Caisse to exit oil producers by 2022 in climate plan

This article was written by Sandrine Rastello and Paula Sambo and published by Bloomberg News on September 28, 2021.

Caisse de Depot et Placement du Quebec will sell its holdings of oil producers, increase investments in green assets by 50 per cent and set aside about US$8 billion to help big polluters cut their emissions as part of a new climate strategy. 

Canada’s second-largest pension manager will sell its remaining oil-production assets, which make up 1 per cent of its portfolio, by the end of next year to avoid contributing to the growth of the world’s oil supply, the fund said Tuesday. It plans to boost its holdings of green assets such as renewable power facilities to $54 billion (US$42.6 billion) by 2025, compared with $36 billion now. 

“The climate situation affects everyone, and we can no longer address it with the same methods used a few years ago,” Charles Emond, chief executive officer of the pension fund, said in a written statement. “The urgent need to act demands that we do more, faster, and that we innovate. We have to make important decisions on issues such as oil production and decarbonizing sectors that are essential to our economies.”

The oil exit strategy improves the Caisse’s position as a climate leader among Canada’s major financial institutions, Shift Action for Pension Wealth and Planet Health said in a written statement.

The divestment doesn’t include existing pipelines, Caisse officials said at a news briefing, though the fund won’t invest in new ones. Oil and gas pipelines account for about 2 per cent of Caisse’s portfolio.

Shift Action chided Caisse for the omission. “It should be acknowledged that if oil is too risky for the climate and Quebecers’ pensions, then so are ongoing investments in fossil gas,” the group said. “The CDPQ’s massive fossil gas infrastructure investments mean that it has not yet reckoned with this reality.”

Still, the Caisse move is likely to make waves in oil-rich Alberta, where many still harbor resentment over Quebec’s past opposition to a pipeline to the Atlantic coast that was ultimately abandoned.

Caisse manages $390 billion on behalf of dozens of Quebec pension funds and other entities. Its largest energy investments include Canadian oil sands producers Suncor Energy Inc. and Canadian Natural Resources Ltd.; the fund held more than than $900 million in shares of those two companies as of June 30, according to data compiled by Bloomberg. 

The divestments affect about 10 companies, with current oil prices giving the pension fund a good window to sell, Emond said at the briefing.

“The destination was known” on its oil decision and started several years ago, he said. Caisse owns roughly $4 billion in such assets, about half the amount it had four or five years ago, he said.

Carbon-Neutral Goal

The fund is also creating a $10 billion “transition envelope” that it will use for new investments in major industrial polluters that have a clear plan to transition to lower carbon emissions, including producers of steel, copper and fertilizer and transportation companies, the fund said. 

Caisse’s green pledge adds to targets it announced in 2017 for scaling back high-carbon investments and adding renewable holdings in its portfolio — targets the fund said it has exceeded. The fund is a member of the United Nations-convened Net-Zero Asset Owner Alliance, a consortium of global investors, and aims to achieve carbon-neutral portfolios by 2050.

Caisse was also the first major Canadian pension fund to set a net-zero emissions target in 2019. The Ontario Teachers’ Pension Plan followed earlier this year, vowing to become carbon neutral by 2050. Both funds also tie carbon-footprint reductions to staff and employee compensation.

Last week, Emond said in an interview that sustainable assets were becoming such a hot market that valuations were “through the roof.” Large institutional investors must help businesses with the money they need to pursue more rigorous environmental, social and governance standards, he said.

Green commitments abound in the asset management world, but they can be hard to measure. The scope of the targets, and the methods to reach them, vary.

A July report by Bloomberg Intelligence analysts showed that the 10 largest U.S. public pension funds still have a lot of money invested in the biggest corporate polluters, in contrast with their climate-related promises.

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