The high-risk gas assets owned by Canadian pension funds – and why hydrogen won’t save them
Shift warns that billions invested by Canadian pension funds in gas infrastructure companies around the world are at risk as the energy transition accelerates, with little chance that hydrogen will save them
Shift’s new report, Gaslighting the Energy Transition: Hydrogen cannot prevent investments from putting planet and profits at risk, reveals how Canada’s largest pension funds have billions invested in private gas utility companies around the world, putting the climate and our retirement savings at risk. Shift found that nine of Canada’s largest pension managers are co-owners of 22 private gas companies that operate nearly 350,000 kilometres (km) of pipelines around the world.
The report explains why gas companies face significant risks as the energy transition accelerates, and why gas infrastructure can’t be re-purposed to transport and use hydrogen. It explores six case studies of gas infrastructure assets owned by Canadian pension funds that are at risk of becoming stranded.
Gas is not a “transition” fuel
“Natural gas”, more accurately described as fossil gas, is a primary cause of the climate crisis. The lifecycle emissions of fossil gas, which is primarily composed of methane, can be even greater than coal. Just like oil and coal, gas must be rapidly phased out in order to limit global warming to 1.5℃ and stop fossil-fueled storms, floods, droughts and wildfires from getting even worse. This means keeping significant reserves of gas in the ground and retiring gas infrastructure like pipelines early. The longer we keep extracting, transporting and burning fossil gas, the worse the climate crisis will get.
An inevitable transition
Climate goals simply cannot be achieved without phasing out gas. Thankfully, this phase-out has already started, as we collectively switch to using cheaper and more efficient electric heat pumps for heating our buildings, batteries to store our energy and renewable energy to generate our electricity. As a result of this trend, demand for gas in many markets, including Europe, is now in decline. The International Energy Agency sees global demand for gas peaking and declining steadily within the next five years, even without new climate policies in place.
As this required energy transition picks up speed, pension-owned gas assets are at risk of losing value and eventually becoming stranded. Given that the goal of pension funds is to grow the value of our retirement savings over the long-term, it would seem unwise to remain invested in companies that make the climate crisis worse and stand to steadily lose their customers.
False Hydrogen Hype
In the face of this harsh reality, gas companies have been desperate for ways they could keep their infrastructure running and stay in business. In particular, they latched on to the idea that they could switch their gas pipeline networks to move hydrogen instead. This might sound like a promising way to maintain the status quo. But a closer look reveals that the gas industry’s flimsy claims about hydrogen simply do not stand up to scrutiny.
Shift’s report summarizes the financial, physical, technical and political barriers which make hydrogen unsuitable as a climate solution for gas companies – and sets out the very limited role that green hydrogen can play in the energy transition. Studies reveal that hydrogen is an expensive, inefficient, impractical and potentially dangerous replacement for gas. It’s rarely the best choice for decarbonizing our energy systems, especially when we already have far better alternatives.
“Despite the considerable focus on hydrogen for heating, a thorough examination of independent evidence fails to substantiate the widespread adoption of hydrogen for space and hot water heating. A comprehensive review, encompassing 54 independent studies, reveals that none of them presents compelling evidence in favor of extensively utilizing hydrogen for heating purposes.”
So if gas needs to be phased out and there’s no credible path for hydrogen to save gas infrastructure in the long-term, why do our pension funds have so much of our savings invested in gas companies?
It seems that Canadian pension funds may have simply failed to see through the “hydrogen hype” pushed by gas companies as a way to keep using their pipelines.
“We’ve come to expect the gas industry to protect its dead-end business model through greenwashing, lobbying, and public relations campaigns that pretend hydrogen is a silver bullet climate solution. That’s no surprise. But we should expect our pension managers to be sophisticated enough to see through this false hydrogen hype. Sadly, that doesn’t seem to be the case.”
What should pension funds do now?
The report concludes with practical recommendations for how gas utilities, pension stakeholders, fund managers and plan members can ensure the climate integrity of their investments—helping to protect both financial returns and a healthy planet on which to enjoy them. It calls on pension funds to:
Advocate with gas companies in their portfolio to halt investments in unjustifiable gas and hydrogen infrastructure;
Increase transparency and disclosure of gas company holdings and how they are aligned with pension fund net-zero commitments;
Acknowledge the need for gas companies to transform their business model and plan for the decommissioning of gas infrastructure over time to avoid stranded assets and loss on investments; and
Divest from gas companies that refuse to align with scientifically credible decarbonization plans and re-invest in climate solutions.
“I expect my pension managers and trustees to exercise due diligence and effectively manage climate-related transition risks when it comes to my hard-earned retirement savings. I was shocked to learn how much my pension managers have bought into hydrogen propaganda spread by the gas industry and exposed my savings to gas assets that need to be decommissioned in order to protect my retirement security in a safe climate future.”
Learn more about the “hydrogen hype” Canadian pension funds are financing
Shift’s report examines several case studies of Canadian pension funds investing your retirement savings in gas companies with hydrogen projects that are risky and unlikely to succeed:
National Gas (UK), 27.7% owned by British Columbia Investment Management Corporation (BCI), which manages public pensions in BC;
Scotia Gas Networks (SGN) (UK), 37.5% owned by Ontario Teachers’ Pension Plan (OTPP);
Open Grid Europe (Germany), 32% owned by BCI;
Società Gasdotti Italia (Italy), 69.4% owned by OTPP;
Exolum (Spain), 24.6% owned by Ontario Municipal Employees Retirement System (OMERS) and 10% owned by Investment Management Corporation of Ontario (IMCO); and
Tallgrass Energy (US), estimated 24.5% owned by the Canada Pension Plan Investment Board (CPPIB).
The report also finds that nine of Canada’s largest pension managers have billions in pension capital invested in 22 gas distribution, transmission, power generation, processing and storage companies, collectively operating nearly 350,000 km in pipelines globally. See the table below for a summary.
