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A U.S. company partly owned by the Canada Pension Plan Investment Board (CPPIB) has made a massive investment in increased oil production.
Civitas Resources announced this week it will spend $6.2 billion to increase its oil production by 60 per cent. The CPPIB, which is responsible for investing the assets of the Canada Pension Plan, has a 21 per cent ownership stake in the company.
Reuters reported Civitas Resources would acquire oil and gas operations in the southwestern United States’ Permian Basin managed by private equity firm NGP Energy Capital Management.
The news has outraged Canadian climate groups, who say doubling down on oil production defies the CPPIB's net-zero emissions commitment and puts millions of Canadians' retirement savings at risk.
The International Energy Agency and the Intergovernmental Panel on Climate Change say there can be no investment in new fossil fuel projects if there is any hope to limit the global temperature increase to 1.5 C by mid-century.
“As Canadians from coast to coast choke on smoke, evacuate their homes and suffer through the worst wildfire season on record, the CPPIB is allowing its growing portfolio of fossil fuel companies to spend $6.2 billion to acquire 335 million barrels of oil in Texas and Mexico,” says Patrick DeRochie, senior manager at Shift Action for Pension Wealth and Planet Health (SHIFT), an advocacy group. “The CPPIB is risking our national retirement fund on stranded assets and investing in a future of ever-worsening climate disaster.”
CPPIB-owned Civitas’ massive increase in oil production comes just three months after the pension board’s acquisition of a 49 per cent stake in Aera Energy, California’s second-largest oil and gas producer, according to a statement sent by SHIFT to Canada’s National Observer. “These investments expose all Canadians to unacceptable levels of climate-related financial risk.”
Canada’s National Observer reached out to the CPPIB for comment but did not receive a response in time for publication.
To make its portfolio net zero by 2050, last year the CPPIB committed to increasing its investments in green and transition assets from $67 billion to at least $130 billion by 2030. It states its goal is to be carbon-neutral in its operations by the end of the 2023 fiscal year.
James K. Rowe, associate professor at the University of Victoria's School of Environmental Studies, argues the Civitas investment does not line up with the CPPIB's need to reduce emissions if it is going to meet its climate goals.
“It is easy to make net-zero pledges for decades in the future,” said Rowe. “The difficult part is crafting a serious plan for achieving the emission reductions. The CPPIB’s investments in fossil fuel companies like Civitas that are significantly expanding production during a climate emergency is a sign that our national pension fund is not seriously planning for the future.”
Rowe said the CPPIB decision to pour billions of dollars into fossil fuel companies undermines climate security and is imprudent financially. “Whether due to the growing use of green energy and electric vehicles or much-needed climate legislation that will be required to forestall 1.5 degrees Celsius warming, it is likely that fossil fuel investments will rapidly lose value in the near future,” he added.
To have a credible net-zero plan, CPPIB would have to cut emissions arising from its investments in half by 2030, said Julie Segal, senior program manager of climate finance at Environmental Defence. “That leaves no room for expanding oil or gas,” she added.
The CPPIB operates Canadian Pension Plan (CPP) investments, serving more than 21 million contributors and beneficiaries. As of March 31, the CPPIB says its 10-year annualized net return was 10 per cent. At $570 billion today, the pension fund is projected to reach $1 trillion by 2031, the board said.
This story was produced in partnership with Journalists for Human Rights for the Afghan Journalists-in-Residence program funded by the Meta Journalism Project.
Comments
Great reporting, thanks for shedding light on this important issue!
Please stay on top of any developments in this entire sphere.
Change must happen.
China and its neighbors might just curtail their fossil fuel use 10 to 10 years earlier that currently anticipated. This would hurt planned exports, especially the large and growing LNG investment. China has a modern integrated nation-wide electric grid unlike the rest of the world, including the USA. It is ahead on nuclear power, especially Thorium, battery & solar panel mfg. & technology, wind & EVs. China will "leap ahead" again.
China's grid alone is a big plus. Having the world's first fully functional production Thorium based nuclear reactor is also a big plus for them. North America's continued reliance on fossil fuels could just be a major disadvantage. It might just be a "millstone around their neck". China will remain the world's manufacturing leader - by an increasing margin, and export i=these technologies to its allies in the Southern world.
Even beyond current negative climate impacts in Canada, this proposal for new fossil fuel extraction is occurring while a severe heat dome has settled over the Southwestern states and Mexico, threatening lives with temperatures into the forties celsius, and power grids shutting down. This investment is unconscionable on so many levels.
Somebody should utter a discouraging word. We can only transition so fast, and if there's money to be made in the declining (but still necessary) industries, that money can fund the transition, too.
But my real objection to beating up carbon producers is that it is identical to blaming drug producers and smugglers for the drug problem. You could make carbon actually illegal - the way cannabis was - and only raise the price a bit, as desperate *consumers* pay more to get their hands on the stuff.
It should be JUST as unacceptable to invest in carbon *consumption* that will inevitably lead to carbon production and shipment. Unacceptable to invest in airlines, heavy construction, new housing developments that require cars to reach, new ICE car factories. Without those buyers, Exxon would wither.
That's a very relevant viewpoint. Fossil fuels were built up over 100 years mainly due to their (then) cheap and abundant energy density. The result was near total dependency. How on Earth are societies going to wean themselves off this elixir quickly?
I don't see politics as the answer. Too flawd a process, too easy to monkey with for self interest, too easily influenced by money. Vote against Trudeau in a fit of anger over his two-faced weaknesses and you'll risk losing the entire cumulative policy on climate action so far (as limited as it is) -- not to mention some good social policies -- to a demolition derby led by PP riding a monster truck. Such is the power of vote splitting given our immature electoral system.
I am also PO'd about my CPP pension funds going into the belching smokestacks of the oil sands. But what am I supposed to do about it, pull my lifetime pension contributions out? How, exactly?
Private investments are another story. They can be redirected. They can also be pulled out entirely and diverted into direct investments in renewable projects and companies. Lifestyles can be adjusted within the bounds of family budgets, knowing that governments need to assist more with grants to convert to low emission appliances and vehicles.
I no longer have the time for those who espouse only political action, especially those who list all the flaws of current leaders and parties. These are endless. Instead, promote the most powerful economic counterpoint to carbon hegemony; Renewables and conservation.
What happened to the 2019 mandate Trudeau gave the Minister of Finance regarding divestment?
And why is the money of Canadian taxpayers continually lining the pockets of shareholders in foreign corporations, whether they rape the planet abroad or within our own borders?