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The movement pressuring institutional investors to divest their holdings in fossil-fuel companies appears to be gaining momentum, posing new challenges for Alberta’s energy industry and the provincial government.
Earlier this week, New York City announced it would sell off $5 billion in fossil-fuel investments from its pension fund, in a move hailed by environmental activists.
The city is also suing five major oil companies for contributing to climate change.
New York’s action is the latest, and perhaps most high-profile, action taken in response to the divestment movement, with American environmental group 350.org claiming that more than 800 institutions worldwide have pledged to disinvest more than $6 trillion.
The arguments for divestment are primarily two-fold — that investors should not be supporting fossil fuels because of their contribution to climate change and that the transition to a low-carbon economy makes those investments inherently risky.
Environment Minister Shannon Phillips said the NDP government takes the divestment movement seriously but that its impact is blunted when energy companies take environmental action, such as what’s mandated in the province’s climate change plan.
“There are a variety of opinions out there but, having said that, Alberta’s work on this matter has been recognized, certainly in the investment community,” she said in an interview Friday.
“That conversation is ongoing but it is certainly better to be in a position of strength in those conversations, rather than in the position of weakness.”
The NDP’s climate policy includes a broad-based carbon tax, a revamped levy on large emitters and a 100-megatonne cap on emissions from the oilsands.
But one advocate for divestment said measures such as Alberta’s, while important, won’t halt the push to get large institutional investors and governments to get rid of their fossil-fuel holdings.
“Over time, if we look ahead five, 10, 20 years from now, in order to fight climate change we need to use less fossil fuels. So it means at some point in time the value of fossil-fuel assets will diminish,” said Karel Mayrand, the Quebec director general for the David Suzuki Foundation.
“The case for divestment, it’s in part based on ethical issues … but most of it is based on risk, on the assessment fossil fuels are increasingly risky. That’s a trend environmental regulations won’t change.”
Mayrand said the decision by New York was “quite symbolically significant.” The divestment movement in Canada meanwhile is still at its beginning but “taking off,” he said.
He pointed to the Caisse de dépôt et placement du Québec, that province’s pension fund, which had been the subject of a campaign calling for it to divest its fossil-fuel holdings. It announced last October that it would reduce its high-carbon investments while boosting its investment in areas such as renewables by $8 billion over three years.
Other major Canadian investors such as the Canada Pension Plan Investment Board and the Ontario Teachers’ Pension Plan have avoided enshrining climate change measures so far, despite pressure.
Jackie Forrest, director of research for Arc Energy Research Institute, said the divestment movement had been “kind of fringe,” focusing on funds such as university endowments, but is now “moving more mainstream.”
That could manifest in a growing pool of investors not willing to put money into the oil and gas sector, potentially increasing the cost of capital for the energy industry, she said.
But Forrest noted that few large investors are fully divesting from the energy industry as the demand for oil and gas is expected to continue to grow in coming decades. Instead, there is a greater emphasis on having companies report on how they’re addressing issues such as climate change, she said.
That means opportunity for energy companies that are able to show they can adapt to a low-carbon economy, said Forrest.
Federal Natural Resources Minister Jim Carr was not made available for an interview Friday but his spokesman said in a statement the energy sector will remain a key driver of the Canadian economy into the future even as the world makes a low-carbon transition.
“There are different motivating factors behind recent divestment decisions. Irrespective of the reasons, the long-term fundamentals of Canada’s energy industry remain strong. Most energy analysts see global energy demand continuing to grow for the foreseeable future,” Alex Deslongchamps said in an email.
The provincial United Conservative Party, meanwhile, said the NDP government’s climate change efforts are having no positive impact on the energy industry’s reputation.
But UCP MLA Jason Nixon downplayed the effect of the divestment movement and suggested New York City’s move was nothing more than a “stunt” by Mayor Bill de Blasio.