Four of Canada’s largest pension funds have stakes in companies that transport Russian gas

An aerial view shows a compressor station for the German natural gas grid at Open Grid Europe (OGE), one of Europe’s largest gas transmission grid operators, in Werne, Germany March 24.INA FASSBENDER/AFP/Getty Images

Four of Canada’s largest pension plans have significant stakes in European gas pipeline or gas distribution companies serving countries that depend on the flow of natural gas from Russia.

The pensions, which have all announced that they will divest Russian investments following the country’s invasion of Ukraine, will not, however, make a similar exit from these assets.

In response to questions from The Globe and Mail, several of the repo’s would not explicitly confirm that these companies are indeed transporting gas from Russia. In many cases, companies simply transport customers’ gas, without saying where it comes from or goes to. All said the companies they own are powerless to take action against Russia absent government sanctions or other regulatory intervention.

The Ontario Teachers’ Pension Plan owns a 69% stake in Societa Gasdotti Italia, Italy’s largest natural gas transmission system. Italy imported 40% of its natural gas from Russia in 2020, according to research firm Eurostat. The pension scheme acknowledges that “a small proportion” of the gas it transports “is likely to come from Russia”.

British Columbia Investment Management Corp. owns 32% of Open Grid Europe, a natural gas transmission network with 12,000 kilometers of pipelines that carry about 70% of Germany’s gas shipment volume. Its customers are gas producers and traders, network operators and large industrial facilities. Germany imported 59% of its natural gas from Russia in 2020, according to Eurostat.

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BCI also owns 26% of Czech Gas Networks, the largest natural gas distribution network in the Czech Republic. The company’s network carries the gas to consumers.

The Ontario Municipal Employees Retirement System (OMERS) owns 50% of Net4Gas, the Czech Republic’s gas pipeline operator.

The Czech Republic imported 86% of its natural gas from Russia in 2020, according to Eurostat.

And the Caisse de depot et placement du Québec owns 20% of Fluxys SA in Belgium. This country imported just under 8% of its natural gas from Russia in 2020, according to Eurostat. However, the Institute for Energy Economics and Financial Analysis, a US think tank that promotes the transition to sustainable energy, says Fluxy’s terminal in Zeebrugge transports Russian liquefied natural gas around the world, “contributing to profit margins Russian fossil fuels”. projects.”

For the funds, which were quick to announce their divestment from Russia after its invasion of Ukraine, their pipeline ownership illustrates that it is not so easy to prevent Canadian retirees from profiting when Russia is helped economically. Russia’s continued export of gas and coal kept its economy functioning and guaranteed war in neighboring Ukraine, waged in defiance of global condemnation.

It also illustrates the economic risk that pensions face: The Russian invasion caused European nations to question their dependence on Russian energy and to consider reducing or eliminating Russian supplies. In the longer term, the transition to a greener future in Europe could allow countries to phase out Russian natural gas ahead of supplies from other nations.

Patrick DeRochie of Shift Action for Pension Wealth and Planet Health, a climate advocacy group, said “pension funds cannot claim that they are not responsible for the real impacts of the companies they own, even if these companies are heavily…regulated utilities.Shift, which criticizes pensions for their carbon-based energy holdings, brought the issue of pensions’ European holdings to the Globe and Mail’s attention.

“In the case of the war in Ukraine, these companies transport and retail the products of the Russian national gas company, indirectly financing Putin’s aggression,” he said in emailed comments. “Pension funds appear to treat infrastructure investments like low-risk ATMs, but there are real implications for business models that help prop up authoritarian regimes and lock in the continued use of fossil fuels. .”

Net4Gas, for example, was placed on negative watch – a warning that a debt downgrade could occur – by Fitch Ratings in early March, less than two weeks after the Russian invasion. The monitoring, Fitch said, reflected heightened and growing risks to Russian gas company Gazprom’s “willingness and ability to meet its obligations under its ‘ship or pay’ gas transit contracts with Net4Gas, which represent more than 70% of income. »

In an email response, OMERS spokesperson Neil Hrab said Net4Gas “is a fully regulated entity. As such, Net4Gas is legally obliged to make its pipeline capacity available to any customer wishing to ship its gas to the Czech Republic and cannot reject any customer who meets the formal requirements set by national/EU laws and regulations. . Mr. Hrab said Net4Gas “is in compliance with all applicable international sanctions laws and continues to monitor the situation closely.”

OMERS and the other three pension funds all made public comments on the divestment from Russian stocks in the first week of March as international pressure mounted on big investors to pull out of the country. The four funds said Russia was not ‘an investment market’ or that they had no ‘direct investments’ in the country, suggesting exposure to Russia was through investments in stock indices.

BCI CEO Gordon Fyfe called Russia’s actions “blatant” when explaining why it was stepping away from politics to comment on its investment activities. All said they would respect Canadian sanctions or expressed support for global sanctions.

BCI spokeswoman Gwen-Ann Chittenden said in an email that the fund “is not involved in day-to-day business” in its investments in Open Grid Europe and Czech Gas Networks Investments, it could not therefore not answer questions about how the two companies would respond to Russian challenges.

Open Grid Europe said the European Hydrogen Backbone Initiative – of which it, Next4Gas and Fluxys are part – has accelerated efforts to reduce Europe’s dependence on Russian energy, pushing through its plans for a new electricity transmission system. hydrogen by 2030, starting in 2035. Following the Russian invasion of Ukraine, it is incumbent on European countries to achieve greater energy independence.

In an email, Teachers spokesman Dan Madge said that given its location in southern Italy, “the vast majority” of the natural gas transported through Società Gasdotti Italia’s network comes from North Africa and Azerbaijan via the Trans-Adriatic Gas Pipeline. “A small proportion enters their network through the TAG pipeline system and the natural gas in this system is likely to come from Russia.”

The company, says Mr Madge, “plays a vital role in transporting natural gas but does not buy or import it and therefore has limited influence over its origin”.

Caisse spokesman Conrad Harrington said in an email that Fluxys had “no financial interest in Russia and does not own the gas that passes through its infrastructure; he only transports and stores it.

The Zeebrugge terminal is, he says, “according to the law, an open-access facility and no customer can be discriminated against. In the absence of European sanctions on Russian gas, Fluxys is required to respect its agreements with all its customers. However, if sanctions were to be put in place, Fluxys would of course comply with them.

The Fund, which held several hundred million dollars worth of Russian stocks, thanks in part to an investment strategy consisting in replicating global indices, sold them in the days preceding the invasion of Ukraine by the Russia.

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