Canadian pension funds remain heavily invested in natural gas companies, potentially putting them at risk as the world transitions to cleaner energy sources. A new report from the advocacy group Shift Action for Pension Wealth and Planet Health warns that these investments could become stranded assets as the demand for fossil fuels declines. The report found that nine of Canada’s largest public pensions have invested in 22 gas-related companies that collectively operate nearly 350,000 kilometers of pipelines globally.
These pension funds include the Canada Pension Plan Investment Board (CPPIB), Ontario Teachers’ Pension Plan (OTPP), and Caisse de dépôt et placement du Québec (CDPQ). Many of these gas utilities are banking on the idea that they can transition to using hydrogen in their existing pipelines. However, experts say this is not a realistic solution due to the high costs and infrastructure challenges involved.
” Hydrogen can’t save gas companies from the climate imperatives and cost-effective technologies already disrupting energy markets and making gas assets obsolete,” says Adam Scott, executive director of Shift. The report emphasizes that pension fund managers must carefully navigate the global shift to net zero carbon emissions to protect investment returns.
Pension funds and fossil fuel risks
Despite this, Canadian pension funds remain heavily invested in fossil fuels. Some major pensions like CPPIB have said they are working with oil and gas companies to reduce emissions while maintaining needed access to energy. However, Shift argues that pensions should push the utilities they co-own to halt fossil fuel expansion and transition to sustainable energy instead.
“There’s a real risk of these gas networks becoming stranded,” says Patrick DeRochie, Shift’s senior manager. It requires really hard thinking on the parts of the gas utilities and their pension fund owners on what they’re going to do with these hundreds of thousands of kilometers of gas pipelines that are going to have to become obsolete if we’re going to achieve our climate targets.
The report suggests that pension funds should use their influence to push gas utilities to diversify their business and become energy providers rather than solely gas providers. This could involve offering programs to help customers switch to heat pumps and other clean energy solutions.
Requests for comment from several of the pension funds mentioned in the report were not immediately received or declined. As the world moves towards a low-carbon future, the pressure on pension funds to divest from fossil fuels is likely to continue growing.
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