Varcoe: Scrap net-zero target, or disclose more transition risks — Suncor faces duelling climate proposals at AGM

For its part, Suncor’s board and management recommend investors reject both proposals

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Investors at Suncor Energy annual meetings have seen plenty of proposals and debate about the company’s climate plans over the years.

But at the upcoming AGM in May, Suncor will face duelling shareholder proposals that come from distinctly different directions.

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One seeks more disclosure about Suncor’s climate transition strategy.

The other calls for the oilsands producer to scrap its commitment to reach net-zero emissions by 2050.

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“I haven’t seen anything like that before, but it just goes to show how controversial it all is,” said Laura Lau, chief investment officer of Brompton Group, which owns shares in Suncor.

While the United States has seen a pushback in recent years against ESG (environment, social and governance) and efforts to have investors exit fossil fuel companies due to climate concerns, there have been far fewer such initiatives in Canada.

But at Suncor’s annual meeting, Suncor investors will vote on a proposal by InvestNow Inc., a non-profit group that “challenges the divestment movement and advocates for investment in Canada’s oil and gas sector,” according to Suncor’s new management proxy circular.

“Net zero by 2050 means massive declines in the use of coal, oil and gas,” InvestNow says in its supporting statement.

“It commits to radical changes in very short time frames. It is not legally required and has no clear connection to increasing shareholder value.”

Gina Pappano, who formed InvestNow and previously was the head of the market intelligence department at the Toronto Stock Exchange, said she believes net-zero targets are akin to divesting in Canada’s oil and gas sector.

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“As a shareholder, I want the oil and gas companies to do what they do best, especially in Canada, which is take oil out of the ground, explore for oil and gas, get it to countries that need it,” Pappano said in an interview.

“We have some of the highest, most stringent environmental regulations in the world. I want them to meet the growing demands and not be constrained from a business perspective by these arbitrary goals.”

Pappano said she’s not asking Suncor or other companies to stop improving their operations and believes they should reduce greenhouse gas emissions, but they need investment to do so.

At the same meeting on May 7, the group Investors for Paris Compliance calls on Suncor shareholders to support a resolution that calls for the company to disclose audited results that assess a range of climate transition scenarios, risks and financial implications.

Such data would include Suncor’s costs and valuations, projections for long-term oil and carbon prices, and future asset retirement obligations. The International Energy Agency has forecast global oil and gas demand will peak later this decade, and countries such as Canada are striving to address climate change with net-zero goals.

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“What we are asking for in this resolution is, start showing us that you are ready for it, that you are making these actions,” said Duncan Kenyon with Investors for Paris Compliance.

“How are you ready for the energy transition?”

For its part, Suncor’s board and management recommend investors reject both proposals.

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Responding to InvestNow, the company said it’s committed to being part of the energy transition and decarbonizing its business.

As for the proposal by the Investors for Paris Compliance, Suncor pointed out it has produced annual climate reports since 2017, and existing disclosure “provides insight into climate strategy, risk, opportunity and performance,” it states in the management proxy circular.

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South of the border, a backlash against ESG targets and disinvestment efforts has grown.

Last week, the Texas Permanent School Fund terminated two investment services contracts with BlackRock to manage more than US$8 billion of funds.

In 2021, Texas passed a law that prevents state agencies from investing in firms that it deems have taken actions to penalize or limit energy companies that don’t pledge to meet environmental standards, beyond state and federal law. (In a letter to shareholders on Tuesday, BlackRock CEO Larry Fink said the firm has never supported divesting from traditional energy firms.)

Other states have pushed back against ESG measures, including Florida, Oklahoma and Utah.

“What we are seeing a lot more of — both in Canada and the United States — is sort of contrasting proposals, both pro-sustainability and anti-sustainability,” said Lindsey Stewart, director of investment stewardship research at Morningstar.

“It’s interesting to see it at a fossil fuel company, Suncor, this time around.”

However, he noted the average anti-ESG shareholder proposal still gets less than five per cent support.

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But Jason Kenney, who as Alberta’s premier criticized banks and funds that stopped offering services or divested from the oilsands, said he expects to see mounting pressure on investment firms that take such steps in the future.

“Cumulatively, (the pushback has) had an impact. I think the bigger impact has been simply driven by returns — the superior returns of many oil and gas companies in the last two or three years,” Kenney said in an interview Tuesday.

“I’m glad to hear that there are people representing the bottom-line interests of investors now, to kind of equalize the debate, because I think it’s been, in recent years, lopsided.”

Jason Kenney
Former Alberta Premier Jason Kenney. Jim Wells/Postmedia

Suncor committed in May 2021 to reach net-zero emissions by 2050.

It’s also one of the founding members of the Pathways Alliance, a group of six oilsands operators working together to reach net-zero emissions.

Pappano said her group, which submitted anti-divestment proposals to Canada’s largest banks last year, was surprised to see Suncor oppose its shareholder proposal.

Kenyon said he hasn’t seen duelling climate resolutions before at an annual meeting of a Canadian oil company, but isn’t surprised. “What’s the old expression: Your best defence is a good offence,” he said.

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Martha Hall Findlay, director of the University of Calgary’s School of Public Policy, who previously was Suncor’s chief climate officer, said the divestment movement “completely ignores” the reality of growing global demand for oil and gas.

Canadian oil and gas companies are at the top of the charts on ESG measures, although they need to continue taking further climate action, she said.

“Divestment doesn’t make any sense. But that said, anti-divestment doesn’t make sense, either. We all know that climate change is a significant problem for the world,” said Hall Findlay.

“Kudos for the companies that are recognizing moderate voices, that are based on evidence, and based on a recognition of what the world needs.”

Chris Varcoe is a Calgary Herald columnist.

[email protected]

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