The student leaders waited months for a response. Finally, the news came in August via a letter from board chair William Berkley, a 77-year-old insurance billionaire. NYU, he said, has no direct ownership of companies engaged in fossil fuel extraction and “commits to avoid any direct investments” in such companies in the future. He even applauded Sunrise NYU, citing their research and communication skills and “their essential set of environmental sustainability values.”

It was a big win. Sure, Harvard and Princeton both agreed to divest fossil stocks last year, but NYU, located just blocks from Wall Street, was different.

Back in 2016, Berkley called divestment “ingenuous” and argued that many fossil fuel companies were investing in green energies. But as Sunrise NYU cofounder Dylan Wahbe told The Guardian in September, with oil companies currently expanding production and cutting back on renewables, “it would be hard to make those arguments today.”

NYU’s about-face should hearten climate activists everywhere. As the climate emergency grows, even recalcitrant institutions feel the ground shifting. Focused, imaginative and relentless action can achieve unexpected victories.

Sunrise NYC is one of 100 chapters of the Sunrise Movement, a youth-oriented political action organization founded in 2017. Sunrise made headlines in 2018 by occupying the Washington office of House Speaker Nancy Pelosi, proving that no politician is safe from their scorn. Wahbe was impressed by that action, so he was quick to join when film student Alicia Colomer started the NYU chapter in 2020.

The national Sunrise organization achieved another win in September, when President Joe Biden launched the American Climate Corps, a paid training and service program that will put 20,000 Americans to work on energy and environmental projects. Inspired by Franklin Roosevelt’s Depression-era Civilian Conservation Corps, Sunrise has lobbied for such a program for three years.

At NYU, the student activists identified their biggest problem as the board itself. So they’ve called out conflicted trustees such as vice-chair Larry Fink, CEO of BlackRock, the world’s largest investor in fossil fuel firms. Other targets include Maria Bartiromo, a Fox News host who is a proponent of the fossil fuel industry, and Berkley, whose company insures oil and gas firms. In addition, the students say, several trustees represent oil interests in the Middle East, and recently retired trustee John Paulson was an advisor to the Trump administration.

As the new school year dawned, Sunrise NYU was back at it, attending Climate Week NYC protests, cleaning up beaches, lobbying to “democratize” the board of trustees, and trying to push fossil fuel money out of university research.

They’re in good company. In Canada, students at University of Waterloo, McGill and Memorial University of Newfoundland (MUN), among others, continue to pressure their schools to divest. They joined thousands of young people who rallied against fossil fuel in cities across the U.S. and Canada in September.

“There are already 12 universities in Canada that are already divesting or having plans to divest,” said one MUN protestor. “But right now, MUN has no plan in place to divest, and that is just not acceptable for us.”

The post How student campaigners finally convinced NYU to divest from fossil fuels appeared first on Corporate Knights.

As of December 1, at least 177 global pension funds had investment policies that partially or completely excluded fossil fuels. In October, Europe’s biggest pension fund, the Netherlands’ ABP, announced that it would divest from fossil fuel producers. Three New York City pension funds committed to net-zero by 2040 and pledged to invest US$37 billion in climate solutions by 2035. And in September, Sweden’s AP1, which already excludes fossil fuels, launched a fund to facilitate the whole-economy net-zero transition and reduce absolute emissions. 

This year also saw Canada’s big public pension funds say that they’re getting serious about the climate emergency, pushed along by a growing number of concerned beneficiaries and sponsors demanding action. But if they want to emerge as global leaders, these pension giants need to rapidly deploy credible climate-safe investment strategies and stop gambling Canadians’ retirement savings on fossil fuel expansion.

Canada’s 10 largest pension funds alone have more than $2 trillion in assets under management. How these funds invest our pensions is critical to achieving the Paris Agreement goal of limiting average global heating to 1.5°C above pre-industrial levels. Avoiding climate catastrophe is critical to pension funds’ fiduciary duty to maximize returns and invest in the best long-term interests of millions of Canadian beneficiaries.

Canadian pension funds are using sophisticated tools to measure their portfolio carbon footprints, testing their portfolios against different global heating scenarios, setting targets to reduce portfolio emissions intensity, and sharpening their shareholder engagement strategies to prioritize climate action. They’re also allocating billions of dollars toward climate solutions, such as renewable energy and clean technology. For example, the Ontario Teachers’ Pension Plan (OTPP) now has 14% of its portfolio, or more than $30 billion, invested in what it considers climate-friendly assets.

In recent years, some of Canada’s largest pension funds have also been quietly offloading their fossil fuel stocks. CPP and Caisse de dépôt et placement du Québec (CDPQ) have reduced the value of their fossil fuel equity holdings by more than 90% over the last 10 years. In November, OMERS (Ontario Municipal Employees’ Retirement System) and the Investment Management Corporation of Ontario established net-zero-by-2050 goals, joining OTPP and CDPQ in the net-zero club.

How these funds invest our pensions is critical to achieving the Paris Agreement goal of limiting average global heating to 1.5°C above pre-industrial levels.

These are all laudable signs of progress, but no Canadian pension fund has gone nearly far enough to address the unprecedented financial risks of climate change and align its portfolio with a safe climate future. The recent Canadian Pensions Dashboard for Responsible Investing report found very few examples of global best practices when it comes to climate risk and responsible investing.

No Canadian pension fund has published a comprehensive investment strategy that credibly aligns its portfolio with climate safety. Apart from the CDPQ’s commitment to divest from oil producers by the end of 2022, none have formalized an exclusionary screen on fossil fuels. CPP continues to explicitly rule out divestment, even though its public equity portfolio’s cumulative return would be 17.08% higher had it divested 10 years ago. It’s encouraging to see CPP’s focus on critical decarbonization pathways for hard-to-abate industries, but it doesn’t seem to grasp that there is no credible or profitable pathway to zero emissions for companies whose core business is exploring for, extracting, refining or transporting fossil fuels. And it doesn’t help that CPP’s board of directors has close ties to the oil and gas industry. 

Even as the International Energy Agency warns that fossil fuel expansion must end immediately to salvage a 1.5°C world, Canadian pension funds invest billions of our retirement dollars in companies and assets that expand oil, gas and coal infrastructure. In many cases, our pension funds own the pipelines, oil and gas companies, and offshore gas fields themselves.

The oil and gas industry’s net-zero commitments lack credibility. Yet Canadian pension funds cling to a misguided belief that “having a seat at the table” means they can “engage” their way to changing a fossil fuel business model that is fundamentally incompatible with climate safety.

ABP, on the other hand, said it was divesting because it saw “insufficient opportunity for [it] as a shareholder to push for the necessary significant acceleration of the energy transition at these companies,” opting to focus its engagement on the utility, auto and aviation sectors instead. In divesting from oil sands companies this year, the New York State Common Retirement Fund (NYSCRF), the third-largest pension fund in the United States, concluded that those companies “do not have viable plans to adapt to the low-carbon future” and “pose significant risks for investors.” 

If Canada’s pension funds are serious about protecting our retirement savings and investing in a safe climate future, there’s no more time for greenwashing and incrementalism. They must catch up with their global peers and listen to the growing number of beneficiaries demanding change: shift capital out of high-risk fossil fuel assets and into profitable climate solutions, crack down on company greenwashing, and dramatically scale up investments in climate solutions.

Patrick DeRochie is the senior manager for Shift Action for Pension Wealth and Planet Health, a charitable project that tracks the fossil-fuel and climate-related investments of Canadian pension funds and mobilizes beneficiaries to engage their fund managers on the climate crisis.

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It was a major reversal for Bacow, who has dodged protesters’ demands that Harvard’s US$40-billion worth of endowment funds divest all traces of oil, gas and coal investments. By the end of 2020, Harvard Management Co. (HMC), custodian of the world’s largest endowment, had actually reduced fossil fuel investments from 11% of its portfolio in 2008 to 2%. But as Bacow, a one-time environmental studies professor, wrote in an article for the independent Harvard Magazine, “I, like my predecessors, believe that engaging with industry to confront the challenge of climate change is ultimately a sounder and more effective approach.”

That familiar brush-off was finally retired on September 9, when Bacow announced that HMC no longer directly owns any fossil fuel investments and “does not intend to make such investments in the future.” He conceded that HMC retains some “legacy investments” through limited partnerships but said those activities “are in runoff mode and will end as these partnerships are liquidated.” Looking ahead, he promised, “HMC is building a portfolio of investments in funds that support the transition to a green economy.”

The announcement came just two days after the nine-year-old Divest Harvard movement held a climate rally for returning students. Against the backdrop of floods, forest fires and hurricanes then devastating American communities, the students carried a massive blue banner symbolizing the rising ocean tides that they said are coming to Harvard’s door.

Activist students hailed Bacow’s reversal. “It’s a massive victory for our community, the climate movement, and the world – and a strike against the power of the fossil fuel industry,” Divest Harvard reported.

The organization framed Bacow’s statement as a milestone in the climate wars. “From the beginning, Harvard has sought to duck, dodge, and deny: claiming that fossil fuel stocks were necessary for profit, claiming that the endowment shouldn’t play a role in fighting climate change, and even claiming that fossil fuel companies are part of the solution. And the fossil fuel companies have loved this, constantly holding up Harvard’s embrace of the industry as a vindication of the industry’s unjust and unsustainable vision for the future.”

Author Bill McKibben, a Harvard grad who founded the climate campaign group 350.org, said he thought Harvard would never divest. “That it finally did is an enormous tribute to generations of Harvard students who have never let up, and to faculty and alumni who backed them up.” Still, McKibben believes Harvard’s “obstinance” in refusing to divest has cost the university prestige and money.

Spoiling the party was John S. Rosenberg, editor-in-chief of Harvard Magazine. He pointed out that Bacow’s statement never actually used the term “divestment” and that 60% of Harvard’s endowment is entrusted to private equity and hedge funds – independent investors who may have different investment strategies. If Harvard has instructed any such partners to avoid all investments that support the fossil fuel industry, Rosenberg wrote, “it has not said so.”

Later, Harvard prof Naomi Oreskes and Sofia Andrade of Fossil Fuel Divest Harvard penned an op-ed in The New York Times that clarified things somewhat. America’s oldest university will divest an estimated $838 million of its $42-billion endowment from fossil fuels, which they called “the first step toward a just transition to a greener future.”

Also this fall, Boston University and the University of Minnesota joined more than 1,300 schools and institutions that have divested, at least in part, from the fossil fuel industry.

Some will dismiss divestment as symbolic, said Oreskes and Andrade. Regardless, symbols matter, they wrote: “Harvard’s divestment is a signal to other investors that as the planet burns, finance must not stand with the arsonists.”

The post Harvard gives in to pressures to divest from fossil fuels (mostly) appeared first on Corporate Knights.

Twelve of Canada’s biggest pension funds were analyzed by Corporate Knights, in partnership with the Smart Prosperity Institute and The Natural Step Canada. Over the past decade, these funds have quietly unloaded their fossil fuel stocks as their values have plunged, to the point where they now make up less than a few percent of total investments. Canadian pension portfolio exposures to fossil fuel stocks are down to a 10th of what they were 10 years ago, notwithstanding some controversial private equity investments.

For instance, the two largest funds in Canada (Canada Pension Plan and Caisse de dépôt et placement du Québec) have slashed the value of their fossil fuel holdings by more than 90% over the past 10 years, from more than 22% of total equity investments to less than 2% and 3% as of September 20, 2021.

On the flip side, we found that collectively, their self-defined environmentally sustainable investments have gone from negligible to more than $150 billion – 7% of their total assets – over the last few years.

Many pension funds are also taking a more active role with the companies they invest in, engaging on environmental, social and governance (ESG) issues ranging from board gender diversity to responsible lobbying and payment of taxes. Similarly, many funds are making efforts to improve their own governance by increasing management diversity. This involves aligning their own executive bonuses with ESG targets and increasing ESG competency on their boards.

Pension funds represent a major pool of Canada’s investment capital: the top 12 funds alone control $2.1 trillion, roughly equivalent to Canada’s entire GDP. Many stakeholders – governments, businesses, non-profits like Shift Action for Pension Wealth and Planet Health, and certainly beneficiaries – are increasingly interested in how pension funds are addressing the challenge of the transition to sustainability. A new tool called the Sustainable Investment Dashboard, developed by Corporate Knights with input from the Smart Prosperity Institute, The Natural Step Canada and a panel of experts, aims to highlight which pension funds are pulling their weight on these issues and which ones are falling behind.

As the transition to a climate-friendly economy speeds ahead, global investors are embarking on what is in all likelihood the largest reallocation of capital in our civilization’s history. This could be more than $100 trillion between now and 2050, according to Mark Carney, former governor of the Bank of England.

There still exists tremendous potential for pension funds to play an active ownership role in helping carbon-intensive companies leverage their assets to make the transition from “grey to green,” through initiatives like Say on Climate and Climate Engagement Canada. This engagement must be underpinned by an honest assessment of what kind of future companies are investing in. Many companies claim to be aligned with net-zero emissions, but if they are still plowing most of their growth investments into high-carbon assets, then net-zero is just a slogan.

Ziad Hindo, the chief investment officer for the Ontario Teachers’ Pension Plan (OTPP), told The Globe and Mail that Canadian pension funds need “a fundamental shift.” Some of Canada’s largest pension plans are realizing that they need to keep up with the pace of change and capture their fair share of clean-growth investment opportunities. They’ll need to boost their investments in low-carbon solutions to roughly 20% by 2025 and fully decarbonize across all asset classes. Given the multi-decade ripple effects of capital allocations made today, this will need to happen well before the 2050 net-zero target for the real economy.

This fall, Canada’s second- and third-largest pension fund managers raised the stakes, announcing plans to achieve net-zero emissions, and linked the objective to executive compensation at the funds.

In September, OTPP set targets to reduce portfolio carbon-emissions intensity by 45% by 2025 and by 67% by 2030, compared to their 2019 baseline. Critically, these targets impact all their assets across public and private markets, including external managers. The pension plan also committed to invest $5 billion in climate and transition solutions so far in 2021 and said they would boost their $30-billion portfolio of green investments.

Also in September, CDPQ updated its climate pledges to boost green assets from $36 billion to $54 billion by 2025 and achieve a 60% reduction in the carbon intensity of the total portfolio by 2030. The plan will also create a $10-billion transition envelope to decarbonize the main industrial carbon-emitting sectors and complete its exit from oil production (currently just 1% of its portfolio) by the end of 2022. Other pension funds are also developing net-zero action plans, which are not yet public. So this trend will almost certainly continue.

While it is encouraging to see the “Maple Revolutionaries” (as The Economist dubbed Canada’s large pension funds for their strong governance and performance track record) rising to the climate challenge, there is a risk that the lack of clear definitions and expectations could result in unnecessary costs, delays, lost opportunities and even risks to financial performance.

As the investment wave toward net-zero takes hold globally, now is the time to position Canadian pension funds (large and small alike) for success.

This will require the federal government to establish a Net-Zero Implementation Standard, a clear definition of what constitutes a net-zero-aligned portfolio. And there should also be a net-zero alignment requirement for all pension funds (a Net-Zero Rule). While Canada has a fragmented regulatory landscape (the 12 largest funds are regulated by eight different supervisory bodies), tax-exempt pensions share a common touch point with the Income Tax Act. This is a powerful tool as pensions currently benefit from $85 billion per year in tax subsidies (a sum equal to 25% of all federal government revenues).

The federal government should consider amending the Income Tax Act to introduce a Net-Zero Rule requiring pension funds to demonstrate net-zero alignment in order to maintain full tax-exemp status. This could be phased in starting with the largest funds, which account for the majority of Canada’s $4 trillion in pension wealth, and would help secure Canadian retirement savings on the right side of the transition to a low-carbon economy.

It would ensure that pension plans generously subsidized with public funds are not investing at cross-purposes to the government’s climate goals, according to Jinyan Li, a professor of tax law and former interim dean of Osgoode Hall Law School. And more generally, it would be in line with the rising recognition of the social role of finance.

A variation on this recommendation could be to provide a small (10 to 20 basis points) limited-duration (two-year) enhanced tax incentive for pension funds aligned with the net-zero requirement, after which a partial reversal of tax-exempt status would kick in for non-compliant funds. In light of the urgency of the climate situation, this could be done surgically for net-zero purposes or, as pension expert Keith Ambachtsheer has called for, as part of an expedited, more holistic overhaul. This could also be used to ensure all Canadian tax-deferred asset pools provide integrated annual reports covering their organizational purpose, governance, business model, performance and strategy, including independent certification that the report deals with reality and not fiction.

Though there is no single incontrovertible global standard for how to calculate net-zero, two of Canada’s three largest funds already have developed best-practice methods (both using the Partnership for Carbon Accounting Financials Standard). And there are other credible international standards upon which Canada could issue guidelines, including the Paris Agreement Capital Transition Assessment (PACTA) tool (a free, open-source methodology and tool the UN helped to finance), which the Bank of England has used.

Portfolio analysis done for this report and by the two large Canadian funds with public net-zero goals (CDPQ and OTPP) both found that there is a financial cost to moving too slowly in this period of unprecedented capital reallocation from high-carbon to low-carbon activities. Any concern about a conflict between net-zero alignment and the duty of pension fiduciaries (to focus on risk-adjusted returns) appears increasingly misplaced. Now is the time to act on implementing net-zero portfolio strategies.

If we get this right, then Canadian pension plans can lead in buying us out of the climate jam while earning healthy returns. Bonus: It’s easier to collect a pension in a world that is not on fire.

Toby Heaps is the co-founder and CEO of Corporate Knights.

Ed Waitzer is a lawyer and former chair of the Ontario Securities Commission.

Derek Eaton is the director of public policy research and outreach at the Smart Prosperity Institute. 

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But some analysts say it isn’t much of a victory from a climate perspective. 

In the transaction, BHP’s oil and gas assets will merge with Woodside Petroleum, an Australian gas producer, in exchange for shares, which will be distributed among BHP’s shareholders. So these oil and gas assets will still be in operation; they’ll just be owned by another company, and one that has only “an aspiration” of achieving a net-zero target by 2050. 

“Woodside is far from being the poster child of the net-zero movement,” says Axel Dalman, an oil, gas and mining analyst at think tank Carbon Tracker. “I think the way that they phrase their net-zero target … is the weakest wording I’ve heard in this context. That really shows that it’s not really a fundamental part of their plan. Is it a climate win? I wouldn’t say so.”

Dalman says Woodside has committed to emitting less through their own processes – the extraction and production of the commodities that they sell – but not so much from the end-use emissions of their products. According to Carbon Tracker, 85% of the emissions from a barrel of oil occur when it’s burned to power transportation. 

The structure of the merger also means that the transaction isn’t necessarily a clean break for BHP shareholders from these assets, as they will still own 48% of the new venture. 

On the same day, BHP also announced plans to spend US$5.7 billion on building what is expected to be one of the world’s largest potash mines in Saskatchewan, betting on what the company hopes will be increased agricultural use of the fertilizer in years to come. 

Of the big three ingredients in fertilizer, potash, or potassium (the others are nitrogen and phosphorus), is easily the least emissions-intensive. Jeff Schoenau, a soil scientist and professor at the University of Saskatchewan, says that potassium serves as an important plant nutrient that is a zero-emissions fertilizer, as it doesn’t volatilize. “Potassium actually could be considered to have a positive impact on the greenhouse gas balance by helping to increase photosynthesis in plants and also to increase carbon stores in the soil,” he says.

When it comes to the production of potash, the mining process does emit greenhouse gases. Nonetheless, nitrogen is a much less sustainable fertilizer, as it emits nitrous oxide – a greenhouse gas with 300 times the warming effect of carbon dioxide. Synthetic nitrogen fertilizers are also produced from natural gas. In 2017, agricultural soil management accounted for 74% of total nitrous oxide emissions in the United States, according to the U.S. Environmental Protection Agency. 

Globally, potash mines have stoked opposition from Indigenous and environmental groups with concerns about deforestation, disruptions to local communities, and potential impacts on waterways. But little public opposition has materialized against BHP’s massive Saskatchewan project. 

BHP’s moves to shed its oil and gas assets and its turn towards potash could put the company in a good position to benefit from the energy transition. But Dalman is less confident in Woodside’s position, as decarbonization will require a winding down of both oil and gas. Woodside may be willing to take on the risks of BHP’s oil assets, but Dalman believes the optimism around gas that likely fuelled this deal will evaporate in the next few years. 

“People are getting around to the fact that oil is probably losing its shine, but they’re still saying gas is a transition fuel,” he says. “I think that will start to break over the next few years as the economics get worse and as the reality of the pathway we need to take becomes clearer.”

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With oil companies and conservatives foot-dragging on climate change, Rockefeller’s descendants have come together to prod science forward once again. In a fall opinion piece in The New York Times, Daniel Growald, Peter Gill Case and Valerie Rockefeller – three of John D.’s great-great-grandchildren – pushed for banks to stop lending to the fossil-fuel sector. Calling the warming climate a “major risk” to the American economy, they urged financial leaders to “embrace innovation and move beyond the profits of fossil fuels to develop banking models that will excel in a zero-carbon world.”

The cousins pointed to Rainforest Action Network’s Banking on Climate Change report that found that since 2016 – when the writing was certainly on the wall for oil companies – 35 global banks have funnelled US$2.7 trillion into fossil-fuel projects. That trajectory, the writers say, “will guarantee a world with runaway climate disruption.”

The biggest lender on that list, at US$269 billion from 2016 through 2019, was JPMorgan Chase.

Also on the list of complicit banks were Canada’s Big Five: RBC, at US$141 billion; TD, at US$103 billion; Scotiabank, at US$98 billion; BMO, at US$82 billion; and CIBC, at US$58 billion.

The cousins were particularly upset that JPMorgan Chase had just released an announcement claiming to align with the Paris climate accord. But America’s largest bank offered no details on the proposed carbon-emission targets for its loan portfolio, nor any plans to curtail lending to the fossil industry – which the Rockefellers consider the best leverage for change.

So the family formed a new lobbying group, BankFWD. Its goal: to mobilize influential banking clients to pressure their banks to embrace the Paris Agreement target of limiting global warming to 1.5°C. Short of aggressive government action, they say, limiting access to financing is the best way to force resource companies to embrace greener solutions.

Meanwhile, oil and gas and coal are also getting pummelled on the investment side. In the first 10 months of 2020, the energy sector of the S&P 500 index plunged 52.5%. That wasn’t just the worst performance on Wall Street last year: “It was by far the worst of any sector in history,” noted Jason Goepfert of Minnesota-based Sundial Capital Research. “It exceeds the relative losses in tech after the internet bubble burst and devastation in financials following the [2008] financial crisis.”

In November, the energy index made up much of that lost ground by rising 30%, based on investors’ growing faith in the upcoming COVID-19 vaccines. Even so, the energy sector now accounts for less than 3% of the overall value of the S&P 500, versus 12% a decade ago.

A version of this brief appears in the upcoming Winter Issue of Corporate Knights magazine.

Rick Spence is a business writer, speaker and consultant in Toronto specializing in entrepreneurship, innovation and growth. He is also a senior editor at Corporate Knights.

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Corporate Knights was able to determine this by pulling the NYSCRF’s stock holdings for each of the past ten years from its 13-F SEC filings and Comprehensive Annual Financial Report (CAFR), and then creating a fossil free portfolio* and comparing its performance accounting for net outflows to the NYSCRF’s fossil inclusive stock portfolio using Bloomberg’s PORT function from April 1, 2008 to March 31st, 2017.

*Fossil free means all oil, gas, thermal coal mining and thermal coal power producers were excluded. The weight of the removed companies was redistributed proportionately towards the remaining companies in accordance with their relative weights

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