[Marxism] Global Financial Giants Swear Off Funding an Especially Dirty Fuel

Louis Proyect lnp3 at panix.com
Thu Feb 13 07:04:11 MST 2020


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 
pressure groups.”

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 
other industries.

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 
emissions.

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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