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Fossil Futures: The Canada Pension Plan's Failure to Respect the 1.5-degree Celsius Limit

By James K. Rowe, Steph Glanzmann, Jessica Dempsey and Zoë Yunker - Canadian Centre for Policy Alternatives, November 2019

THE WORLD’S LARGEST PENSION FUNDS comprise over half of global investment capital. The Canada Pension Plan Investment Board (CPPIB) manages one of the country’s largest pools of investments, at $400 billion. How pension funds choose to invest has significant bearing on how we collectively address the climate emergency and the needed energy transition away from fossil fuels. In this report we ask: Is the CPPIB investing with the 1.5-degree Celsius limit on global average temperature rise in mind?

In April 2016, Canada was among 195 countries that signed the Paris Agreement, committing to “holding the increase in the global average temperature to well below 2 degrees Celsius above pre-industrial levels and pursuing efforts to limit the temperature increase to 1.5 degrees Celsius.”

Our major finding is that the CPPIB is not investing with the 1.5-degree limit in mind. Within its public equities portfolio, it has over $4 billion invested in the top 200 publicly traded fossil fuel reserve holders (oil, gas and coal). To stay within 1.5 degrees, these companies can extract only 71.4 billion tonnes of carbon dioxide, yet the companies the CPPIB is invested in have 281 billion tonnes in reserve, meaning they have almost four times the carbon reserves that can be sold and ultimately burned to stay within 1.5 degrees. Since reserves are factored into current company valuations, this means the CPPIB has invested billions of dollars in companies whose financial worth depends on overshooting their carbon budget.

This is a moral and ecological failure. It is also a financial risk. As energy generation shifts away from fossil fuels, investors who do not respond could be left with “stranded assets”—investments that are no longer profitable. In its 2019 Financial System Review, the Bank of Canada included climate risk in its analysis for the first time. Canadian fossil fuel companies and their investors are especially exposed to stranded asset risk since the majority of oil produced in Canada is high-cost, carbon-intensive bitumen from the oil sands. And yet, the CPPIB remains exposed to the biggest oil sands majors, with over $1.2 billion invested in Canadian Natural Resources Ltd., Suncor Energy Inc. and Cenovus. Canadian pension beneficiaries may therefore be particularly vulnerable to stranded assets and the financial risks they pose.

Read the report (PDF).

Alberta’s Coal Phase-out: A Just Transition?

By Ian Hussey and Emma Jacksonn - Parkland Institute, November 2019

This report explains that Alberta will have little coal-fired electricity left by the end of 2023, six years ahead of the federally mandated coal phaseout deadline of December 31, 2029. This relatively rapid transition away from coal power is the result of numerous decisions made since 2007 by various provincial and federal governments, a few arms-length agencies of the Alberta government, and several large publicly traded corporations that produce electricity for the Alberta market. Our report aims to evaluate Alberta’s electricity transition to date against principles and lessons gleaned from the just transition literature.

Following the introduction, the report proceeds as follows. In Section 2, we provide an overview of Alberta’s coal power industry, communities, and workforce. In Section 3, we delineate key principles and lessons from the just transition literature. In Section 4, we present case studies on the three companies affected by the Notley government’s accelerated coal phase-out (TransAlta, ATCO, and Capital Power). We examine the Notley government’s transition programs for coal workers in Section 5 and for coal communities in Section 6. Section 6 also includes a case study of Parkland County, which is the municipal district in Alberta perhaps most affected by the phase-out of coal-fired electricity. In Section 7, we provide an analytic discussion of our research results by evaluating the government’s transition programs against the key principles and lessons drawn from the just transition literature. In Section 8, we outline our conclusions based on the research results.

Read the report (Link).

UNISON launches a campaign for pension fund divestment with a Guide for Local Unions

By Elizabeth Perry - Work and Climate Change Report, February 6, 2018

On January 10, 2018,  the U.K. union UNISON launched a campaign to encourage members of local government pension schemes to push for changes in the investment of their funds – specifically, to “explore alternative investment opportunities, allowing schemes to sell their shares and bonds in fossil fuels and to go carbon-free.”  A key tool in this campaign: Local Government Pension Funds – Divest From Carbon Campaign: A UNISON Guide, which states:  “Across the UK there are nearly 50 divestment campaigns targeting local government pension funds ….. In September this year, it was revealed that a total of £16 billion is invested in the fossil fuel industry by Local Government Pension funds.”  The new Guide explains how the U.K. pension system works for local government employees, and provides case studies of existing divestment campaigns.  In addition, it provides “Campaign Resources”, including a model campaign letter, a glossary of pension and investment terms,  and it reproduces the Pensions and Climate Motion passed at the 2017 UNISON Delegates conference.  The Guide was written by UNISON, in collaboration with ShareAction – a registered U.K. charity that promotes responsible investment practices by pension providers and fund managers.

Information about the divestment campaign, as well as information about the National Auditor’s Report re the U.K. Green Investment Bank,  is included in the January-February issue of the newsletter of the  Greener Jobs Alliance , a U.K.  partnership of “trade unions, student organisations, campaigning groups and a policy think tank.” The Greener Jobs Alliance is part of the Campaign against Climate Change Trade Union Group, which is organizing an event on March 10 in London: Jobs & Climate: Planning for a Future that Doesn’t Cost the Earth

Banking on Climate Change: Fossil Fuel Finance Report 2020

By Alison Kirsch, et. al. - Rainforest Action Network, et. al., January 2019

Financial companies are increasingly being recognized — by their clients, shareholders, regulators, and the general public — as climate actors, with a responsibility to mitigate their climate impact. For the banks highlighted in this report, the last year has brought a groundswell of activism demanding banks cut their fossil fuel financing, at the same time that increasingly extreme weather events have further underscored the urgency of the climate crisis.

This report maps out case studies where bank financing for fossil fuels has real impact on communities — from a planned coal mine expansion in Poland, to fracking in Argentina, to LNG terminals proposed for South Texas. Short essays throughout highlight additional key topics, such as the need for banks to measure and phase out their climate impact (not just risk) and what Paris alignment means for banks. Traditional Indigenous knowledge is presented as an alternative paradigm for a world increasingly beset with climate chaos. November’s U.N. climate conference in Glasgow, on the fifth anniversary of the adoption of the landmark Paris climate agreement, will be a crucial deadline for banks to align their policies and practices with a 1.5° Celsius world in which human rights are fully respected. The urgency of that task is underlined by this report’s findings that major global banks’ fossil financing has increased each year since Paris, and that even the best future-facing policies leave huge gaps.

Read the report (PDF).

Should Your Union’s Pension Fund Divest from Fossil Fuels?

By staff - Labor Network for Sustainability, November 2018

This guide is designed to help you and your union consider whether you should divest from fossil fuels.

Working people collectively own an enormous amount of capital in our pensions. As a sector, pensions are the largest source of investment in financial holdings, even larger than standard investment houses and banks! Pensions constitute over $40 trillion! Our pension funds are invested in stocks and bonds that may not be serving our interests as working people and may be harming our families’ futures. Imagine what we might be able to support and build, imagine the great jobs we could create, if we use more of our pension funds to directly benefit our members and our families.

The Guide Contains:

  • An introduction to pension fund divestment and links to further information about it
  • Whether failure to divest can constitute a failure in fiduciary responsibility
  • How you can respond to divestment proposals and what questions need to be answered to reach a decision
  • How to start a divestment campaign yourself and answers to questions you may encounter from union members and divestment opponents

Download and Read the PDF Here.

NYC Public Pension Funds Fossil Fuels Divestment Campaign

By Nancy Romer - Labor Network for Sustainability, November 22, 2017

New York City Public Worker Pension Funds are on the cusp of selling off or divesting from their fossil fuel stocks.  How and why are NYC workers and climate activists so intent on achieving this?  What will it mean if they win this?  First some background.

Pension Funds are the Capital of US Workers

American workers too often feel overwhelmed by the power of capitalism in general and financial corporations in particular.  We may feel we have few economic resources with which to exert our opinions and defend our needs in a system based on money.  We may want to challenge “fossil fuel capitalism” that threatens the future for our grandchildren, but how?

Most American workers do own capital in the form of their own homes and, especially, in their pension funds.  Often the pension funds are managed with the support and participation of their unions or, more specifically, their union leaders. What if union members were to look closely at our pension funds and see how we could use them to create the kind of world we want:  investments in renewable energy, public transportation, affordable housing, public education, regenerative agriculture?

As a sector, pension funds are the single largest institutional investor followed by banks, investment firms, and insurance companies (Global Pension Statistics Project, GPS).  Approximately $40 trillion was invested by pension funds in financial markets in 2015 and that gives workers much more financial punch than we realize or use.

Pensions represent deferred compensation to workers and are negotiated through contracts on behalf of union members.  The intention is to provide income during retirement years. Workers have the potential financial power through collectively using their pension funds to both protect us through financially insecure times such as these and to have an impact on the world we want to see, the world we want to leave to our children and future generations.  Too often the second part of this formula—having an impact on the world we want to see—is totally ignored.

A growing number of American workers are questioning the wisdom of keeping their hard-earned deferred income in fossil fuel holdings.   Some unions, particularly public service unions, are joining the other financial entities, like universities, faith organizations, and foundations, which have divested their funds from fossil fuel holdings. Pension funds committed to divestment comprised 12% of all divestment commitments. Globally, a full $5.2 trillion in assets has been pledged to divest from fossil fuels. [Arabella Global Divestment Report, 2016]  That’s a huge start!  We are denying funds from the fossil fuel industry, devaluing their stocks, stopping to “feed the beast”, making fossil fuel corporations pariahs, like we did with tobacco companies that caused cancer.

First U.S. City to Ban Fossil Fuel Expansion Offers Roadmap for Others

By Kevon Paynter - Yes! Magazine, February 5, 2018

On a clear July morning three years ago, dozens of environmental activists pushed their kayaks into the Willamette River in Portland while others rappelled 400 feet from the top of St. Johns Bridge in an attempt to block a Shell Oil ship and its drilling equipment from leaving the port and entering Alaskan waters.

A key piece of Shell’s arctic drilling fleet, the vessel had arrived in Portland for repairs but its departure was delayed by protesters chanting “coal, oil, gas, none shall pass!” during two days of civil disobedience that became known as Summer Heat.

By the time the vessel finally sailed, the stage had been set for what would be a yearlong battle, culminating in an ordinance that banned construction and expansion of fossil fuel infrastructure in the city.

Last month, the Oregon Court of Appeals upheld Portland’s ban as constitutional, affirming the city’s power to regulate the safety and welfare of its residents and sending a powerful signal to cities that they too can take the lead to limit fossil fuel use.

nd while the court ruling could set precedent for similar climate action elsewhere, how Portland passed the nation’s first fossil fuel infrastructure ban holds important lessons for how other communities can use grassroots activism to implement the renewable energy transition in their cities.

Think Globally, Act Locally: Bill McKibben & PERI Tell You How

By Steve Hanley  - Clean Technica, February 2, 2018

A report published January 31 by The Hill claims the budget the Trump administration will release later this month will take an ax to renewable energy funding and carbon reduction research. Specifically, its sources say the administration intends to slash the Department of Energy’s energy efficiency and renewable energy programs by a whopping 72%. In addition, the proposed budget would cut research on fuel efficient vehicles and bio-energy by 82%. Funding for solar energy technology research would suffer a 78% cut. In the process, 250 DOE employees would lose their jobs.

Sun, Sit, and Sell/Sue

Bill McKibben, author of Oil & Honey and founder of 350.org, told The Guardian on February 1 that any hope the federal government will take the lead on climate change or renewable energy was dashed by the State of the Union speech and the Democratic response. Both utterly failed to address climate change, arguably the most serious existential threat ever to humanity and all the species currently sharing the planet with us.

McKibben writes, “If we’re going to make progress on climate change, it’s not going to come through Washington DC — not any time soon. The strategy that’s been evolving for US climate action — and for action in many other parts of the planet — bypasses the central governments as much as possible. That’s because the oil industry is strongest in national capitols — that’s where its money is most toxically powerful. But if frontal attack is therefore hard, its flanks are wide open.”

Channeling Timothy Leary, the 60s era counterculture guru who told us all to “Turn On, Tune In, Drop Out,” McKibben has a three part prescription for what we as individuals can do to move toward a renewable energy future without fossil fuels and carbon emissions. He calls it Sun, Sit, and Sell/Sue and it works like this.

Sun: “The first — joining in work pioneered by groups like the Sierra Club — is to persuade towns, cities, counties, and states to pledge to make the transition to 100% renewable energy. This is now easy and affordable enough that it doesn’t scare politicians. Cities from San Diego to Atlanta have joined in, and they will help maintain the momentum towards clean energy that the Trump administration is trying so hard to blunt.”

Sit: “Job two is to block new fossil fuel infrastructure. In some places, that will be by law. Portland, Oregon, recently passed a bill banning new pipes and such, over the strenuous objections of the industry. In other places it will take bodies — tens of thousands have already pledged to journey to the upper Midwest if and when TransCanada decides to build out the Keystone XL pipeline that Trump has permitted.”

San Francisco Prepares for Historic Vote on Fossil Fuel Divestment

By Thanu Yakupitiyage and Dani Heffernan - Common Dreams, January 18, 2018

San Francisco - On January 24, the San Francisco Retirement Board will vote on a long-awaited resolution to divest San Francisco’s pension fund from fossil fuel companies.

The decision will be seen as an early indication of whether or not the fossil fuel divestment movement can build on the momentum from last week’s historic announcement that New York City would be divesting its pension funds and suing Big Oil for damages caused by climate change.

"This is a definitive moment for San Francisco in the fight for a fossil free world. As the city prepares to host a climate convening of the world's local leaders later this year, it's time to put their money where their mouth is,” said May Boeve, Executive Director of 350.org. “Tackling the climate crisis means that cities everywhere will need to stand up to the fossil fuel industry, specially when federal leaders are slow to act. By divesting their more than $20 billion pension fund from fossil fuels, the City by the Bay will show Big Oil billionaires and communities around the globe that they're serious about real climate action."

Since the campaign launch six years ago, the fossil fuel divestment movement has succeeded in securing commitments from over 800 institutions in over 77 countries representing more than $6 trillion in assets.

In San Francisco, it’s been a long path to next week’s vote. The San Francisco Board of Supervisors voted to endorse fossil fuel divestment in April 2013. Last December, hours before he passed away, Mayor Ed Lee published a piece in Medium endorsing divestment, writing, “By taking the bold step to divest from fossil fuel assets, we are once again taking a strong stand on the essential issue of the environment.”

Meanwhile, many Bay Area institutions have been at the forefront of the divestment campaign. San Francisco State University became the first community college district in the nation to divest from fossil fuels. In the South Bay, the Santa Clara Valley Water District became the first such entity to make a commitment, while Stanford University made an early commitment to divest from coal in 2014.

Divestment has proved an effective tool to help stigmatize the fossil fuel industry and increase investor worries that as the world moves towards renewable energy, coal, oil and gas reserves could become “stranded assets” and drive down the share price of fossil fuel companies. A report from the University of Michigan concluded that the divestment campaign has successfully shifted the conversation around fossil fuels and institutional responsibility to act on climate.

According to many investment advisors and financial experts divesting from fossil fuels poses no significant risk to the portfolio performance. In fact, many are now arguing that as fossil fuel companies become an increasingly risky bet, divestment may be safer than holding onto coal, oil and gas stocks.

"The time to divest from all fossil fuels is now. Our pension board needs to listen to city workers and union members who have testified, written letters, and, presented the facts on the fossil fuel industry for years. SEIU 1021, that counts over 54,000 members in Northern California, publicly supports total divestment,” said Martha Hawthorne, retired RN from the Department of Public Health. “Our hard work built this pension system and we want an end to investments in a system of life killing extraction that endangers our future. We know climate crisis is upon us. This is evident by the drought, record pollution, extreme heat, catastrophic fires and deadly mudslides in just the last few months. We are in a race against time. Divestment is a clear way for San Francisco's pension board to make a difference now."

The nation’s largest environmental groups, notable figures such as Nobel Peace Prize Winner Desmond Tutu and former UN Secretary General Ban Ki-Moon, have all endorsed fossil fuel divestment as a key strategy in fighting climate change.

On January 24, San Francisco has the opportunity to take a bold step forward by announcing that it will join New York City and institutions around the world by divesting from fossil fuels.

Was 2017 the year that the tide finally turned against fossil fuel projects?

By Suzanne Dhaliwal - Open Democracy, December 21, 2017

Last week AXA announced its sell off of €700m of tar sands investments from its balance sheets, covering 25 tar sands companies and 3 major pipelines projects. Thomas Buberl, the company’s chief executive, called the projects “not sustainable and therefore also not insurable.”

This was a significant win for activists like the UK Tar Sands Network and the Indigenous Environmental Network, who have been calling on financial institutions to end investments in the tar sands projects and pipelines since 2009, and who have most recently taken their campaigning efforts to the insurance industry.

The AXA decision comes just weeks after BNP Paribas broke the news that it will no longer finance new shale or tar sands projects, nor work with companies that mainly focus on those resources. Last Friday, Norway’s largest life insurer, KLP announced that it would exclude from its portfolio any firms that derive 30 percent or more of revenues from the extraction of tar sands. In the same week the World Bank announced it would cease financing upstream oil and gas after 2019.

It’s welcome news. Based on the financial risks, climate impacts and indigenous rights violations, we have seen a significant shift in financial institutions backing fossil fuels. The Bank of England now recognizes the monetary risks associated with climate change and is advising the central banks and governments to get out of highly polluting fuels due to the pending carbon bubble and the bad business associated with ‘extreme’ energy extraction. As a result BP, Shell, Exxon and others have pulled out of major tar sands projects and pipelines.

And now the insurance industry is beginning to act more meaningfully. As early as the 1970s, the insurance industry acknowledged the risk of climate change and the need for the sector to take meaningful action. Insurers have already seen the costs of climate related catastrophes and extreme weather events skyrocket, compelling them to be among some of the first movers divesting from coal and also develop policies to stop the underwriting of new fossil fuel projects. But they have massive holdings in fossil fuels. And so they need public pressure to push them to divest.

So despite last week’s news, we must be careful not to pop those champagne corks too fast. Significant action and commitment has yet to be seen by Asian and American insurers. Moreover, regenerative steps need to be taken to ensure that the communities whose livelihoods depend on fossil fuels benefit from the transition to the clean energy economy. Simply put, who will be responsible for the massive clean-ups of stranded projects and direct the green energy transition?

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