The Caisse de dépôt et placement du Québec is planning to completely divest from oil production — roughly one per cent of its total portfolio or about $3.9 billion based on the size of its net assets as of June 30 — by the end of 2022, as part of its new climate change strategy.
However, the Caisse will still maintain exposure to oil through investments such as pipelines and industrial machinery, said Charles Emond, president and chief executive officer of the Caisse, during a press conference on Tuesday.
“We’re not saying it’s the end of oil tomorrow. We’re staying exposed to some elements of oil. . . . but it’s not sustainable to keep increasing the supply of oil. There are alternatives and we feel, from that perspective, natural gas offers a source of transition. We think there’s an incentive to go into transition initiatives with oil companies. Over the last 30 years, oil and gas have had returns of three and four per cent versus an index of 11 per cent. There’s no compromise from a return standpoint.”
Through its climate strategy, the Caisse is aiming for a 60 per cent reduction in carbon emissions across its total portfolio by 2030, according to a press release. In addition to oil divestment, the organization will create a $10-billion transition envelope to decarbonize the main industrial carbon-emitting sectors in which it invests, while setting a target of $54 billion in green assets by 2025, including investments in hydrogen, electric transportation and carbon capture technologies, the released noted.
The Caisse currently holds roughly $36 billion in low-carbon assets and has reduced the carbon footprint of its portfolio by 38 per cent. Other Canadian pensions have made similar commitments to achieving net-zero emissions, including the Ontario Teachers’ Pension Plan and Bâtirente.
The Caisse’s move would position it as a climate leader among Canada’s major financial institutions, said Shift Action for Pension Wealth and Planet Health, a charitable initiative that encourages pension funds to engage on the climate crisis.
“It is amazing that it took until 2021 for a Canadian pension fund to finally recognize that protecting our retirement savings from the worsening climate crisis inevitably requires abandoning market exposure to high-risk fossil fuels,” it said in a news release.
Shift said investments in natural gas are also too risky for the climate and Quebec pensions and should also be phased out. To limit global warming, it said natural gas must also be kept in the ground and oil and gas production must be reduced by an average of three per cent per year starting immediately.
“The CDPQ’s massive fossil gas infrastructure investments mean that it has not yet reckoned with this reality.”