Industry Capture? CPPIB is not shy about spouting oil industry talking points.
It should be obvious that achieving the Canada Pension Plan Investment Board’s (CPPIB) mandate is dependent on stabilizing global temperatures at relatively safe levels, while avoiding exposure of the fund to stranded assets. Canadians require a livable planet on which to retire, and climate scientists and energy modellers are clear that limiting global temperature increase to 1.5°C and avoiding catastrophic impacts to our ecosystems, economy and financial system requires fossil fuels to be rapidly phased out. By publicly pledging to grow its portfolio of oil and gas assets, CPPIB is making an alarming bet on the world failing to limit global heating to safe levels, putting the Canada Pension Plan at risk from an accelerating energy transition and Canadians’ retirement security at risk from catastrophic climate change.
But CPPIB continues a troubling pattern, which we first documented in the 2022 Canadian Pension Climate Report Card, of making public statements that:
1. Signalling that CPPIB will continue to prop up the fossil fuel industry
“We’ve been able to take the energy leadership from here in Alberta and showcase it around the world — through forums like today and our CEO Global Energy Summit held last month. Alberta is uniquely positioned globally within the energy value chain. Canada has the potential to continue to be a global leader through innovation in traditional energy production with initiatives like the Pathways Alliance and significant potential to deliver LNG to global markets.”
- CPPIB CEO John Graham, November 2023, CPPIB Insights Institute
“Canada Pension Plan Investments (CPP) is on the hunt to buy utility and oil and gas assets unloved by competitors seeking to unload polluting assets, then profit from reducing greenhouse gas emissions and put them back on the market, Chief Sustainability Officer Richard Manley said on Thursday.”
“We’ve been very transparent about how we think about investing in the transition and very transparent that we will continue to invest in the oil and gas sector.”
- CPPIB CEO John Graham, February 2023, ARC Energy Ideas podcast
“‘On the international stage, CPP Investments and I have been a vocal advocate for a non-divestment approach to decarbonization. We were one of the first global investors to state publicly that divesting of conventional energy investments is counter-productive to global decarbonization goals,’ [said CPPIB CEO John Graham]. The global investment community has also changed its tune when it comes to fossil fuel divestment, he added. Its perspective shifted after Russia’s invasion of Ukraine shocked global energy markets and led to skyrocketing energy prices in Europe, which scrambled to end its reliance on Moscow fuels.”
Why it’s problematic:
Achieving a maximum rate of return without undue risk of loss in the long-run requires reducing the fund’s exposure to high-risk sectors facing rapid, structural decline. It is not part of CPPIB’s mandate to assure the oil and gas industry that CPPIB will remain a steadfast investor. Nor is it in the best long-term interest of CPPIB contributors and beneficiaries to signal to markets that fossil fuels will be around for many more decades or to undermine or criticize the decisions of investors or governments that have clearly articulated a call to phase out fossil fuels. CPPIB must publicly acknowledge the scientific consensus that phasing out fossil fuel finance is necessary in order to prevent catastrophic global heating outcomes that undermine the retirement security of Canada Pension Plan members.
2. Framing the fossil fuel industry as a critical part of the energy transition
“Oil and gas has a critical role to play in the energy transition.”
- CPPIB CEO John Graham, February 2023, ARC Energy Ideas podcast
“The latter, like us, see far more scope for positive impacts, including very lucrative and sustained returns, by investing in the energy transition but, [sic] not forsaking oil and gas in its entirety. Unlocking value here will require decarbonization of high-emitting industries and, [sic] investments in solar and wind power, as well as innovations in carbon capture and sequestration, very distinct approaches, but ones that will collectively contribute toward a lower-carbon future.”
“We've long been of the view that to talk about the transition is too simplistic, and that the debate has to be about how we deliver the optimal transition — one that removes the most emissions from the economy with the least damage to the economy and one that is inclusive and sustainable of all stakeholders in the economy.”
- CPPIB CSO Richard Manley, September 2023, Net Zero Investor
“The Head of [Sustainable Energies Group], Bill Rogers, rallied everyone around a shared objective: delivering excellent risk-adjusted returns while addressing the energy trilemma of security, affordability and sustainability.”
Why it’s problematic:
It is not a part of CPPIB’s mandate to help oil and gas companies incrementally reduce emissions in order to prolong the production and use of fossil fuels. Nor is it part of CPPIB’s mandate to falsely imply that ensuring energy security requires further fossil fuel expansion. Rather, prudent investment in the energy transition helps reduce costs and improve energy security for society, while accelerating the phase-out of climate-damaging fossil fuels. It is bizarre that CPPIB regularly communicates to companies and stakeholders that oil and gas are crucial to the energy transition, yet is silent when it comes to the scientific consensus that fossil fuels must be rapidly phased out in order to prevent catastrophic climate outcomes.
3. Confusing mitigation with transition
“Aera Energy is California’s second largest oil and gas producer, accounting for nearly a quarter of the state’s production. We’re looking to pursue strong investment returns by helping Aera balance its energy transition efforts with the need to continue meeting California’s energy demands by investing in renewable energy to power existing operations.”
“We know that conventional energy will remain a critical component of primary energy supply for decades to come. The opportunity is to ensure that hydrocarbons that can’t be substituted in the near-term are delivered to the market with the smallest possible emissions footprint by stopping fugitive methane release and taking scope 1 and 2 CO2 emissions to zero. Oil and gas producers could deliver a much cleaner molecule to market by comprehensively decarbonizing the production, processing and transmission processes in the value chain. If the oil and gas industry can do this, the airline or gas-fired power plant will only incur emissions associated with combustion, not the whole value chain. This is a real opportunity for the industry to dramatically slow global warming from continued hydrocarbon consumption until long-term substitutes are developed and deployed at scale”.
- CPPIB CSO Richard Manley, September 2023, Net Zero Investor
Why it’s problematic:
There is a crucial difference between the concepts of mitigation and transition. For the oil and gas industry, mitigation refers to marginally reducing the carbon intensity of a barrel of oil to reduce upstream emissions, for example through measures like reducing methane leakage or powering operations with renewable energy. While mitigation is critical in the short-term, it cannot come at the expense of the required long-term transition, which by definition requires transitioning away from fossil fuels to zero-carbon sources of energy. Yet CPPIB spokespersons regularly make statements that seem to confuse mitigation with transition, undermining the fact that CPPIB’s mandate could become impossible to fulfill if the world fails to phase out fossil fuels in line with 1.5°C emissions pathways.
4. Repeating and amplifying false oil and gas industry propaganda
“There is very much a recognition around the world of the quality of Canada’s traditional energy producers. And Canada does produce some of the most responsibly-produced hydrocarbons in the world and does have amazing technical talent.”
- CPPIB CEO John Graham, February 2023, ARC Energy Ideas podcast
“‘Our upstream portfolio is increasingly focused on being lower carbon production. … It plays to building blocks we’re doing elsewhere; increasingly responsible, energy efficient and green production of steam and what’s required for oil production and carbon capture,’ [said CPPIB Senior Principal and Head of Renewables and Power Bruce Hogg]. Hogg outlined the process envisaged, which will play into California’s clean energy goals, which aims for 100 percent zero-carbon electricity and net-zero greenhouse gas emissions by 2045. ‘In the near term, it provides accessible oil to meet energy supply and security needs for California but the plan over time is to decarbonise the supply of oil and ultimately turn this into a green business and asset,’ explained Hogg.”
“We hosted the gathering in Alberta — not only because it is home to one of the world’s most beautiful natural landscapes, but also because it has a reputation for responsibly-produced energy and skilled talent that can help advance the energy transition.”
Why it’s problematic:
Perhaps the most alarming example of CPPIB’s fealty to the oil and gas industry is seeing CPPIB spokespeople regularly repeat industry propaganda that is demonstrably untrue. The most egregious example of this came in November 2023, when CPPIB President and CEO John Graham gave a speech before the Calgary Chamber of Commerce that highlighted CPPIB’s investments in Alberta’s oil and gas industry; falsely called Western Canada home to "some of the most responsibly produced conventional energy in the world," "something every Canadian should be proud of"; and called for Canada “to be a global leader through innovation in traditional energy production with initiatives like the Pathways Alliance and significant potential to deliver LNG to global markets." CPPIB then chose to amplify this speech on the opening day of COP28, a conference at which the key measure of success was for the international community to agree to phase out fossil fuels.
Meanwhile, Graham’s assertion that Canada is a “responsible energy producer” is a fictitious claim that’s commonly made by the oil and gas industry, but shouldn’t come from a prudent pension manager. Amidst a worsening climate crisis, there is no such thing as “energy efficient” or “responsibly-produced” oil and gas.
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