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NY Times, Feb. 13, 2020
Global Financial Giants Swear Off Funding an Especially Dirty Fuel
By Christopher Flavelle
Some of the world’s largest financial institutions have stopped putting
their money behind oil production in the Canadian province of Alberta,
home to one of the world’s most extensive, and also dirtiest, oil reserves.
In December, the insurance giant The Hartford said it would stop
insuring or investing in oil production in the province, just weeks
after Sweden’s central bank said it would stop holding Alberta’s bonds.
And on Wednesday BlackRock, the world’s largest asset manager, said that
one of its fast-growing green-oriented funds would stop investing in
companies that get revenue from the Alberta oil sands.
They are among the latest banks, pension funds and global investment
houses to start pulling away from fossil-fuel investments amid growing
pressure to show they are doing something to fight climate change.
“If you look at how destructive oil sands can be, there’s a very strong
rationale,” Armando Senra, head of BlackRock’s iShares Americas funds,
said in an interview, saying that the oil sands, along with coal, are
“the worst offenders, if you want, from a climate perspective.”
Despite the pressure from foreign investors, oil-sands production has
continued to increase in part because local Canadian banks and pension
funds have remained willing to lend. And, as Alberta’s government is
quick to point out, some of the same companies pulling away from oil
sands are continuing to invest in oil projects elsewhere in the world
including in countries such as Saudi Arabia.
Nevertheless, the clash over foreign divestment in Alberta — and the
strong response it has provoked from local leaders — suggests the
potential for the financial industry to influence climate policy if
firms follow through on their early pledges to incorporate climate
change into their investment strategies.
Alberta, meanwhile, has fought back hard against the divestment. In
April, voters elected a provincial leader who promised to punish
companies that stopped financing the oil sands. Then, in December,
Alberta opened what it called a war room to attack anyone perceived as
criticizing the industry.
“We have been targeted by a foreign-funded campaign of special
interests,” Alberta’s premier, Jason Kenney, said after winning office
last year. “When multinational companies like HSBC boycott Alberta,
we’ll boycott them.” HSBC, the largest bank in Europe, has said it will
stop financing new oil sands developments.
Financial institutions worldwide are coming under growing pressure from
shareholders and activists to pull money from high-emitting industries.
At the same time they are waking up to the fact that they have
underestimated the climate-change risk in their portfolios.
Oil has made Alberta one of the wealthiest regions in North America, but
the process of extracting petroleum from oil sands releases an unusually
large volume of greenhouse gases. Because Alberta’s oil is locked in
geological formations that make it particularly energy-intensive (and
therefore environmentally damaging) to extract, it has provided an easy
early target for investors eager to make a statement.
The oil sands have long been a target of environmentalists’ ire. But in
2017, the campaign against them shifted to the world of finance. That
summer, the largest pension fund in Sweden, AP7, said it had divested
from TransCanada, the company building Keystone XL, a pipeline to carry
crude from the oil sands to the United States.
Other international lenders followed, announcing they would divest not
only from pipelines but from oil-sands extraction projects as well. They
include BNP Paribas Group and Société Générale of France, and Norway’s
sovereign wealth fund.
It wasn’t just financing that suddenly seemed at risk. Some of the
world’s largest insurance companies, including AXA, Swiss RE and Zurich
Insurance, announced they would stop providing coverage to projects in
the oil sands, which are sometimes referred to as tar sands, as well as
no longer investing money in those projects.
In December, the American insurer The Hartford said it would no longer
insure or invest in companies that get more than a quarter of their
revenue from oil sands or thermal coal mining. “We selected coal and tar
sands because they have been identified as leading contributors to
carbon emissions,” said David Robinson, the company’s general counsel.
Even large international oil companies began pulling out of the oil
sands, including Shell in 2017.
A Shell representative said the company left because other companies
with more oil-sands experience were better able to work there. But
Andrew Leach, a professor of energy economics at the University of
Alberta, said Shell was also responding to pressure from its own
investors to pull out, given the high levels of greenhouse gases
associated with oil extraction there.
“They were under significant pressure from their shareholders to pull
out,” Dr. Leach said.
The latest blow came in December, when the rating company Moody’s
downgraded the creditworthiness of Alberta’s debt to its lowest level in
20 years, citing, among other concerns, the province’s dependence on the
oil sands and the environmental costs of extracting the oil.
In response to that pressure, Alberta has only increased its support of
the oil sands.
Mr. Kenney, Alberta’s premier, has publicly vilified investors that
left, complaining that some of those same investors also finance oil
production in countries such as Iran and Saudi Arabia, which have lower
greenhouse gas emissions per barrel but far worse human-rights records.
Mr. Kenney also promised to strip government contracts from companies
such as HSBC and also threatened to put up billboards in the London
subway, where the bank is based, intended to embarrass it for investing
in Saudi Arabia while spurning Alberta.
Spokeswomen for HSBC and for Mr. Kenney both declined to say whether
Alberta had canceled government contracts with the bank.
“I refuse to allow us to be lectured to by European banks and insurance
companies” that do business with Middle Eastern oil producers, Mr.
Kenney said in October. “We’re going to take that right to their
doorsteps in Europe.”
After Moody’s downgraded the province in December, Mr. Kenney lumped it
in with other global finance companies as biased, misinformed, or both.
“Increasingly, financial institutions, and this includes apparently
Moody’s, are buying into the political agenda emanating from Europe,”
Mr. Kenney said, adding that those institutions are often making
decisions “based on data distorted, torqued data provided by green left
Later that month, Alberta opened its war room, which has a budget of 30
million Canadian dollars and a mandate to rebut criticisms of the oil
sands. One of its first items, which are designed to look like online
news articles, attacked a nonprofit group that teaches schoolchildren
about climate change and criticized school administrators for letting
the group talk to Alberta students.
“The center will take a fact-based approach, counteracting myths and
lies being spread about our province and about our energy sector,” Sonya
Savage, Alberta’s energy minister, said of the war room, whose formal
name is the Canadian Energy Center.
Oil sands extraction leads to about 70 percent more greenhouse gas per
unit of energy on average than the global mean, according to research
published in the journal Science in 2018 using data from 2015. Of the 90
countries whose oil extraction was studied, few generated more
greenhouse gas per barrel.
The government’s antagonism toward overseas investors and other
perceived critics reflects a political calculation, according to Melanee
Thomas, a professor of political science at the University of Calgary:
Railing against foreign influence plays well with conservative voters.
The problem with that approach, she said, is that the government has
made it harder for voters or the oil sands industry to hear the message
those banks are delivering: The world’s appetite for the most polluting
fossil fuels is fading.
“The market’s already pointed in a particular direction,” Dr. Thomas
said. “You can scream at it as it goes, but that’s not going to change it.”
In response to written questions for Mr. Kenney, his spokeswoman,
Christine Myatt, wrote that investors should evaluate oil sands projects
individually, adding that some projects have lower greenhouse gas
emissions than others. “It is unscientific to draw a line around a
region and say it is off-limits for investment,” Ms. Myatt said.
Mr. Kenney’s position “is not a campaign tactic,” she added. “It’s about
responding to an existential threat to Alberta’s — and Canada’s —
economy and to the livelihoods of hundreds of thousands of Canadians.”
Despite the political rancor, the divestment campaign has yet to curtail
production. More oil was extracted from the oil sands last year than
during any previous year on record, according to data provided by the
Canadian Association of Petroleum Producers, the industry’s trade group.
That’s partly because Canadian banks and pension funds have remained
willing to lend. Those institutions are more wary than their global
counterparts of prompting a backlash from the Canadian public, experts said.
A senior Alberta official, speaking on the condition that he not be
identified, said the frustration inside the government revolved around
the belief that foreign investors are pulling out of the oil sands to
earn the good will of environmentalists and activists. That tactic
imposes no great sacrifice on those investors, the official said, since
the returns from the energy industry have been low anyway compared with
The official also said the investors were ignoring progress that oil
sands companies are making on greenhouse gas emissions, as well as the
fact that some oil sands operations are closer to the global average on
The critics of divestment aren’t just in Alberta.
Michael Sabia, chief executive for the Caisse de Dépôt et Placement du
Quebec, one of the country’s largest pension funds, said it continues to
invest in oil sands companies, while pushing the companies to reduce
greenhouse gas emissions.
“What does divestment get you? What you get is, you get a headline,” Mr.
Sabia said in an interview. “But you haven’t done anything really to
direct your organization to be a positive contributor to the energy
transition that the world has to go through.”
Jeanna Smialek contributed reporting.
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