Alberta public pensions being used to prop up struggling energy industry, union says

Alberta's largest labour organization says public-service pensions are being used to prop up the province's struggling fossil fuels industry at a time when many large investment funds are moving away from the sector.

"We're afraid they're going to use our pension savings to fund a political agenda rather than invest those funds in a way that's responsible," said Gil McGowan, president of the Alberta Federation of Labour.

The Alberta Investment Management Corp., or AIMCo, says theinvestment of nearly $115 billion it manages for 31 pension, endowment and government funds to carbon-intensive industries that could be affected by efforts to fight climate change is on par with that of similar funds around the world.It points to figures suggesting that risk is declining.

Other measures suggest the fund's carbon footprint has increased by nearly two-thirds since 2015.

One analyst has concluded that a portion of AIMCo's funds set aside to invest in Alberta has largely been put into small energy firms a sector lately fraught with bankruptcy and bad debts.

Earlier this year, one of the world's largest investment groups, BlackRock, announced it would put climate and sustainability at the centre of how it decides to invest its $7-trillion fund.

A survey of institutional investors by the University of Texas found more than half the managers of 439 banks, insurers and fund managers say climate risks are already a factor in their investment decisions.

'Trending downward'

Documents on AIMCo's website suggest the amount of carbon generated by companies it invests in has grown significantly to 6.9 million tonnes of carbon dioxide in 2018 from 4.2 million tonnes in 2015.

For every $1 millionAIMCo invests, it now produces 243 tonnes of carbon dioxide up from 179 tonnes in 2015.

AIMCo spokesman Denes Nemeth said a third measure carbon output per revenue generated shows its risk is falling. The calculation concludes AIMCo is generating 194 tonnes of carbon for every $1 million its investments earn, down from 202 tonnes five years ago.

That measure "demonstrates clearly that AIMCo is trending downward," he said.

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No consensus exists on how to measure investors' carbon exposure, but Nemeth said an international business group on climate risk disclosure uses the emissions-per-revenue method.

Nemeth points out those measures only cover equities, not other investments such as infrastructure or real estate. AIMCo says its renewable energy infrastructure investments have increased to nearly 20 per cent of its total portfolio in that sector.

Joel Gehman of the University of Alberta's Canadian Centre for Corporate Social Responsibility said AIMCo's equity investments seem to be in line with global averages for carbon exposure.

The overall U.S. stock market generates 175 tonnes of carbon dioxide per $1 million in sales. Global stocks average 188 tonnes.

Still, parts of AIMCo's portfolio are heavily carbon-intensive. In 2015, Alberta's New Democrat government announced that up to three per cent of the province's heritage fund, managed by AIMCo, would be invested to help Alberta's economy grow.

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Since then, AIMCo has invested about $46 million in renewable energy, says an analysis by the non-partisan Alberta Liabilities Disclosure Project that works to provide accurate data on the province's oil and gas liabilities.

But about $269 million about 70 per cent of the money invested under the Alberta growth mandate has gone to oil and gas companies.

Some, such as Trident Exploration, have already gone bankrupt despite a $12.3-million AIMCo infusion, leaving behind millions of dollars in cleanup liabilities.

The politics of investment

The Alberta Federation of Labour, in a report that was to be released Wednesday, says that investing trend is no accident.

McGowan points to recent legislation that removes the right of public pension funds to leave AIMCo's management. Those include the Alberta Teachers' Retirement Fund, the Local Authorities Pensions Plan and the Public Services Pension Plan.

Gehman has concerns about AIMCo's exposure to carbon risks. He said Albertans, just because of the role that carbon-intensive industries play in the province's economy, are probably already overexposed.

"A true diversification strategy would suggest the AIMCo would want to be significantly underweight in carbon intensity to counterbalance this," he wrote.

Leave politics out of investing, says the labour group's report.

"We think it would be unwise and irresponsible to use either public dollars or the retirement savings of hundreds of thousands of Albertans to do what the markets and the global investment community are increasingly reluctant to do themselves."