BC pension fund invests in companies contributing to climate change

Carrie Saxifrage Posted: Oct 31st, 2012
Source: The Vancouver Observer


British Columbia Investment Management Corporation’s (bcIMC) prides itself on its support for principles of responsible investment and, as signatory to the United Nations Environmental Programme’s Declaration on Climate Change, appears particularly concerned about climate change.

The UN declaration states that, without immediate action, climate change will cause extreme weather events, drought, crop failure and disease, and that these impacts will fall most harshly on the world’s poor. In accordance with these goals, bcIMC has called on federal Environment Minister Peter Kent to institute a carbon tax.

Yet bcIMC is invested across the board in fossil fuel companies, many of them the most controversial and destructive companies in the province and nation. These companies mine and transport the oil sands, frack for natural gas, and mine and transport coal.

Investing in catastrophe

bcIMC holds stock in at least eighteen of the oil sands’ major players, including Sinopec (“the Khomenist regime’s lifeline to a nuclear bomb” according to Terry Glavin in the National Post) and ExxonMobil (a major funder of climate denier groups).

It also holds stock in controversial pipeline companies:

  • Enbridge, which is responsible for the Kalamazoo oil spill and the controversial Northern Gateway Pipeline proposal;
  • Kinder Morgan, with its proposed Trans Mountain pipeline expansion which could lead to 475 crude oil tankers travelling through the waters of Vancouver each year;
  • Transcanada, whose controversial Keystone Pipeline resulted civil disobedience and an historic numbers of arrests in Washington DC and Canada; and
  • Pace Oil and Gas which spilled 22,000 barrels of tar sands oil and water into the Alberta muskeg last May, 2,500 barrels more than Enbridge’s infamous spill into the Kalamazoo River in Michigan.

bcIMC’s coal holdings include stocks in coal companies such as Arch Coal and China Coal Energy, two of the world’s top coal producers. Coal has the highest greenhouse gas emissions per unit of energy of all fossil fuels and there is enough economically available coal to trigger run away climate change.

bcIMC also invests in coal terminals, such as Jimmy Pattison’s Westshore Terminals, which shipped 27.3 million tons of coal in 2011, enough to create the same amount of carbon dioxide that BC gives off in burning all its fossil fuels combined. As the US divests from coal, terminals that can ship coal to Asia are seen a necessary link to Asian markets. Thanks to coal terminals, coal companies get the profits they need, Asia burns one of the world’s most climate disrupting fuels, and Northwest residents get toxic dust. As a matter of conscience, Nobel Prize laureate and SFU Economics Professor Mark Jaccard and 12 others blocked a train headed for this terminal last May.

bcIMC owns many natural gas company stocks, including companies such as AGL and Apache that use fracking. Hydraulic fracturing injects millions of litres of water and thousands of liters of unidentified chemicals underground at high pressure to release natural gas from shale rock formations. The Council of Canadians opposes it because of its high water use, its high carbon emissions, its impacts on human health, the disruption to wildlife and the danger it poses to ground water and local drinking water.

bcIMC’s Kern Energy private equity funds, meanwhile, cover all the dirty energy sectors: rail transport of oil sands, North Sea oil and gas development, oil sands development, natural gas exploration and development of coal bed methane.

Betting against climate stability

Such investments are a bet that the federal government won’t impose a price on carbon. Yet, even in Canada, a price on carbon must be inevitable. The Economist magazine, a clarion of free trade, foresees that the mounting costs of inaction on climate change will force governments to act:“Sooner or later such arithmetic is going to force governments to get serious about dealing with climate change. It is already clear what is required: policies to put an appropriate price on carbon emissions.”

According to a recent study by the Massachusetts Institute of Technology, if the federal government were to impose a carbon tax, the oil sands would become economically non-viable, even with Carbon Capture and Storage. In other words, if Minister Kent were to act on bcIMC’s suggestion, bcIMC’s investments would decline in value because oil sands infrastructure will become stranded assets. According to the International Energy Agency, all new fossil fuel infrastructures from this time forward will either lock in catastrophic climate change or become a stranded asset. Like other investors in oil sands industries, bcIMC is betting against a price on carbon and betting for extreme weather events, drought, crop failure and disease.

bcIMC’s direct engagement with corporations

bcIMC prides itself on directly engaging corporations to encourage better practices. In the oil sector, these engagements include:

  • Meetings with Enbridge about pipeline safety following the Kalamazoo spill and about obtaining free, prior and informed consent of First Nations impacted by the Northern Gateway Pipeline proposal, then voting against a shareholder proposal asking Enbridge to produce a report on how it will factor First Nations’ opposition into the final decision to proceed with the Gateway Pipeline.
  • Encouraging oil sands companies to participate in the Carbon Disclosure Project, which measures corporate emissions.
  • Suggesting to oil sands operator Cenovus that it include community health and safety factors in future polices.

Surely the United Nations Declaration call to “immediate action” to prevent extreme weather events, drought, crop failure and disease intends more effective measures than these.

Where direct engagement is not enough

Direct engagement may be a suitable tool for industries such as forestry where operational changes can protect the public interest. But the oil sands product itself poses unacceptable costs to society. A movement toward divestment from fossil fuels is beginning, on those very grounds. Hampshire College in the US, which was the first institution to divest of South African stocks in the apartheid era, has just divested itself of fossil fuel stocks. Author and activist Bill McKibben is beginning a university tour to encourage students to apply pressure to their institutions to divest. University divestment was the beginning of the end for apartheid in South Africa.

bcIMC has used divestment as a tool in the past, with companies that produce landmines and cluster munitions. bcIMC’s divestment from oil industry stocks could serve both ethics and the fund’s stability. Unsustainable industries pose a high level of investment risk for long term investors. For example, US coal companies are facing bankruptcy as domestic markets switch energy sources in response to rules that restrict toxic mercury, sulphur and CO2 emissions from power plants. Stock prices for many major US coal companies have plunged 60 to 80 percent in less than two years. If the US adopts even a modest and slowly rising price on climate pollution, the industry will effectively shut down.

In addition, reaching the diminishing reserves of conventional oil requires high risk operations and economic volatility results. Deep water drilling is one example. Doug Pearce, bcIMC’s CEO, called the collapse of BP’s stock price since the Gulf of Mexico oil spill “one of the greatest environmentally-related destructions of shareholder value in history.” bcIMC held more than $100 million in BP shares in 2009 and the Gulf oil spill had a “profound impact” on its portfolio.

Stable investments for a stable future

bcIMC’s intention to invest responsibly reflects the reality that large institutional investors must change their portfolios to meet the challenge of climate change. An OECD working paper notes that, with a total of some $28 trillion in assets, the involvement of pension funds is essential to a successful transition to a low-carbon and climate resilient global economy. According to some estimates, 85 per cent of funding from the transition will have to come from private investment, yet pension fund investment in green industries remains low.

Recent studies show that industries are not acting quickly enough on their own: current corporate sustainability efforts will not prevent a future of resource scarcity. bcIMC, with its commitment to responsible investment and its $92 billion in assets, is positioned to do much better for its beneficiaries, for BC and for the world.


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