, Canadian magazine Corporate Knights released its rankings of the 100 Most Sustainable Corporations in the World in January 2016 . Perhaps surprisingly given the current VW emissions scandal, a German automaker, BMW, is ranked #1 in sustainability, based on its energy, waste and water reduction performance and for linking the salary of its senior executives to their sustainability performance. Corporate Knights also introduces its Eco Fund ratings , along with a discussion of responsible investing , “to make it easy for Canadian investors to see which funds provide the best combination of economic and environmental performance.” Canadian mutual funds are ranked, with calculations of their 3-year annualized returns, weighted carbon intensity, and exposure to green companies.  Such ranking may prove useful to the financial managers at the University of Toronto, who are currently considering the recommendations of a Presidential Advisory committee on divestment from fossil fuels . The committee has recommended that the university determine a method to evaluate whether a given fossil fuels company’s actions blatantly disregard the 1.5-degree threshold, and then proceed with “targeted and principled divestment from specific companies in the fossil fuels industry”.   Alternatives Journal puts this in context of the wider university divestment movement in “U of T could make Divestment History” (Dec. 2015)  . Disappointingly, the Globe and Mail reported on December 23 “Ontario Teachers, CPPIB opt to maintain fossil-fuel assets” . The Ontario Teachers’ Pension Plan and Canada Pension Plan Investment Board say they are committed to their roles as “engaged investors”, seeking transparency from companies regarding risk.     On January 1, 2016, Marc Lee summarized the issues in The Tyee and asked, “Is your Pension Fund in Climate Denial?

New York Climate Summit: Labour Marches and Business Makes Pledges

The New York Times Editorial Board pronounced its verdict on the U.N. Climate Summit – focussing on the People’s March rather than the official meetings, and noting “a palpable conviction that tackling climate change could be an opportunity, and not a burden”.

The article notes that cooperation between the U.S. and China could create the conditions for a breakthrough agreement in 2015, “But what might really do the trick – if Climate Week is any guide – is the emergence of a growing bottom-up movement for change”. In an article in Truthout, Abby Scher summarizes the support for the People’s March by national unions in the U.S., including Service Employees (SEIU) and Communication Workers of America, as well as the New York state and city unions and the community-labour alliances which have taken root in New York since Hurricane Sandy.

The business community made headlines with its reports and announcements over the Climate Summit week: a Global Investor Statement by nearly 350 global institutional investors representing over $24 trillion in assets, calling for stable, reliable and economically meaningful carbon pricing and a phase-out of fossil fuels; the Carbon Tracker Initiative published a report for investors to measure their risk exposure and start directing capital away from high cost, high carbon projects; the new We Mean Business coalition released The Climate has Changed report; and iconic companies like Kellogg’s, Nestle, Apple, and IKEA and others released their own statements supporting climate change action.

CalPERS, the largest public pension fund in the U.S., pledged to measure and publicly disclose the carbon footprint of its $300 billion investment portfolio, and the California State Teachers Retirement System announced that it will increase its clean energy and technology investments from $1.4 billion to $3.7 billion over the next five years. And according to a New York Times summary of business initiatives: “The major Indonesian palm oil processors, including Cargill, issued a separate declaration on Tuesday pledging a crackdown on deforestation, and asking the Indonesian government to adopt stronger laws. Forest Heroes, an environmental group, called the declaration “a watershed moment in the history of both Indonesia and global agriculture. We should not underestimate the significance of what is happening”.

And for an interesting, more neutral point of view: consider the special report Climate Protection as a World Citizen Movement, presented to the German Federal Government on the occasion of the UN Climate Summit in New York. The German Advisory Council on Global Change (WBGU) recommends a dual strategy for international climate policy: governments should negotiate the global phasing-out of fossil CO2 emissions at the Paris meetings in 2015, while civil society initiatives, including those of trade unions and religious organizations, should be supported and encouraged.

LINKS:

“A Group Shout on Climate Change” Editorial in the New York Times (September 27) is at: http://www.nytimes.com/2014/09/28/opinion/sunday/a-group-shout-on-climate-change.html?emc=edit_th_20140928&nl=todaysheadlines&nlid=67440933&_r=0. In contrast, see also “Moving Forward after the People’s Climate March” in Canadian Dimension at: https://canadiandimension.com/articles/view/moving-forward-after-the-peoples-climate-march

“At Least Some Unions Step Up for Big Climate March!” by Abby Scher in Truthout at: http://www.truth-out.org/news/item/26137-at-least-some-unions-step-up-for-big-climate-march, with a list of the unions who officially endorsed the People March at: http://peoplesclimate.org/organizedlabor/. See also the BlueGreen Alliance statement at: http://www.bluegreenalliance.org/news/latest/members-of-labor-environmental-partnership-front-and-center-in-peoples-climate-march

For Business documents, see Global Investor Statement is at: http://investorsonclimatechange.org/; Carbon Supply Cost Curves: Evaluating Financial Risk to Oil Capital Expenditures is at the Carbon Tracker Initiative at: http://www.carbontracker.org/report/carbon-supply-cost-curves-evaluating-financial-risk-to-oil-capital-expenditures/; We Mean Business website is at: http://www.wemeanbusinesscoalition.org/, with The Climate has Changed at: http://www.wemeanbusinesscoalition.org/stories. CalPERS statement is at: http://www.calpers.ca.gov/index.jsp?bc=/about/newsroom/news/montreal-carbon-pledge.xml; California Teachers Retirement System press release is at: http://www.calstrs.com/news-release/calstrs-commits-increase-clean-energy-and-technology-investments; “Companies take the Baton in Climate Change Efforts” in the New York Times at: http://mobile.nytimes.com/2014/09/24/business/energy-environment/passing-the-baton-in-climate-change-efforts.html?_r=3

Climate Protection as a World Citizen Movement by the German Advisory Council on Global Change is at: http://www.wbgu.de/fileadmin/templates/dateien/veroeffentlichungen/sondergutachten/sn2014/wbgu_sg2014_en.pdf