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Canadian energy hits an ESG roadblock

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Blue sky oil plant

Last week, the Canadian energy sector was dealt another blow when the world’s largest sovereign wealth fund decided to divest from four Canadian oil companies, citing ‘unacceptable greenhouse gas emissions’.

Norges Bank said in a statement that the bank’s executive board has, “decided to exclude the companies Canadian Natural Resources (CNQ), Cenovus Energy (CVE), Suncor Energy (SU),and Imperial Oil (IMO) after an assessment that acts or omissions that on an aggregate company level lead to unacceptable greenhouse gas emissions. The Council on Ethics recommended to exclude the companies because of carbon emissions from production of oil to oil sands. It is the first time this criterion is being applied.”

This is just the latest in a series of blows to Canadian oil. Last month, for the first time in history global crude slipped into negative territory, as demand collapsed due to the COVID-19 pandemic, while supply stayed steady, leading to an unprecedented storage shortfall. Buyers were paying up to US$37 per barrel of oil to offload their trades.

Candice Bangsund Vice President and Portfolio Manager Fiera Capital called it “a perfect storm for prices.” Though these were global figures, she pointed out that we saw the same sort of trends in the Canadian space. “Crude prices in Canada are also on the decline, because of a general lack of demand, and again, no storage. There’s no buyers out there and what’s accentuated the volatility in that downside is the fact that the sellers are far outpacing the buyers right now,” she said.

Canadian oil has even more problems. Morningstar analyst Joe Gemino believes that we will see oil supply decrease in Canada due to curtailment, ramp down of crude by rail contracts, and less drilling activity. “Because of that, discounts aren’t expected to widen and might even narrow some over the next two years. However, prices will be extremely low and almost all production will be uneconomical,” he says.

And in the middle of this bleak landscape, Norges Bank came in with its decision to divest from the beleaguered sector.

Canadian oil and ESG
It’s hard to talk about Canadian investing in general without discussing oil. Energy makes up almost 14% of the S&P/TSX Composite Index, and oil is a major employer and contributor to the economy.

But at the same time, with climate change a key concern for many, how will all this tie in with ESG investing, especially when, as Jackie Cook, director of sustainability stewardship research for Morningstar, points out, investors will be under increased pressure to reduce their exposure to fossil fuels? “Companies and projects operating under weak regulatory oversight will be at greater risk as investors consider the heightened reputational risks of fossil fuel investments,” Cook says. 

Despite this, some investors see opportunities. ESG-focused fund company NEI Investments includes energy as a focus area, and actively invests in the sector. In this year’s Corporate Engagement Focus List, of the 26 names, four are in Canadian Energy, three of which are Suncor, Canadian Natural Resources and Cenovus.

“Our take around the energy companies in Canada is that we think they are a key part of our energy transition and that they have a role to play. There’s opportunities to diversify, whether it’s getting into biofuels, whether it’s looking at renewables in a serious way, things like hydrogen, things like building a lithium industry out of the existing infrastructure that we have, ideas that oil sands companies are working on around bitumen beyond the barrel, what can you do with bitumen that doesn’t involve burning things like carbon fibre? These are all opportunities that can be explored,” explains Jamie Bonham, Director of Corporate Engagement at NEI Investments, when asked if energy and ESG can coexist.

“Unconventional oil sources with the highest emissions levels are believed to have little to no growth trajectory in a low-carbon future. It could still be possible for Canadian energy companies to expand production if technological innovation improves the emission intensity of oil sands to comparable levels of lighter oils. However, we caution that the drive to reduce carbon emissions in oil sands extraction could increase production costs, which could erode any gains from the improved efficiency,” says Sustainalytics research Manager Jose Yakoubian.

Bonham points out that nothing fundamental has changed in NEI’s understanding of the risks facing the energy industry in Canada as a result of Norges Bank’s divestment. “It has been very clear – for some time now – that climate-related risks are a material concern, if not THE material concern. If anything, this just underscores the importance of the work done in working with investors, companies, regulators, and governments on aligning the industry – and the Canadian economy – with the energy transition. That work will continue to be a priority.”

To Bonham and NEI it absolutely does make sense to continue engagement with oil companies. “If your goal is impact then engagement is extremely relevant. There is no doubt that investors are starting to gravitate towards the solutions and opportunities that align with a low-carbon future. If Canadian oil & gas companies want to remain viable in that future they have to make the case to investors that they fit into that future. To be clear, we think they can, but it isn’t a given and it will take some bold vision and innovation. It will also take a certain boldness from investors to not only support this innovation but to push for more. It is very important for the Canadian economy for this sector to continue to prosper but it has to look radically different than what it looked like yesterday. That won’t happen overnight, and it likely won’t happen without investors supporting that vision, but it can happen,” he says.

Alberta’s government isn’t helping
To see whether it can indeed happen, investors and advocates are closely watching the response of the Alberta government, where a majority of the oilsands are located. What has happened so far is not particularly encouraging for ESG investors.

“The Alberta government has become the oil patch’s own worst enemy by weakening environmental monitoring and oversight to the extent that foreign investors and foreign companies alike face reputational risks by investing in oilsands companies and projects.  Following on from budget cuts and layoffs at the Alberta Energy Regulator late last year, in early April the UCP government suspended reporting requirements under provincial environmental legislation for three months during the COVID-19 pandemic.  Then earlier this month, it announced further limiting oilsands oversight as a COVID-19 measure by suspending monitoring at 16 oilsands projects,” says Cook.

Of the four companies that requested this relief measure, three are on Norges’ exclusion list – Suncor, Imperial Oil, and Canadian Natural Resources, and these same three are also on the Climate Action 100+ list of globally systemically significant emitters targeted for engagements.

What next for the excluded companies?
The fact is that with all this attention, investor pressure is going to require Canadian firms to take leadership.  

“This is not a new story for the sector, just a new name involved. But it may help tilt the playing field for those internal champions who have been advocating for bolder transition strategies,” says Bonham, adding that nothing will change with NEI’s engagement with the three companies on the focus list. “We have been engaging companies in the sector on the imperative of the energy transition for over a decade and we have seen some really substantive change during that time. I think most everyone (companies included) would agree that the pace of change in recent years is both unprecedented, but also not nearly enough. Conversations on achieving a net-zero future and aligning with the Paris Agreement will continue to be a focus,” he says.  

So in the face of this, the main question then is, will other funds and global investors follow Norges Bank’s lead?

Others to follow Norges Bank’s strategy?
“The move is likely to raise similar concerns among other investors, particularly asset owners, and is also likely to make foreign companies more concerned about investing in oilsands projects,” points out Cook. She notes that globally, large asset owners are driving a more forceful ESG stewardship agenda and are expecting the same from their asset managers.

“While divestment precludes stewardship, this move by the largest sovereign wealth fund strengthens the arm of other investors in their engagements with oil and gas companies in general and with those on Norges’ exclusion list in particular.  My reading of this is that Norges’ exclusions also draw attention to the risks resulting from the oil sector’s political capture in Alberta,” Cook says.

Bonham says it would be surprising if other funds did not follow Norges Bank’s lead, but engagement is also gaining traction. 

Progress
At the end of last month, ESG advocates got a rare win in Canadian energy, when 56% of the shareholders of Ovintiv (OVV) vote in favour of climate change disclosure proposal, and asked the oil and gas producer for specific climate-related targets aligned with the Paris Agreement.

The resolution filed by the Pension Plan of the United Church of Canada, supported by the Shareholder Association for Research & Education (SHARE) sought disclosure from Ovintiv regarding climate-related targets that address medium and long-term climate related risks and opportunities, and that align the company’s objectives with the goals of the Paris Agreement.

This was the first Paris-aligned targets proposal to get majority support at a Canadian company. “It’s especially significant to get that result when the proposal was opposed by management,” pointed out Anthony Schein, director of shareholder advocacy at SHARE.

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National teacher survey reveals that all is not well in education during the time of COVID

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OTTAWA, ON, July 10, 2020 /CNW/ – Canada’s teachers have spoken, sharing their views in a national survey that shows that distance learning is not only failing to provide quality learning, but is fueling concerns of rising inequity and declining mental health.

The Canadian Teachers’ Federation (CTF/FCE) pandemic survey provides a look into how the closure of school buildings and an emergency transition to distance and online learning have affected teachers and students in every province and territory. The responses, from nearly 18,000 teachers from coast to coast to coast, show how current solutions are potentially detrimental to health, safety, and learning. 

“We have vulnerable students who have challenging home lives,” reads one submission. “For some of our students, school is their safe place and where their connections are to feel safe and secure.”

One teacher shared that they “worry about students’ well-being when they never, or seldom, connect on line,” while another said that “the current model only widens the gap between the haves and have nots.”

The report is available to read here

Responding to open and closed questions, teachers shared the reality of teaching and learning since school buildings were closed in March 2020. The findings make it clear that distance and online learning have not only led to a fall in quality education, but have also revealed existing inequities and posed other challenges on teachers, students, and families. 

Notable findings

  • 74% are concerned with the mental health and well-being of their students.
  • 73% have concerns or questions about getting their students what they need to be successful with online instruction.
  • 44% state that they have concerns with their mental health and well-being.

Of the teachers who responded to open-ended questions:

  • 92% say that access to technology and learning materials was a barrier to equitable quality public education.
  • 89% report concerns about student emotional health. Educators note that students are isolated and missing social connections with their classmates and schools, and they are concerned with students returning to school after a period of detachment.
  • 99% have concerns about the return to school buildings discussed anxieties around not knowing the plans, adding that constant changes from Ministries of Education, without proper time and supports to adapt, have taken a toll on their mental health and well-being.

With the participation of the CTF/FCE’s 18 Member Organizations, the survey was completed in English and French between June 1 and June 18, and sought to capture the experiences and observations of the teaching profession during the pandemic.

The Canadian Teachers’ Federation
Founded in 1920, the Canadian Teachers’ Federation is the national voice for the teaching profession.  As the national alliance of provincial and territorial teacher organizations, the CTF/FCE represents over 300,000 elementary and secondary school teachers across Canada. 

SOURCE Canadian Teachers’ Federation (CTF/FCE)

For further information: Media contact: Andrew King, Canadian Teachers’ Federation, [email protected], Mobile: 819.213.7847

Related Links

http://www.ctf-fce.ca

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School district to add 50 janitors to casual list, but union wants them permanent

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The province’s largest school district and its largest public sector union began meetings Thursday to discuss school staffing in September, and at the top of their list was the number of janitors being tasked with keeping schools sanitized.

With constant cleaning necessary for any return to classrooms, the Newfoundland and Labrador English School District told CBC News this week that it intends to add 50 to 60 janitors to its casual call-in list to ensure there are no shortages when custodians call in sick.

That’s not good enough for Newfoundland and Labrador Association of Public and Private Employees’ (NAPE) president Jerry Earle.

“The resources that were in these schools pre-pandemic are not going to be sufficient to ensure the safety, the cleanliness of the schools during the health emergency,” Earle said. 

“Casual staff are not going to be the answer. A full-time complement of dedicated staff for each facility is a necessity.”

Jerry Earle is the president of NAPE, the union representing several groups of workers in schools around the province, including custodians. (Mark Quinn/ CBC)

Despite the union’s concerns, Terry Hall, the assistant director of education for the Newfoundland and Labrador English School District, said cleaning won’t be an issue, as it’s a top priority.

“We have every confidence in our cleaning staff,” he said. “We are doing a big push to have a robust and rather lengthy list of casuals that we can call upon at any time to come in and help to make sure these schools are clean.”

District disconnect?

Prior to the pandemic, casuals had been used to fill in behind full-time custodians when they called in sick or went on vacation. Hall said the minister of education is committed to increasing the budget for cleaning services if the need arises.

That “if” doesn’t sit well with NDP education critic Jim Dinn, who used to be the head of the province’s teacher’s association.

His experience is that there is often a disconnect between needs at the school level and action taken at the district level.

“I can tell you that there is often a vast gulf between the perception and the comments and the statements of district personnel, and the reality for many teachers,” Dinn said.

Dinn, like Earle, wants to see the roster of full-time staff bolstered before the school year starts.

“All I’m asking is government have the resources in place so they can do their jobs,” Dinn said.

In his experience as a teacher, many schools were understaffed when it came to janitorial staff. The district itself said it had a practice of not calling in casuals on the first day a janitor called in sick.

Terry Hall, with the Newfoundland and Labrador English School District, says cleaning is a top priority in the district’s planning. (Eddy Kennedy/CBC)

Hall said they would often get other janitors to pull overtime to cover all the tasks for a sick day, before assessing if they needed to call in extra hands. He also said there were sometimes cases where nobody on the casual call list was available.

Whatever it took, Hall said the schools always got cleaned, and he guaranteed that mentality will only be amplified in September.

‘A prayer and a hope’

Dinn said his classroom experience suggests schools were always understaffed when it came to custodians. Earle agreed.

In the province’s return-to-school plans, it recommends all sports equipment be cleaned between classes. Dinn said while that is absolutely necessary, it has the potential to be a pressure point.

“Who is going to do that? The teacher? Is someone going to be there to help them?” he said.

NDP MHA Jim Dinn is concerned about cleaning in schools, and wants to see the NLESD hire more full-time cleaning staff. (Eddy Kennedy/CBC)

The NLESD and NAPE have a working group sorting through issues and assessing needs. Earle spoke to CBC News about his concerns before the group had a chance to dig into those discussions, and he balanced his concerns with optimism they would get things sorted out.

Dinn hopes so, too, since the status quo won’t do with the possibility of COVID-19 lurking in the classrooms and corridors.

“You cannot simply say we’re not going to assign additional resources. That is not a plan. That is a prayer and a hope.”

The province released its back-to-school plan on Monday, outlining different scenarios for students to return to classes dependent on the spread of COVID-19.

Read more from CBC Newfoundland and Labrador

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Send students back to class full-time this fall, OPH says

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Ottawa’s medical officer of health is recommending that students return to school full-time in September.

Dr. Vera Etches made the recommendation at a special meeting of the Ottawa-Carleton District School Board (OCDSB) Thursday evening.

“I’m recommending that we prioritize and plan to have students in class five days a week, and that we work from there to make sure we make that as safe as possible,” Etches said.

“This would balance the risk of COVID infection … with the observed harms to children and youth and families that we’re seeing.”

Etches said Ottawa Public Health is seeking to influence the provincial government as it develops recommendations for the return of schools.

The Ministry of Education has asked school boards to develop three separate plans for a return to school that could be implemented based on the public health situation.

The boards were tasked with creating a plan for regular class instruction five days a week with heightened health protocols, a plan for at-home virtual learning only, and a hybrid model that would see groups of students attending schools on alternate days or weeks.

The province has not yet said which model it will be going ahead with.

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