AIMCo Gambles Albertans' Retirement Savings by Ignoring Climate Investment Risk

  • National Newswatch

Last month's alarming news about the huge losses facing Alberta's pension funds have undermined public confidence in the provincial fund manager, AIMCo. But Albertans should be particularly concerned by another new report revealing that AIMCo has endangered another billion dollars of their retirement savings to prop up high-risk domestic oil and gas companies.The study, released by Progress Alberta last month, revealed that the Alberta Investment Management Corporation (AIMCo) repeatedly gambled the province's retirement savings on high-risk bailouts for oil and gas companies with massive environmental liabilities as part of the Alberta Growth Mandate. The risky fossil fuel bets could put AIMCo on track to lose billions of hard-earned Albertan pension dollars.Even without the short-term shocks brought on by COVID-19, the long-term financial risks in the oil and gas sector were plain to see. Red flags were visible in the form of environmental liabilities like abandoned wells and growing financial risks related to climate change and the accelerating low-carbon energy transition.The report's frightening findings paint a picture of a politicized pension fund manager working against the interests of the workers and retirees who rely on it, at a time when much of the financial sector is raising serious concerns about climate-related investment risks.Instead, AIMCo invested more than $1.1 billion in high-risk small- and mid-sized oil and gas producers and oilfield service companies with weak balance sheets and at least $3 billion in environmental cleanup liabilities. Every single recipient of AIMCo financing saw its share price fall. One company has already gone bankrupt.Yet it's hard to imagine how AIMCo failed to track the financial trends that would have pointed it in a different direction:
  • Major international investors have steadily abandoned key segments of Alberta's oil and gas sector, principally because Canadian crude is too expensive to produce, refine and transport, and oil prices are perpetually too low to make a healthy return;
  • Investors managing over US$11 trillion and counting, including large pension funds in the United States and Europe, have excluded fossil fuels from their portfolios;
  • Investors are increasingly attuned to the risks of stranded fossil fuel assets, as carbon pricing goes mainstream and unsubsidized renewable energy options now compete successfully against fossil fuels;
  • The financial community is demanding better accountability and risk disclosure from oil and gas, including AIMCo's “responsible investment” policy that incorporates a climate risk assessment.
But AIMCo decided to invest billions in high-risk companies with massive liabilities anyway.A pension plan's mission is to minimize risk and maximize long-term returns for beneficiaries who have spent decades working and are counting on their fund manager's knowledge and integrity to secure their future. Albertans are facing enormous difficulties right now and shouldn't have to worry about the safety of their pensions.It didn't have to be this way.The irony is that AIMCo might have generated much better returns had it devoted itself to finding the most promising investment mix for Albertan workers and retirees, rather than the most expedient portfolio for the province's most powerful industry. The former path would see investment in the clean assets that will carry Alberta into a decarbonized future, rather than staking its economy on a product that producers will pay to get rid of. These assets include:
  • Some of Canada's most affordable wind procurements and the country's second best solar resource;
  • A committed and knowledgeable energy efficiency sector;
  • A skilled workforce with the experience and know-how to pivot into drilling deep geothermal wells.
Today's clean energy technologies are practical, affordable, and ready for primetime. Green investments are outperforming the market in the current recession. All of which is just an early taste of what may be in store when entire economies are transformed through post-pandemic green recovery plans.If Alberta's public pension manager wants to work for the people it was designed to serve and help to build the modern, diversified economy the majority of Albertans want, it wouldn't take much for AIMCo to shift its focus away from risky oil and gas investments and into profitable climate solutions. That shift is long overdue.Adam Scott is Director, and Patrick DeRochie is Pension Engagement Manager, for Shift Action for Pension Wealth and Planet Health.