Biden’s decision to rescind permit perceived as one more burden for investment in oilsands,
Biden’s revocation of permit perceived as one more burden for investment in oilsands
Sustainable investing experts say TC Energy Corp.’s plan to decarbonize the Keystone XL pipeline is unlikely to save its fortunes, as a growing movement to divest from fossil fuels gains political clout.
U.S. president-elect Joe Biden intends to sign an executive order on inauguration day, Wednesday, to rescind the presidential permit for the Keystone XL pipeline issued by his predecessor Donald Trump, according to transition documents.
The company in turn announced that its plan for the Keystone XL project would achieve net zero emissions when it is placed into service.
Biden’s move to rescind the permit for the project, which has faced controversy over its effects on landowners, Indigenous groups and the environment, may not be a surprise for investors who followed the project during Barack Obama’s administration, said Olaf Weber, research chair in sustainable finance at the University of Waterloo.
However, Weber said Biden has sent a strong signal — that more projects could be cancelled — to the group of
investors that were already questioning the future of Canada’s oilsands. Weber said coal and oilsands are considered particularly risky under increasingly popular standards of environmental, social and corporate governance (ESG) investing.
Weber said it could be possible for Canadian companies like TC Energy to fit into the ESG framework for some institutional investors. Royal Dutch Shell, for example, has told investors it won’t add greenhouse gases to the atmosphere starting in 2050.
Still, Weber said that globally, financial investment is moving away from fossil fuels, particularly those that are most carbon intensive, in countries that have signed onto the Paris Agreement.
He pointed to Kommunal Landspensjonskasse, or KLP, Norway’s largest pension fund, which in 2019 cut four Canadian energy names from its investment list, aiming to divest from companies that derive more than five per cent of their revenue from the oilsands.
While the energy sector represented 23 per cent of foreign direct investment in Canada as of 2018, that was down one per cent from the prior year, according to Natural Resources Canada.
“From an international perspective, we have already seen investors go out of the oilsands,” Weber said.
“Canadian investors, they hesitate doing that, because it’s a very strong industry in the country.”
While TC Energy’s carbonneutral pledge for Keystone might reassure investors, it also might be coming too late, said Ryan Riordan, director of research at the Institute for Sustainable Finance at Queen’s Smith School of Business.
Riordan added that even those who aren’t interested in the ESG framework may be skeptical of TC Energy’s path forward.
“Decarbonizing projects isn’t free … so while the reputational or environmental risk around carbon might be dealt with, it’s really just making a project more expensive.”