Alberta’s public investment manager does not make net zero commitments, and selling out fossil fuel producers is out of the question. Instead, it will focus on investing alongside its portfolio companies to decarbonize, its chief executive said.
Alberta Investment Management Corp. will unveil a “transition funding” strategy in the coming months that will outline its plans for investing in a low-carbon economy on behalf of several pension plans and public accounts across the province. Unlike some institutional investors, divestment from fossil fuels – still Alberta’s dominant industry – will not be on the agenda.
For Edmonton-based AIMCo, focusing on a specific net-zero goal would be a distraction from what’s needed to balance energy supply and emissions reductions, CEO Evan Siddall said. He believes in the concept, but says he can’t engage on behalf of clients if he doesn’t see a clear path to get there.
“Energy consumption is increasing, and net zero does not mean zero. The initial reaction of many in the investment world was to jump on a net zero bandwagon that was focused on divestment. We think it’s misguided for a bunch of reasons,” Mr Siddall said in an interview.
“The world is going to need hydrocarbons. We need to make the “net” large enough to be net zero. It’s not just about eliminating the gross, it’s also about increasing the net. If we don’t take care of the oil and gas industry and help them invest in this decarbonization, we won’t reach net zero.
Divestment by fossil fuel companies robs them of the ability to make the capital investments needed to reduce greenhouse gases and increases the risk that producers will be acquired by buyers who have no interest in cleaning up operations or even by “hostile regimes”, he said.
Not all major Canadian pension plan managers share this view. Last year, the Caisse de depot et placement du Quebec caused a stir when it announced that it would sell its remaining oil assets as part of its climate strategy. It has also set up a $10 billion fund to decarbonize other high-emission industrial sectors in which it has stakes. The Ontario Teachers’ Pension Plan and the Canada Pension Plan employ various strategies for their net zero ambitions.
But the Public Sector Pension Investment Board takes a similar approach to AIMCo, avoiding a specific emissions target and focusing on decarbonization efforts of portfolio companies.
Environmental advocates have criticized many of Canada’s major pension plans for failing to set targets to exclude fossil fuels from their portfolios, arguing this exposes beneficiaries’ pension funds to climate-related risks. .
As oil and gas shortages cause economic upheaval in Europe and contribute to inflation in North America, the race to drain carbon from the global economy has become increasingly contentious. But Mr Siddall, who is chairing the opening of a new AIMCo office in Calgary this week, said transforming the oil and gas industry could be “our generation’s investment opportunity in one place, one place.” a time when there are few”. .”
“So we really want to get our hands dirty. We have the advantage of being Albertans and not being pushed into this kind of divestment frenzy. Instead, we can help big emitters in the oil and gas sector, invest in them and decarbonize,” Mr Siddall said.
AIMCo, which is owned by the Government of Alberta, manages $168 billion in assets on behalf of 32 entities, including pension funds for municipal workers, first responders, judges, teachers, college professors. university and others, as well as government accounts such as the $19-billion Heritage Savings Trust Fund.
In late August, it announced a 4% investment loss for its second quarter, joining several of its peers in showing how sharp declines in stock and bond markets have hurt results. Still, the results beat similar assets he uses as a benchmark, he said.
Mr Siddall took the helm in July 2021, following his tenure as CEO of Canada Mortgage and Housing Corporation. His entry follows a period of upheaval at AIMCo triggered by a $2.1 billion investment loss at the start of the volatility pandemic. -related instruments, when the markets were spinning wildly. An internal review revealed that the organization suffered from a poor approach to risk management as well as insufficient oversight.
Today, he said, AIMCo is a transformed organization after what he called his “Tylenol moment,” with new leadership that emphasizes close consultation with customers on strategies for investment – a promise he made a year ago. This includes speaking to pension plan officials “almost weekly”.
“I have direct relationships with client CEOs. I present to their boards of directors. [Chief fiduciary management officer] Amit Prakash leads this part of the organization and in this respect I work for him. It tells me where to go and who to talk to,” he said.
AIMCo plans to open new offices in New York and Singapore to strengthen its expertise in these major financial centers. Asia and China, in particular, are attracting great interest. In addition to its head office and new location in Calgary, it currently has offices in Toronto, London and Luxembourg. “It’s something we’re looking at and we haven’t decided yet,” Mr Siddall said. “It’s a complicated thing. You have to find space. You have to find people – the right people. Ideally, we will have senior managers in each office.
Mr. Siddall is clear that AIMCo remains committed to maintaining environmental, social and governance (ESG) standards as criticism of the field increases in some political and business spheres. Part E is represented by the decarbonization strategy, and he sees diversity, equity and inclusion – which are part of the S category – as being key to the success of the organization.
“We are a decision-making institution, aren’t we? This is what we do. If people don’t feel comfortable speaking up and challenging decisions, we can’t make good decisions. And when people feel excluded, for whatever reason – their gender, their ethnicity, their education, their age – then we restrict our ability to make the best decisions.