Norway’s wealth fund excludes oil sands investments over greenhouse gas emissions

Prime Minister Justin Trudeau says news that one of the world’s largest investment funds will exclude four Canadian oil sands producers from consideration for investing is part of a continuing shift in global attitudes for which oil companies will have to adjust.

On Wednesday, Norges Bank Investment Management, which manages Norway’s sovereign wealth fund, announced it would stop investing in Calgary-based Canadian Natural Resources Ltd., Cenovus Energy Inc., Suncor Energy Inc. and Imperial Oil Ltd. after concluding they produce unacceptable levels of greenhouse gas emissions.

It also excluded three other non-Canadian companies, two over environmental concerns and one for human rights reasons. It said its holdings in all of the companies have been sold.

“We’ve seen investors around the world looking at the risks associated with climate change as an integral part of investment decisions they make,” Trudeau said Wednesday in Ottawa.

“That is why it is so important for Canada to continue to move forward on fighting climate change and reduce our emissions in all sectors, and I can highlight that many companies in the energy sector have understood that the investment climate is shifting and there is a need for clear leadership and clear targets to reach on fighting climate change to draw on global capital.”

Alberta Premier Jason Kenney said, “To be blunt, I find [the decision] incredibly hypocritical.

“Norway is actually engaged in exploring to develop new massive offshore fields to increase their production of oil, so we’re not going to be lectured to by a state sovereign wealth fund 100% of whose primary revenues are generated by oil development.”

The fund said it is following its Council on Ethics’ recommendations in making the decisions. It listed the council’s reasons for its outlook for the four oil sands companies individually but the four summaries of reasons were almost identical.

In each case, the council said the producer should be excluded “due to an unacceptable risk that the company is contributing to or is itself responsible for actions or omissions which, at the aggregate company level, lead to an unacceptable level of greenhouse gas emissions.”

It added each company has “a substantial output of oil from oil sand [sic] resources in Alberta, Canada,” and declares that such production results in “far higher greenhouse gas emissions than the global average.”

It says the companies have no specific plans to reduce emissions to an acceptable level “within a reasonable period of time” and adds their GHG emissions are not subject to a regulatory regime as stringent as the European Union GHG emissions trading system.

Alberta Energy Minister Sonya Savage said Norges Bank’s decision to blacklist four Canadian energy companies is “poorly informed and highly hypocritical.”

“Canada’s energy producers have some of the highest environmental, social and governance standards [ESG] in the world,” she said in an email.

Savage added that Alberta-based companies are doing their part with active strategies to reduce emissions.

“When it comes to the environment, Alberta’s overall average oil sands emission intensity has decreased 19% from 2011 to 2017 alone, with further reductions anticipated in the coming years through industry led innovation.”

The Canadian Association of Petroleum Producers criticized the bank’s move, noting that the industry is making environmental progress as the country’s leading investor in environmental protection and innovation.

“Attempts to stifle Canadian production by restricting financing can have only one effect; countries with lower environmental standards — and in many cases lower social, human rights and governance standards — will fill the void,” said association CEO Tim McMillan.

The Canadian oil companies were not immediately available for comment.

All are on record as saying they have reduced GHG emission intensity in recent years and some have set targets for more reductions.

Suncor and Cenovus have said they will reduce emission intensity per barrel by 30% by 2030 and Cenovus has said it will aim for zero GHG emissions by 2050.

Canadian Natural has pledged to work toward a zero-emissions target without giving a specific date, using technology to improve efficiency and earning credits through its carbon capture and storage operations.

Imperial says it reduced the carbon intensity of each oil sands barrel by more than 20% between 2013 and 2018, and is developing technologies that could reduce intensity by 25% to 90% for future oil sands production.

Norges Bank says it’s the first time that GHG emissions have been used as the reason for excluding companies on ethical grounds.

However, it has warned since 2017 that the Canadian oil sands producers could be excluded because their emissions are higher than the global average.

“One of the largest investors in the world is saying the oil sands emperors have no clothes when it comes to action on climate change, so they’re out,” said Greenpeace Canada senior energy strategist Keith Stewart in an email.

“This is the way the world is heading.”

The investment exclusion comes as oil sands producers are cutting spending plans, salaries, production and dividends because of a dramatic decline in prices for their products as well as limited pipeline capacity to transport it.