Albertans woke up on Boxing Day to discover their public pension plan had bought a gas pipeline. Unfortunately, this late Christmas gift is likely to be a liability, due to the financial, regulatory, reputational and legal risks involved with the purchase.
On Dec. 26, 2019, the Alberta Investment Management Corporation, which manages public-sector pension plans and other provincial government funds, announced a partnership to purchase a 65-per-cent stake in TC Energy’s Coastal GasLink (CGL) pipeline.
Part of the heavily-subsidized LNG Canada project, CGL is a $6.6-billion pipeline that would ship gas from fracking fields in northeastern B.C. to an export terminal in Kitimat, B.C., locking in an additional 8.6 million tonnes of carbon pollution per year by 2030 and undermining B.C’s and Canada’s insufficient emissions reduction efforts. B.C.’s gas sector is already under fire for causing earthquakes, contaminating water, and leaking methane, a potent greenhouse gas.
Many pension funds, including AIMCo, publicly recognize the financial risks of climate change and claim to screen their investments for environmental, social and governance (ESG) factors. If ever there was a project that fails a credible ESG screen, it’s CGL. The project’s environmental risks and failure to respect Indigenous rights should disqualify it for investment for any firm claiming to invest responsibly.
CGL will massively increase carbon pollution over the 30-year lifespan of the project, on top of even more emissions when the gas is burned downstream. This comes at a time when scientists have repeatedly warned that emissions must drop rapidly within this decade in order to avoid the catastrophic global impacts of a warming world.
With investors and central bankers sounding the alarm about climate risk, financing new long-lived fossil-fuel infrastructure should be seen as a foolhardy venture. Investors can reasonably assume that new measures to curb both the consumption and extraction of fossil fuels will negatively impact returns over time. Recent research reveals that technological disruption and new climate policies could strand as much as $4-trillion in fossil-fuel investment by 2035 alone, a particular risk for export-dependent countries like Canada.
CGL is also under fire for its failure to respect Indigenous rights and title. While TC Energy has signed agreements with band councils along the pipeline route, the Wet’suwet’en hereditary chiefs, who hold authority over their unceded traditional territories, have long opposed the pipeline.
Last January, TC Energy used a court injunction to enable the RCMP to violently remove Wet’suwet’en members from their lands and begin construction. Uncovered documents reveal that RCMP officers were instructed to “use as much violence … as you want” and considered using lethal force. The RCMP continues to surveil and harass Wet’suwet’en members, while CGL construction has destroyed Wet’suwet’en archaeological sites. British Columbia’s human rights commissioner called for the suspension of CGL absent the free, prior and informed consent of impacted First Nations. Wet’suwet’en hereditary chiefs issued an eviction notice to CGL on Jan. 5.
It doesn’t have to be this way. In 2020, there are numerous profitable, low-risk opportunities to invest that can help to address the climate crisis without raising red flags over human rights. A recent World Bank study estimates the opportunity for climate-smart investments in emerging markets alone in the next decade at US$23-trillion. Just last fall, the Canada Pension Plan purchased the renewable energy producer Pattern Energy, valued at US$6.1 billion, demonstrating the ability for Canadian asset managers to profit from investing in climate solutions at scale.
AIMCo has a fiduciary responsibility to invest in the best long-term interest of its beneficiaries to ensure Albertan retirees and workers can collect their pensions in a warming world undergoing a rapid energy transition. In buying a yet-to-be-built “carbon bomb” that undermines Indigenous rights, AIMCo risks rendering the term “responsible investing” meaningless.
Adam Scott is director and Patrick DeRochie is pension engagement manager for Shift: Action for Pension Wealth and Planet Health, a charitable organization that helps Canadians engage their pension funds on climate change.
This content was originally published here.