Pension plan investors double down on oil despite climate concerns

Investors face backlash for challenging net-zero emissions commitment

Pension plan investors double down on oil despite climate concerns

In a significant move, a US company with partial ownership by the Canada Pension Plan Investment Board (CPPIB) has announced an investment aimed at boosting oil production. 

Civitas Resources, which has a 21% stake owned by CPPIB, revealed plans this week to invest $6.2 billion in increasing oil production by 60%.  

According to Reuters, Civitas Resources acquired oil and gas operations in the Permian Basin of the southwestern United States previously managed by NGP Energy Capital Management.  

The decision has drawn criticism from Canadian climate groups, who argued that such a move contradicts CPPIB's commitment to achieving net-zero emissions and places the retirement savings of millions of Canadians at risk. 

“As Canadians from coast to coast choke on smoke, evacuate their homes and suffer through the worst wildfire season on record, the CPPIB is allowing its growing portfolio of fossil fuel companies to spend $6.2 billion to acquire 335 million barrels of oil in Texas and Mexico,” said Patrick DeRochie, senior manager at Shift Action for Pension Wealth and Planet Health (SHIFT). 

Both the International Energy Agency and the Intergovernmental Panel on Climate Change have emphasized that any hope of limiting global temperature increases to 1.5°C by mid-century requires a complete halt of investments in new fossil fuel projects. 

“The CPPIB is risking our national retirement fund on stranded assets and investing in a future of ever-worsening climate disaster,” DeRochie said.  

This latest investment by CPPIB-owned Civitas Resources follows the board's acquisition of a 49% stake in Aera Energy, California's second-largest oil and gas producer, according to a statement sent by SHIFT to Canada's National Observer. 

CPPIB pledged to make its portfolio net-zero by 2050 and aimed to increase investments in green and transition assets from $67 billion to at least $130 billion by 2030 to support this goal. The board also aimed to achieve carbon neutrality in its operations by the end of the 2023 fiscal year. 

Critics, such as James K. Rowe, an associate professor at the University of Victoria's School of Environmental Studies, argued that the investment contradicts CPPIB's emission reduction targets and raises climate security concerns.  

“It is easy to make net-zero pledges for decades in the future,” Rowe said.  

“The difficult part is crafting a serious plan for achieving the emission reductions. The CPPIB’s investments in fossil fuel companies like Civitas that are significantly expanding production during a climate emergency is a sign that our national pension fund is not seriously planning for the future.” 

Rowe also questioned the financial imprudence of investing billions of dollars in fossil fuel companies. 

“Whether due to the growing use of green energy and electric vehicles or much-needed climate legislation that will be required to forestall 1.5 degrees Celsius warming, it is likely that fossil fuel investments will rapidly lose value in the near future,” Rowe said.  

Julie Segal, senior program manager of climate finance at Environmental Defence, highlighted that for CPPIB to have a credible net-zero plan, it would need to halve emissions resulting from its investments by 2030.   

“That leaves no room for expanding oil or gas,” Segal said.  

The CPPIB manages the investments of the Canadian Pension Plan (CPP), which serves over 21 million contributors and beneficiaries.