A new report by a climate change advocacy group casts doubt on the argument that natural gas providers can successfully transition to greener hydrogen and says pension fund investments in the industry are putting the pensions of millions of Canadians at risk.
Wednesday’s report by Shift Action for Pension Wealth and Planet Health calls on fund managers to divest from natural gas, an energy source scientists say is contributing to the climate crisis through carbon and methane emissions.
The report argues the transition to hydrogen from natural gas is too expensive and difficult to pull off.
Adam Scott, executive director of Shift, says the “hyped-up story that gas companies have been telling the public, regulators, and investors about their ability to switch their infrastructure to hydrogen, does not stand up to scrutiny.
“Hydrogen can’t save gas companies from the climate imperatives and cost-effective technologies already disrupting energy markets and making gas assets obsolete.”
Investment returns depend on how well pension managers adapt to the global economy’s transition to net zero. Still, Canadians’ pensions remain invested in fossil fuels despite climate change risks pushing businesses to phase out carbon, according to the report’s authors.
“Canadian workers should not have their retirement savings invested in these high-risk, high-carbon, soon-to-be-stranded assets,” said Scott.
The Star reached out to the pension funds referenced as case studies in the report, including British Columbia Investment Management Corporation (BCI), Canada Pension Plan Investment Board (CPPIB), Investment Management Corporation of Ontario (IMCO), Ontario Municipal Employees Retirement System (OMERS) and Ontario Teachers’ Pension Plan (OTPP).
CPPIB, OMERS and OTPP declined to comment. BCI and IMCO did not respond to a request for comment.
Many of Canada’s pension plan giants, including CPPIB and OMERS, have pledged to have their portfolios become net zero of greenhouse gas emissions by 2050.
Collectively, Canada’s largest pension funds are part owners of gas companies operating about 350,000 kilometres of pipelines around the world, according to the report.
Using electricity to break water into hydrogen and oxygen is what creates so-called “green hydrogen,” which is a potentially clean way to power people’s gas appliances, explains Paul Martin, a Toronto-based chemical engineer and consultant at Spitfire Research.
This process, however, requires expensive equipment and is much less efficient than using electricity to directly run homes’ heat pumps, he went on to say.
Martin believes gas companies continue to invest in hydrogen to mask their risk of going out of business, especially as electrification technologies like renewable energy advance rapidly.
“Their entire future depends on this notion that they can keep selling gas door-to-door and that hydrogen is going to solve their problem. And that’s not true,” said Martin. “The natural gas industry doesn’t want to talk about that.”
In Canada, around 80 per cent of greenhouse gas emissions are currently energy-related, with the oil and gas sector accounting for 31 per cent, according to think tank Ember.
On Wednesday, the Star also published an investigation revealing the emissions produced by Canadian natural gas pipeline giant Enbridge rose after it received $7.3 billion in sustainability-linked financing.
The story was part of an international collaboration with Washington D.C.-based The Examination and Mississippi Today that explored allegations of greenwashing in sustainable finance.
