The Caisse de dépôt et placement du Québec (CDPQ) became Canada’s first institutional investor to announce plans to divest from oil production and exploration, as it laid out new details for how it aims to reach net-zero emissions by 2050. Here’s what you need to know:
Divesting from oil, mostly: About one per cent of CDPQ’s nearly $390-billion fund is invested in oil-production and -exploration assets. In a press conference Tuesday, Kim Thomassin, CDPQ head of stewardship investing, said the fund began slowly offloading those holdings a few years ago, and plans to sell them off entirely by the end of 2022. However, that divestment doesn’t include its pipeline assets, which represent about two per cent of its portfolio. The fund currently owns stakes in one firm in the category through Colonial Pipeline, and said it won’t invest in new pipeline businesses. It also plans to keep investing in natural gas, which Thomassin called “a transition energy” that “can be greened.”
Investing in the energy transition: The plan also includes a $10-billion “transition envelope” to help new portfolio companies reduce their emissions. The firm said eligible companies will need to have net-zero objectives and clear plans for how to reach their targets. That could include traditional oil companies, so long as they’re shifting to cleaner energy sources, creating a loophole for them.
A new strategy: The move is a stark contrast from other institutional investors’ climate-risk strategies. While many have pledged net-zero targets, no others plan to divest from oil. John Graham, CEO of the Canada Pension Plan Investment Board—which hasn’t set net-zero goals—recently told the Financial Post that Canada’s largest pension-fund manager doesn’t intend to divest from the oil sector under his leadership. “Simple divestment is essentially a short on human ingenuity,” he said, adding that he thinks the sector will innovate away from carbon-intensive energy. Even those that have set net-zero targets maintain that keeping emissions-heavy assets in their portfolios puts them in a better position to influence the industry to decarbonize.
CDPQ president and CEO Charles Emond said the firms’ new strategy is driven by its fiduciary responsibility and climate commitments: “Oil companies are increasing production generally. This is not aligned with the transition [to net-zero], and we do not want to be associated with this.”
Who does it impact?: Divestment will affect about 10 oil producers, said Emond. As of June 30, CDPQ held more than US$1.5 billion worth of public equities in Canadian firms TC Energy, Suncor, Enbridge and Canadian Natural Resources alone.
Net-zero goals revised: The strategy also includes ambitions to cut the carbon intensity of its portfolio by 60 per cent of its 2017 levels by 2030, up from its first interim goal to cut intensity by 25 per cent by 2025, and to grow its green assets from $36 billion today to $54 billion by 2025.
How stakeholders are reacting: Canadian Association of Petroleum Producers president and CEO Tim McMillan criticized the plan, arguing that oil and gas demand is expected to rise, and divestment from Canadian firms will drive business to markets like Iraq and Russia. “This reduces jobs and opportunities for Canadians while enriching other countries that do not share Canada’s environmental or human rights standards,” he said in an email to The Logic. Meanwhile, sustainable-finance and climate advocates applauded the move. A coalition that includes Greenpeace Canada, the David Suzuki Foundation and Climate Justice Montreal said it sets a new tone for other investors. “The Caisse listened to the markets, to science, and to the desire of Quebecers that their money not be used to fuel the climate crisis. The message to other funds and Canadian banks is clear: if the Caisse can do it, you can and should do it too,” said the organization in a statement.