John Graham, chief executive at the Canada Pension Plan Investment Board speaks at the Canadian Chamber of Commerce's Annual General Meeting and Convention in Ottawa on Friday, Oct. 14, 2022.Sean Kilpatrick/The Canadian Press
Albertans should remain part of the Canada Pension Plan because it will help protect them from an unpredictable global economy, the CPP Investment Board chief executive officer says, as the governing United Conservative Party continues to boost its case to exit the program.
Speaking to Calgary business leaders Tuesday, John Graham called the energy transition a “generational investment opportunity,” as the CPPIB intends to grow the fund’s portfolio of both conventional and renewable energy in Alberta and globally.
The CPP is a “safe, non-partisan, stable pension we already have that’s delivering on its purpose for millions of Albertans,” Mr. Graham said. The CPPIB invests where it can drive value, he said, and energy is one of those areas.
“We look across the globe, across all industries. Energy is a big part and will continue to be a big part of the global economy.”
Before she was the Premier of Alberta, Danielle Smith mulled publicly about creating an Alberta Pension Plan (APP) to help support the oil and gas sector, claiming that “the big banks and the big pension funds” were punishing Alberta industry.
“One of the ways we push back is making sure that we repatriate our own investment dollars so that we can, if we need to, make sure that we can counteract some of that hostility,” she said in May, 2022.
The proposal, and the report the government is using to support its math, have been sharply criticized by the CPP. The plan also faces union and political opposition in Alberta and Ottawa, including by Prime Minister Justin Trudeau and federal Conservative Leader Pierre Poilievre.
Of the $575-billion in assets that the CPPIB manages on behalf of Canadians, $6-billion is in Alberta’s oil and gas industry, and 11 per cent of its assets, or $63.25-billion, is in energy globally – and the fund has no plans to divest from fossil fuels.
When it comes to supporting Alberta’s energy sector, then, the CPP is “not exactly staying on the sidelines,” Calgary Chamber president Deb Yedlin told media on Tuesday.
“When you look at it from a returns perspective, it’s pretty hard to look at the energy sector and say, ‘It doesn’t make sense from the broader mandate,’ which is to generate returns to support the pension benefits that are being used by all Canadians from across the spectrum from coast to coast.”
Last year the CPPIB committed to a goal of net-zero emissions by 2050, in line with international targets set out in the Paris climate agreement, and Alberta’s own goals.
But rather than divesting holdings in carbon-intensive industries such as oil and gas, the CPPIB wants to invest in efforts that reduce their carbon footprints. As such, it is seeking more opportunities in companies that will provide strong, risk-adjusted returns during the energy transition.
“The challenge of moving the entire global economy toward lower carbon sources of energy is immense. As investors we view it as a generational investment opportunity. This is good news for Alberta since some of the most responsibly produced conventional energy in the world is in Western Canada,” Mr. Graham said Tuesday.
“On the international stage, CPP Investments and I have been a vocal advocate for a non-divestment approach to decarbonization. We were one of the first global investors to state publicly that divesting of conventional energy investments is counter-productive to global decarbonization goals.”
The global investment community has also changed its tune when it comes to fossil fuel divestment, he added. Its perspective shifted after Russia’s invasion of Ukraine shocked global energy markets and led to skyrocketing energy prices in Europe, which scrambled to end its reliance on Moscow fuels.
Ms. Yedlin said the chamber respects the province’s right to examine the potential of leaving the CPP, but is worried about the many uncertainties surrounding the plan. She questioned whether it would cause problems attracting labour, for example, particularly if benefits aren’t portable between provinces or countries, and how an APP would generate returns similar to the CPP given that it would be a much smaller pool of capital.
Ms. Yedlin personally believes Alberta’s position in the CPP is an issue of national importance.
“Anything that compromises our unity as a country is going to affect our ability to attract investment,” she said.
“Whether it’s attracting capital for the energy transition, developing our energy resources, or critical minerals, or anything else. We need foreign capital, we can’t introduce an element of uncertainty. And I see this as doing just that.”