I come from a family that loves playing sports. So, being of Caribbean Heritage, I always heard one phrase: “don’t let the side down”. Now, to be honest, it is not a Caribbean phrase but one that the British left “us”. So if you played or watched rugby in South Africa, New Zealand or Australia; cricket in India or Pakistan, soccer/football in Africa, UK or Canada, you probably heard the phrase. It is common in the Commonwealth and it means a simple thing: “don’t let anyone down”. That anyone could be a regimental unit or a team, it could be your school or your country; what is most important is that your loyalty to your friends, team mates, comrades, patriots et al. – to your side – should drive you to do your best. This is what I try to do in life and I hope I succeed.
However, Licia Corbella seems to have let down the side in a recent article. In the article, “Corbella: Hypocrisy too weak a word for wealth fund’s divestment from oilsands”, Ms. Corbella started to let down the side by just having bad form, poor writing. In the article, Ms. Corbella tried to parrot Premier Kenney’s opinion on the exclusion of four Alberta Oil Sands firms – Canadian Natural Resources Ltd., Cenovus Energy Inc., Suncor Energy Inc., and Imperial Oil Ltd. – from Norway’s sovereign wealth fund (Government Pension Fund Global). Licia blamed Norges Bank for this action and I was legitimately confused. Why would a columnist blame Norges Bank or its investment arm – Norges Bank Investment Management – for a decision of the Norwegian Government? It was only after a lot of research that I realized that the Norwegian Government had contracted out the management of the fund to Norges Bank Investment Management. Now, if this had been the only bit of poor writing or problematic thinking, one could say that this PostMedia Columnist was just having a bad day. After all, forgetting to write something as simple as “Norges Bank, the manager of the Norwegian sovereign wealth fund” is an act that many of us could be guilty of. My problem is that this was not the case.
Ms. Corbella “let down the side” because she went on to make a poor argument. For brevity, I will paraphrase her argument: Premier Kenney is right, Environmental, Social and Governance tools and screens (ESGs) are silly, hypocritical and political. She described Norgest Bank as hypocritical because:
“According to the Canadian Energy Centre, Norges Bank’s investments in those four Canadian oilsands companies as of 2019 totalled US$1.2 billion. By comparison, Norges Bank has US$42 billion in equity holdings in countries designated “Not Free” by Freedom House.”
For purposes of her article, the definition of “Not Free” would be those countries which don’t have similar political-economic rights as ourselves like illiberal democracies, dictatorships, authoritarian governments and the like.
Now, I don’t dispute the Canadian Energy Centre’s claim that Norges Bank has invested “US$42 billion in equity holdings in countries designated “Not Free” by Freedom House”. Nor would I dispute that the Norwegian Bank puts more money into places that don’t share our – Norwegian, Canadian or Western – values. However, it is equally true that the Norges Bank doesn’t determine what the ESG screen looks like when it comes to Norway’s sovereign wealth fund (called the “Government Pension Fund Global”). When it comes to the fund, Norges Bank is only following the rules that were created by its client: the Norwegian King, the Norwegian Government and Norway’s Ministry of Finance. Back in 2014, Norway created rules and regulations surrounding the management of its sovereign wealth fund. Canadian Natural Resources Ltd., Cenovus Energy Inc., Suncor Energy Inc., and Imperial Oil Ltd were found to be in violation of those rules back in 2017. Since then Norges Bank, the Norwegian Ministry of Finance and the Council of Ethics have been discussing how to move forward. Yup, those three Norwegian entities took three years to come to a conclusion and their conclusion was damning.
Many in Alberta have said – including Ms. Corbella, in her article – that the question of Alberta’s environmental or GHG record is an issue of technical acuity and not one of morality. As a result, the questions surrounding the investment decisions of the Government Pension Fund Global should be made in a similar manner. Accordingly, from this point of view, the decision to punish Canadian Natural Resources Ltd., Cenovus Energy Inc., Suncor Energy Inc., and Imperial Oil Ltd is one which is disproportionate to the “crime”. However, the Norwegian entities had a different view: they said that the problem was neither technical or moral but one of market construction. The four companies in question were “not subject to a regulatory regime that is as stringent as the EU ETS, and have a government-imposed cost that is considerably lower than corresponding emissions in the EU”. On top of that, those four companies have ““no specific plans that would reduce its emissions to this level within a reasonable period of time.” So put in other words, Canadian Natural Resources Ltd., Cenovus Energy Inc., Suncor Energy Inc., and Imperial Oil Ltd had three years to come in line with the laws, regulations and rules that are placed on European Oil and Gas firms; and, Alberta and other Canadian Governments had three years to create similar legislation. In the preceding three years, everyone – Canadian Natural Resources Ltd., Cenovus Energy Inc., Suncor Energy Inc., Imperial Oil Ltd, the Alberta Leg and “Ottawa” – decided that Canada should not follow the example created by the European Union. Alberta based companies kept their existing business model; therefore, the Norges Bank listened to the wishes of their client: the Norwegian Government.
Now the list of excluded companies is growing. It includes more than 150 firms from OECD and BRIC countries. However, it is notable that Westjet, Teck Resources, Husky Resources, Enbridge Inc. Parkland Fuel Corp, TC Energy Corp and Pembina are not on the list. Teck Resources is a Oil Sands firm who has committed to being GHG neutral by 2050. That is probably why they are not on the list. So as the market proponents always say, Canadian Natural Resources Ltd., Cenovus Energy Inc., Suncor Energy Inc., and Imperial Oil Ltd had a choice. Now, those same companies have to live with the market consequences that their choices have wrought.
In many ways, this is why Licia Corbella’s column bugs me so. She is a journalist who has worked for daily newspapers in Canada for more than 27 years. She is currently a columnist and the editorial page editor at the Calgary Herald. Ms. Corbella has better research skills than I; and, yet, she didn’t use them. Instead, she chose to parrot the words of Premer Kenney.
Ms. Corbella is old enough to know that Environmental Social Guidelines (ESGs) are only part of an investment process. Most investors don’t stop investing in a firm just because the ESG is triggered. As was the case for Canadian Natural Resources Ltd., Cenovus Energy Inc., Suncor Energy Inc., and Imperial Oil, an ESG tool/screen is a tool that starts a process. After an ESG is triggered, a portfolio manager will begin to intensively research the firm. They will look at a firm and see if other market players are doing the same thing. They will ask why Teck Resources, Royal Dutch Shell, Total Energy and Equinor ASA (formerly Statoil and StatoilHydro) are committed to being GHG neutral by 2050. An investor will see whether Canadian Natural Resources Ltd., Cenovus Energy Inc., Suncor Energy Inc., and Imperial Oil could do the same thing. Then an investor using a ESG tool will think about their own “diversification” and the long term future of the company (or companies) that have set off the ESG screen. These are the same things that a good journalist would ask: “why can’t the four firms do what their international competitors are doing” or “what was the three year process that the Norwegian Government and Norges Bank used” or “why the Premier is defending these four firms”. Ms. Corbella is a good journalist and she should have asked these questions because the future of Alberta depends on those answers.
Alberta would not be hindered by having stronger environmental guidelines because those guidelines have not hampered other European Energy firms. However, regulations – such as those suggested – would make change. Those regulations might begin some transitional change, open up new markets to our existing products or even create new products with the resources we have. We can see that Total, Equinor and Royal Dutch Shell are adapting to the higher ethical standard. With the help of the federal and provincial governments, such change would provide increased employment in this province and provide new opportunities. Those outcomes will provide the most benefit for the most people and it will also provide enough revenue to create programmes, opportunities and resources for those who are displaced. As change in this process can create jobs for many, we should not fear it but embrace it with courage, guile, intelligence and innovation; both in government, the NGO and business sectors. All of this is possible if we choose to witness what is happening. I ask Ms. Corbella to join me in witnessing that change. Instead of parroting points put forth to argue for the status quo, I ask her to be a change agent and to ask the hard questions. Until she does those, she is letting down the side, she is letting down Alberta.