Norway fund criticized for ditching energy investment
Backing out of stake in Canadian oilsands producers is ‘short-sighted’
ATCO Ltd. chief executive Nancy Southern devoted part of her opening address at the company’s annual meeting Wednesday to deliver a passionate defence of Canada’s energy sector.
And after the event, she didn’t hold back on speaking out against a decision by Norway’s sovereign wealth fund to ditch its investments in four Canadian oilsands producers over climate concerns.
“I believe it is short-sighted,” Southern said in an interview.
“I just see a piling on, whether it is the credit rating agencies, whether it’s government leaders, whether it is universities jumping on to this bandwagon. And I think it is time for people to stand up and demonstrate true moral leadership about the fact that the world is better because of petroleum products.”
On Wednesday, Norges Bank Investment Management issued a statement saying it decided to exclude seven companies from being held in the wealth fund, including Suncor Energy, Canadian Natural Resources, Cenovus Energy and Imperial Oil.
On its website, Norges said it made the decision after a recommendation from its ethics council “to exclude the companies because of carbon emissions” from oilsands production.
According to Reuters, the $1-trillion fund held Us$1.15-billion worth of shares in these Canadian-based companies at the end of last year.
What frustrates Southern and many in the sector is the lack of recognition of the progress the industry has made in reducing its emissions per barrel in recent years, the work underway to lower it further, and the oilpatch’s importance to the national economy.
Both Cenovus Energy and Canadian Natural Resources have set aspiration targets of attaining net-zero greenhouse gas emissions — Cenovus is aiming to hit the goal by 2050. Suncor has vowed to lower its emissions intensity by 30 per cent by 2030.
“What more can you ask of them? What more do they have to do?” Southern said of the divestment decision.
“It is hypocritical.”
This isn’t the first time this debate about divestment efforts targeting the oilsands has cropped up this year, nor will it be the last.
According to federal data, total emissions from Canada’s oil and gas sector increased 23 per cent between 2005 and 2017 as overall crude production climbed.
But the Alberta government points out that average emissions per barrel fell by 19 per cent between 2011 and 2017.
By 2030, oilsands emissions intensity is expected to decrease by another 23 per cent as companies make strides through ongoing innovation efforts, said the Canadian Association of Petroleum Producers.
For example, Imperial Oil says the company reduced its emissions intensity by 20 per cent from its oilsands operations between 2013 and 2017. Cenovus Energy said it curbed its emissions per barrel by about 30 per cent in the past 15 years.
The federal government has committed Canada to reach net-zero emissions by 2050.
Asked Wednesday about the divestment decision, Prime Minister Justin Trudeau said investors around the world are assessing the risks associated with climate change as a part of their overall investment decisions.
“Many companies in the energy sector have understood that the investment climate is shifting and there’s a need for clear leadership and clear targets to reach on fighting climate change to draw on global capital,” he said.
But it’s also clear that targets won’t be good enough for industry critics.
Oil and gas producers have to do more than set aspiration goals, but aggressively shift their investment strategy to reflect them, said Keith Stewart, Greenpeace Canada’s senior energy strategist.
“This is the way the world is going and it is something we have to be prepared for,” he said.
However, there is no doubt Canadian companies are investing heavily in technology that will improve their environmental performance, such as using solvents in new thermal oilsands projects to curb GHG levels, said Richard Masson, an executive fellow at the University of Calgary’s School of Public Policy.
“From my point of view, it’s disappointing to see a big fund like this throw them all under the bus,” said Masson, former CEO of the Alberta Petroleum Marketing Commission.
“We need to make sure we work together so the world understands we are doing the right things.”
That will be easier said than done, given the polarized debate surrounding the issues of energy transition and climate change.
Speaking to reporters, Premier Jason Kenney blasted the Norwegian fund’s decision, saying it underscores why Alberta needs to get its message out to European institutional investors about the progress being made on lowering emissions, along with environmental, social and governance (ESG) issues.
“To be blunt, I find that incredibly hypocritical. That entire sovereign fund owes its genesis to oil revenues coming from the North Sea reserves of Norway. It’s the pot calling the kettle black,” Kenney said.
He pointed out Alberta announced Tuesday it’s reached an equivalency agreement with Ottawa that is expected to lower methane emissions in the province by 45 per cent from 2014 levels by 2025.
At ATCO’S annual meeting, Southern also stressed the importance of the energy industry to Canada during a tough time, with its contribution to the overall economy eclipsing the aerospace and auto sectors.
She called for leaders in government and other institutions to recognize the industry’s value to the country.
“I just feel the rhetoric that’s going on is not only polarizing, but it’s a misunderstanding of the base that our energy industry provides Canada with,” she said in the interview.
“I just feel we urgently need better dialogue to occur.”
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