By Jack Mintz, October 7, 2021
Eyebrows went up in the oil-producing provinces when Quebec’s pension fund, the Caisse des dépôt et placement, recently announced that after 2022 it will no longer hold oil and gas company shares. At year’s end 2020 its investments included $550.6 million in Canadian Natural Resources and $447.9 million in Suncor (and a quite small one of $5 million in Imperial Oil, of which I am a director).
Leave aside Alberta and Saskatchewan’s resentment that the much-maligned petroleum industry’s taxes help fund equalization payments going to Quebec: Westerners know they have been treated as a cash cow. And, in this case, it’s nothing personal: the Caisse is dropping all fossil-fuel investments, not just in Canada.
A more important issue is the Caisse’s uneven application of environment, social and governance (ESG) criteria, which could undermine the profitability needed to pay Quebecers’ pensions. Like other funds, the Caisse is pulling the rug out from under profitable fossil-fuel companies yet ignoring other ESG issues, such as human rights, corruption and other reputational issues that could easily lead to portfolio losses.
For the first six months of this year, the Caisse’s investment in equities has yielded an unremarkable 12.1 per cent return (including dividends), substantially worse than the TSX composite return of 18 per cent. While it earns good returns on private equity, the Caisse’s average annual return on its public equity portfolio was 9.5 per cent for the years 2016-2020, a half percentage point below its benchmark. And, as reported recently in the Logic, between June 30 and September 23 of this year it lost over a third of its US$480 million investment in Chinese companies listed in the United States.