This article originally appeared in the Financial Post.

In November, InvestNow, the not-for-profit of which I’m executive director, submitted shareholder proposals to Canada’s Big Five banks asking them to exit both the Net Zero Banking Alliance (NZBA) and the Glasgow Financial Alliance for Net Zero (GFANZ). These are two interrelated, UN-sponsored, and Mark Carney-led organizations whose members pledge to align their lending, investment and other activities with decarbonization goals, including achieving net-zero emissions by 2050. As I wrote in these pages in December, “Canadian banks should not pursue political or ideological goals at the expense of fiduciary ones. And they shouldn’t shun oil and gas.”

This article originally appeared in the Financial Post.

In 2021, Canada’s Big Five banks — TD, CIBC, BMO, Scotiabank and RBC — all signed on to the Global Financial Alliance (GFANZ) and the Net Zero Banking Alliance (NZBA).

The UN-sponsored, Mark Carney-led GFANZ was launched in April of that year. Self-described as a sector-wide coalition, its goal is to accelerate the transition to decarbonization and a net-zero global economy.

The NZBA is a subgroup of the GFANZ. A prerequisite for joining is the signature of a bank’s CEO on the organization’s “commitment statement.“ Much of the statement and its “principles for responsible banking” is unobjectionable, even anodyne. “Banks play a key role in society,” and “Our success and ability to remain profitable and relevant is (sic) intrinsically dependent on the long-term prosperity of the societies we serve.” Who could disagree?

But the document quickly takes a sharp ideological turn. The NZBA commits its members to: align their lending and investment portfolios with net-zero carbon emissions by mid-century or sooner; use decarbonization scenarios in lending and investment decisions; and focus on higher-emitting sectors first and foremost. These ideological commitments do not instil prosperity-building confidence.

What does a “net-zero global economy” mean in practice? It means drastically reducing oil and gas production and use over a short time. For a country like Canada, whose economy is extremely reliant on natural resources, especially oil and gas, a net-zero global economy would be a catastrophe. Already we are beginning to feel the impact of dogged pursuit of “net zero by 2050”: carbon taxes, soaring energy prices, emissions caps (production caps, really) for oil and gas, deindustrialization and widely felt economic hardship.

By joining the NZBA, the Big Five banks have agreed to divest from oil and gas, eliminating projects and companies from their investment pool simply because they are oil and gas companies. But such divestment poses a serious threat to Canadian, not to mention global, energy security.

More narrowly but equally crucially, it threatens shareholder returns. Maximizing long-term total returns for clients and shareholders — traditional goals of banks, other financial institutions and most private businesses — is not in the NZBA pledge. In fact, the word “shareholder” does not appear once in the statement.

Why have our banks signed up for divestment? Did the bank CEOs read the commitment statement before signing it? Do they understand that GFANZ and NZBA want to decarbonize the economy? Were they just trying to appease activists? Or do they really believe GFANZ and the United Nations have Canada’s and Canadians’ best interests at heart?

The real-world effect of decarbonization is to eliminate oil and gas, one of Canada’s most important sectors. The commitment statement completely ignores: Canada’s role as an ethical supplier of relatively clean oil and natural gas; the energy reality that coal, oil, and gas together still make up about 80 per cent of the global energy mix; and the fact that demand for oil and gas keeps growing. The singular focus on decarbonization and net zero ignores the fact that Canada’s prosperity depends on a strong oil and gas sector.

This year, InvestNow, the not-for-profit of which I’m executive director, has submitted shareholder proposals to the Big Five banks asking them to exit both the NZBA and the GFANZ. In pledging to comply with NZBA and GFANZ rules and deny our energy companies the loans, investments and underwriting they need in order to operate and thrive, Canadian banks are doing great harm, not just to their shareholders, but to the country at large and, ultimately, to the global community.

As a stable, responsible, democratic country with abundant energy resources, Canada is uniquely positioned to meet more and more of the world’s demand for oil and gas. We produce and export energy now and have enormous capacity to do more of both, meaning the industry can play a key role in maintaining both Canadian and global energy security.

Canadian banks should not be pursuing social, political or ideological goals at the expense of fiduciary ones. As essential institutions, modern banks must be held to a standard of strict political neutrality. The whims of a select group of unelected and unaccountable individuals working through a supra-national organization should not guide this country’s banking policy. The best interests of Canada and Canadians should.

This article originally appeared in the Financial Post.

If the Canadian oil and gas industry has not yet realized it is at war with the current federal government, enactment into law of Bill C-59 last month should open its eyes.

The bill makes significant amendments to the Competition Act, with an eye towards combating so-called “greenwashing,” which Merriam-Webster defines as the practice of “making a product, policy, activity, etc. appear to be more environmentally friendly or less environmentally damaging than it really is.”

Bill C-59, which should really be called the “Oil & gas company cancellation act,” stipulates that any claims that citizens, advocates, organizations, or businesses make about the environmental benefits of a product or technology must be proven, by the measure of international standards so nebulous as not even to be defined. It is not clear which international standards companies need to measure themselves against or by whom outside of Canada they must be recognized. This does not bode well for oil and gas companies, which have long been demonized in international opinion.

The penalties imposed by the bill are not small. For corporations, the fine for a first offence could be up to $10 million, or three times the benefit gained from the “false advertising.” A second conviction would raise the fine to $15 million. In addition to hefty penalties, beginning next year activist groups can use Bill C-59 to bring their own claims against oil and gas companies, which seems certain to result in costly and time-consuming legal battles.

With this new gag law, the Trudeau government is attempting to stop oil and gas companies from promoting themselves to investors, governments, employees, customers, suppliers and the world in general. Canada already has world-class corporate governance and disclosure systems and standards that ensure accurate information gets to people who are making decisions. Bill C-59 ignores these clear and stringent governance standards and replaces them with vague ones that will be nearly impossible to comply with.

As someone who has been fighting for Canadian oil and gas, I am not surprised by this law. But I am frightened by it. It is just another weapon in the arsenal of those who want to destroy our natural resource sector. For over a decade, oil and gas companies have been attacked simply for being oil and gas companies. Globally, movements have been calling for banks, university endowment funds, public pension funds and governments to stop investing in hydrocarbon energy.

Shareholder proposals have also been weaponized against oil and gas companies. The stated goal of these activist-offered proposals? To “make producers stop exploring for more oil and gas, “and to “wind down the company’s business in oil and natural gas.” Their asks all focus on the suppression and eventual elimination of oil and gas.

With net-zero plans, emissions caps and other anti-oil and gas policies, governments, regulatory bodies and financial institutions have made this country an inhospitable place for oil and gas companies, investors and advocacy groups. Bill C-59 is one more weapon for activists intent on scuppering Canadian oil and gas.

What can industry players and their advocates do to fight back? They can start standing up for themselves. Many have recently scrubbed their websites of environmental claims for fear of running afoul of Bill C-59. That’s understandable, but it’s also wrong. Canada’s natural resource sector has made major strides in emissions reduction and strives to be a responsible steward of the environment. It should be proud of its success and willing to fight all the way to the Supreme Court of Canada, if need be, to defend its right to tell Canadians about it.

For years, oil and gas companies and other targets, like banks, have tried to appease the activists. That clearly hasn’t worked. Now is the time to stop cowering and speak up about all the good things that the industry brings to the citizens of the world. The truth may not be an admissible defence under Bill C-59 but, as the saying goes, it shall set you free.

Gina Pappano, executive director of InvestNow, was head of market intelligence at the Toronto Stock Exchange (TSX) and TSX Venture Exchange (TSXV).

This article originally appeared in the C2C Journal.

No matter what business they engage in, the purpose of all corporations – their raison d’être – is to generate returns on their shareholders’ investment and to maximize shareholder value by achieving a rising price in the stock market, paying dividends to shareholders, and eventually perhaps engineering a profitable “exit” from the market by being taken over at a premium. This understanding is known as “shareholder primacy” and it is so central to good corporate governance that companies and regulators have developed a mechanism, the shareholder proposal, whereby anyone who holds stock in a corporation can petition its board of directors to examine some practice or other with an eye towards improving the company and its value.

But in the 21st century – especially in the last decade or so – activist groups have repurposed shareholder proposals into weapons used to pressure companies to adopt policies informed by the group’s ideological concerns. No sector in Canada has been targeted by ideologically driven agendas more than the oil and natural gas industry, a crucial branch of Canada’s economy that includes hundreds of producers, pipeline companies, refinery operators and service companies, many of which are publicly traded. Using shareholder proposals whose goal is the limitation and eventual elimination of Canada’s oil and natural gas production, activists who are shareholders-of-convenience are attempting to villainize one of the most productive, vital and longstanding pillars of our country’s economy.

Stand.earth, Investors for Paris Compliance, the BC General Employees’ Union, Environmental Defence Canada, the Shareholder Association for Research and Education and MÉDAC are just a few of the activist groups that over the past few years have presented anti-fossil-fuel shareholder proposals to Canada’s “Big Five” banks and to oil and natural gas companies. Last year, for example, Stand.earth demanded that the Royal Bank of Canada’s (RBC) “Board of Directors adopt a policy for a time-bound phase-out of the RBC’s lending and underwriting to projects and companies engaging in new fossil fuel exploration, development and transportation.” In other words, they were asking Canada’s biggest bank to stop supporting an industry that provides hundreds of thousands of Canadian jobs, pays tens of billions of dollars in taxes annually and forms the economic backbone of three Canadian provinces.

The demands of these groups are premised on convincing shareholders that eliminating one of our country’s most productive sectors will benefit Canada socially and environmentally and reduce global CO₂ emissions, when the facts demonstrate that nothing Canada could do domestically could influence emissions on a global scale. The most recent Statistical Review of World Energy, for example, described 2023 as a “year of record highs in an energy hungry world”.

The world will continue to need crude oil and natural gas for decades to come – not only the energy these fuels provide, but the thousands of crucial products that are made from them. Canadian oil and natural gas companies, with their high environmental and safety standards and technical expertise, should be among the preferred suppliers of the energy that powers the world. Yet the activists driving these economically ruinous crusades, based on dogma and ideology, want shareholders, investors and Canadians at large to vote in favour of their proposals. How did we get here?

The Annual General Meeting as Town Hall Meeting

Historically, the annual general meeting (AGM) of a corporation (whether privately held or publicly traded) was called to present and discuss the previous year’s results as embodied in the audited annual financial statements, to elect any new directors that might be required, to announce the retirement of existing directors if applicable, to announce any major changes to the company’s executive team, and to discuss any other relevant business as the company’s leadership might deem necessary. These were often stodgy and boring events, especially if things were ticking along smoothly. And these are still the core matters to which the majority of AGMs are devoted among Canada’s approximately 3,500 publicly traded companies as well as the vastly more numerous privately held companies.

But since the Second World War, and especially over the past 30 or so years, AGMs have become more – much more. In the United States’, the Securities and Exchange Commission’s (SEC) Shareholder Proposal Rule (Rule 14-a8) came into force in 1942. In testifying before Congress on the then-new rule in 1943, SEC Commissioner Robert H. O’Brien explained that its motivation was to “approximate the widely attended town hall meeting type of forum characteristic of the days when nearly all corporations were closely held and geographically limited.”

The Town Hall analogy is a good one. In a 2022 speech entitled The Shareholder Proposal Rule: A Cornerstone of Corporate Democracy, former SEC Director Renee Jones laid out the role and the rights of the shareholder. “Shareholders, that is individuals or institutions that invest in a corporation, are purchasing a share of the company with the understanding that the board of directors and senior management team will use their investment wisely, making sound corporate decisions with the intent of increasing profits, to which [the shareholders] are entitled to a share. They are also entitled to certain governance rights including the right to elect directors, approve major corporate transactions and express their views on corporate governance matters and other fundamental issues related to the corporation’s business. Additionally, shareholders generally have the right to bring matters before other shareholders for a vote at a shareholder or ‘town hall’ meeting.”

"In 1969 a group called the Medical Committee for Human Rights filed a shareholder proposal asking Dow Chemical Corporation to stop manufacturing napalm, an explosive chemical used with at-times horrifying effects in the Vietnam War."

The bulk of the foregoing paragraph is a good synopsis of a shareholder’s rights and roles as it has been understood for the past 200-300 years. But Jones packed a lot into the sentence following the word “Additionally”. What she mentioned has in fact happened – with a vengeance. Since the enactment of the U.S. Shareholder Proposal Rule and the U.S.-inspired Canada Business Corporations Act’s Shareholder Proposal Regime, the number of shareholder proposals being presented every year in each country has increased exponentially.

The mechanism allows for any shareholder to present a proposal to a corporation provided the shareholder meets certain technical requirements set out by the SEC or the Canada Business Corporations Act, as the case may be. The proposal is printed in the set of corporate documents sent to all stockholders prior to any AGM. At the AGM, the shareholder presents the proposal and there is a vote.

In the early years, most shareholder proposals concerned matters of corporate governance. It was not until the 1960s and 70s that the phenomenon took off, possibly reflecting the era’s increased social activism. For example, in 1969 a group called the Medical Committee for Human Rights filed a shareholder proposal asking Dow Chemical Corporation to stop manufacturing napalm, an explosive chemical used with at-times horrifying effects in the Vietnam War. In the 1970s and 1980s, the anti-Apartheid movement used the shareholder proposal process to pressure corporations to terminate their business dealings in South Africa.

Most such proposals did not tend to get very far, however; Boards of Directors typically recommended voting against them, and that tended to be the end of it. Most shareholders in publicly traded companies do not delve very deeply into the affairs of the often-numerous companies in which they might hold a position. A small business owner who is saving for retirement, for example, might well hold shares in several dozen companies via their RRSP portfolio; what they or their investment adviser monitor above all is whether dividends are being paid and share prices are doing well.

Accordingly, most shareholders take their cue from the Board of Directors and vote according to their recommendation, via so-called “proxy” forms, which also cover votes on standard matters like approving the financial statements and electing new directors. In this vein, proxy advisory firms have arisen, which institutional investors and large public pension funds rely upon to guide their voting. This is why it is very difficult to vote against a board and why most shareholder proposals fail at the AGM ballot.

Still, the number of shareholder proposals has grown dramatically and this increase has coincided with a rise in ideologically driven proposals. And none more than those associated with the environmental, social and governance (ESG) movement. In even a cursory investigation into this issue, one is struck by the degree to which shareholder proposals and ESG have become inextricably linked. Many of the current definitions of shareholder proposals one comes across, in fact, claim that they are “an important corporate governance tool which allow[s] shareholders to engage with public companies with respect to environmental, social and corporate governance issues.” Effectively, the shareholder proposal mechanism has been hijacked and harnessed to one dominant purpose.

Shareholders vs. Stakeholders

The evolution away from shareholder primacy to what is known as stakeholder primacy in the purpose and governance of corporations has been closely aligned with the rise of ESG investing. Proponents of so-called “stakeholder capitalism” contend that corporations should care less about superficial concerns like profits for shareholders and instead focus on the good of all their “stakeholders”, by which they mean anyone who is affected by, depends on or makes use of a company: customers, employees, the communities in which a company operates, the environment, governments and society as a whole. Klaus Schwab, founder of the World Economic Forum, is a prominent proponent of stakeholder capitalism, writing a book of that title.

"Under the ESG or ‘responsible investing’ vision, society presumably no longer has much need for profitable companies whose earnings help build up the retirement accounts of tens of millions of future pensioners, but has become primarily focused on saving whales, fighting climate change or paying for free social housing."

The company’s actual investors, who make its work possible, should presumably get some consideration as well, but their good tends to get lost in the idealistic rhetoric which accompanies the ESG approach. The corporation’s original purpose as a profit-maximizing entity dedicated to serving its shareholders’ financial interests becomes subsumed by the deluge of social welfare-oriented activities (“giving back to the community”) and support for environmental causes. It is noteworthy that all of this is heavily skewed towards “progressive”, i.e., left-leaning, causes. In some cases, this has become self-destructive if not borderline suicidal, such as the BP CEO who some years ago infamously stated that the “B” in British Petroleum should be reimagined as “Beyond”.

An important and current statement of ESG principles can be found in the United Nations-supported Principles of Responsible Investing (PRI), which has been signed by over 3,500 asset managers pledging to further “environmental, social, and corporate governance” goals in order to “better align investors with broader objectives of society.” Under this vision, society presumably no longer has much need for profitable companies whose earnings help build up the retirement accounts of tens of millions of future pensioners, but has become primarily focused on saving whales, fighting climate change or paying for free social housing.

It is interesting to note that the Canada Pension Plan (CPP) Investment Board is one of the PRI’s founding signatories. As a future beneficiary of Canada’s public pension system, I find myself worried by this fact. Like millions of other Canadians, my future wellbeing depends on the continued solvency of the CPP which, in turn, depends on the ongoing profitability of the companies in which it invests. The same can be said about dozens of other pension funds such as those for teachers, nurses and government employees.

The two most prominent concepts among ESG investing principles and in shareholder proposals meant to push ESG agendas are: (1) diversity, equity and inclusion (DEI), and (2) “sustainability”. DEI is a highly ideological, neo-Marxist doctrine with which C2C readers are by now amply familiar. Sustainability is a somewhat older term that refers to goals pursued by the environmentalist movement, which currently include “net zero”, so-called decarbonization and the divestment from, reduction or outright banning of fossil fuel production and consumption.

Most shareholder proposals focused on sustainability are sector-specific. Oil and natural gas companies and financial institutions received the largest number in the 2023 AGM season. In Canada, most proposals have been aimed either at pushing oil and natural gas companies to net zero and decarbonization goals or at pressuring the Big Five chartered banks to stop investing in oil and natural gas companies and projects.

In 2022, for instance, Investors for Paris Compliance (I4PC) asked Calgary-based pipeline and utilities giant Enbridge Inc. to “strengthen their net zero commitment such that the commitment is consistent with a science-based, net zero target.” I4PC defines net zero to mean “no new oil and gas fields are required beyond those already approved for development in conjunction with a historic investment surge in clean technologies.” So not only was I4PC demanding that Enbridge officially commit to long-term decline in its business (since all oil and natural gas fields deplete over time, requiring continuous reinvestment in new fields merely to maintain current production), but it was also prescribing a huge (“historic”) amount of investment in so-called “clean” technologies that are outside Enbridge’s core business (wind turbines do not require pipelines).

The Gathering Pushback in the United States

There are glimmerings of an awakening that the wave of activist shareholder proposals and ESG investing is materially impairing investment returns and could prove economically ruinous. Investors are, in effect, being defrauded by companies diverting capital, executive attention and employee talents towards expensive social goals that do not, say, develop new products or generate revenue.

In the U.S., pushback has been gathering from several directions. Warren Buffett, the famous “Sage of Omaha,” has openly expressed skepticism about ESG investing and things like corporate reporting on climate change efforts – although it is a sign of the ideology’s thorough penetration of the investment world that Buffett’s stance would be labelled “unconventional” in a business magazine.

More substantively, new asset management firms have been launched by entrepreneurs who concluded that the stakeholder primacy model just does not work. Strive Asset Management was founded in early 2022 explicitly to “live by a strict commitment to shareholder primacy – an unwavering mandate that the purpose of a for-profit corporation is to maximize long-run value to investors.” Its founders are private equity manager Anson Freriks and flamboyant commentator Vivek Ramaswamy, who was a candidate for the most recent Republican Presidential nomination, won by Donald Trump.

Strive believes that companies should do what they do best and not fall prey to other agendas. The fund was started specifically to “solve a problem,” as its website explains: “Large financial institutions, including the biggest asset managers, were using their clients’ money to advance social, cultural, environmental and political agendas in corporate America’s boardrooms. Asset managers and for-profit corporations have a fiduciary duty to maximize value, and that duty had been neglected.”

Strive’s pitch clearly resonated with investors, as the firm soon became one of the fastest-growing asset managers in the U.S. And its position appears to be having an effect. The latest edition of Strive’s newsletter, The Fiduciary Focus, includes the following headlines: “The Financial Times Credits Strive for Pushing Companies to Drop ESG-Linked Compensation,” “John Deere Pulling Back on ESG,” and “Wall Street Cools on Sustainable Funds.”

There is also growing concern in the political arena that ESG investment and other socially motivated corporate activities pose a threat both to the financial integrity of public pension funds and a challenge to democratic governance. A number of U.S. states have taken formal steps to confront and counter the ESG investment behemoth. One such measure is the non-profit State Financial Officers Foundation (SFOF). According to its website, “SFOF’s mission is to drive fiscally sound public policy, by partnering with key stakeholders, and educating Americans on the role of responsible financial management in a free market economy.”

The organization and its members are firm and vocal defenders of shareholder primacy. Among their activities have been letter-writing campaigns to corporations and fund managers that urge them to scale back political activism and instead focus on the interests of their shareholders. They are putting teeth to their words: according to a recent Torys Report, 18 of the SFOF’s member states have enacted anti-ESG laws, including prohibiting fund managers from considering ESG factors in their investments and state entities from investing with asset managers deemed to be discriminating against or boycotting the fossil fuel industry.

"ExxonMobil’s bolder, more confrontational tactic may be pointing the way, because in late June both activist groups not only dropped their proposals but promised not to bring forward similar demands in future; in return, ExxonMobil agreed to have its lawsuit dismissed."

Some of the SFOF member states have also put their money where their mouths are in pushing to restore shareholder primacy. The organization recently supported the State of Texas Permanent School Fund (a large investment fund with US$53 billion in assets that helps pay for the state’s school system) as it cancelled a US$8.5 billion investment with BlackRock, one of the world’s largest investment funds and a prominent proponent of ESG investing. As SFOF urged, “BlackRock should withdraw from international organizations seeking to orchestrate opposition to fossil fuel investment, abandon ‘decarbonization’ policies that are a form of boycotting fossil fuels, and stop using its proxy voting authority to promote an anti-fossil fuel agenda.”

Further pushback is coming from some of the recipients of activist shareholder proposals. It is perhaps not surprising that ExxonMobil is among the leaders here. The company has long been reviled by environmentalists for its insistence on keeping profitability, technical excellence and energy production central to its business. To some, it is the ugly face of “Big Oil”.

In January, ExxonMobil filed a lawsuit to block a shareholder resolution put forward by the groups Follow This and Arjuna Capital, whose stated objective was to force the company to commit to precipitous cuts in CO₂emissions, including with respect to the downstream effects from the combustion of its products by customers. Exxon argued that such a resolution would force the company to “change the nature of its ordinary business or to go out of business entirely.” Which is what these “shareholders” intend; Exxon’s lawsuit quotes Arjuna Capital’s contention that “Exxon should shrink” and Follow This’s statement that its goal is “to wind down the company’s business in oil and natural gas.”

As Follow This states on its website: “We buy shares in order to work on our mission to stop climate change.” And, it says, its shareholder proposal aims to make ExxonMobil “stop exploring for more oil and gas.” While this kind of agenda is no longer surprising, ExxonMobil’s response was. Corporations generally try to deal with motivated activists by adopting some version of their favoured policies in the hopes they’ll go away (not that they do). ExxonMobil’s bolder, more confrontational tactic may be pointing the way, because in late June both activist groups not only dropped their proposals but promised not to bring forward similar demands in future; in return, ExxonMobil agreed to have its lawsuit dismissed.

Still more pushback in the U.S. is coming from the small but growing number of advocacy organizations submitting anti-ESG shareholder proposals that call on corporations to refocus themselves on shareholder-centred capitalism. The National Center for Public Policy Research and the National Legal and Policy Center are two such organizations. According to a recent SquareWell Partners report entitled “What Do Shareholders Propose?” these kinds of proposals surged by 64 percent in 2023.

Now What About Canada?

This process is still at a much earlier stage in Canada. Last year the not-for-profit organization I lead, InvestNow, submitted and presented shareholder proposals to three Canadian banks asking for explicit commitments to continue to invest in and finance the Canadian oil and natural gas sector. These were the first proposals of this nature presented to Canadian banks and their shareholders. The overwhelming majority of the vote – 99.5 percent of it – was against InvestNow’s proposal. However, fellow shareholders and even some board members approached me after the meeting and thanked me for standing up to the banks and for advocating on behalf of Canadian oil and natural gas and everyday Canadians.

We were back again doing the same this year, presenting shareholder proposals at the AGMs of all five big chartered banks – BMO, CIBC, Scotiabank, RBC and TD – asking them to commission and issue reports qualifying and quantifying the impacts and costs of their net zero commitments. This time we received one percent support for our proposal, a 100 percent increase over last year.

"Although InvestNow’s proposal was rejected by Suncor’s board, our hope is that we planted a seed in the directors’ minds about their duty of care and fiduciary obligations to the company’s shareholders and that they will soon find the courage and conviction to say ‘No’ to the activists and ‘Yes’ to shareholder proposals like ours."

This year InvestNow also submitted our first shareholder proposal to an energy company. We asked Suncor Energy Inc., one of Canada’s largest oil producers and refiners (with production this year estimated at approximately 800,000 barrels per day), to drop its pledge to achieve net zero carbon emissions by 2050 and rededicate the company to its core business of producing and refining crude oil. In our view, Suncor should be producing more oil and getting it out to more customers in Canada and around the world – not contributing to its own demise and that of its industry. And it should do this unapologetically. In the face of growing global demand and concerns over energy security, Suncor should increase Canada’s energy supply, thereby helping to reduce energy costs for Canadians and the world.

Like Exxon, Suncor has received many anti-fossil-fuel shareholder proposals over the years. Unlike Exxon, however, Suncor has not yet publicly pushed back. But why not? Suncor has worked concertedly to improve its “emissions intensity”, which is the volume of greenhouse gas emissions per unit of oil or natural gas produced, and has held its overall greenhouse gas emissions essentially flat, as the accompanying graph shows. [Editor’s note: the recent passage of the Liberals’ Bill C-59, which makes it illegal for energy companies and advocacy groups to defend themselves, on pain of criminal penalties, caused a vast amount of useful technical information to be abruptly removed from the internet.] Why commit to an arbitrary target like net zero, especially one that would necessitate massive declines in the use of oil and natural gas? Net zero wouldn’t increase shareholder value. Quite the opposite, since fossil fuels are Suncor’s main business.

Although InvestNow’s proposal was rejected by Suncor’s board, our hope is that we planted a seed in the directors’ minds about their duty of care and fiduciary obligations to the company’s shareholders and that they will soon find the courage and conviction to say “No” to the activists and “Yes” to shareholder proposals like ours.

Canada’s shareholder proposal regime was put in place as a response to the U.S.’s rule on shareholder proposals. Hopefully, the boards of directors at Canadian corporations and financial institutions, investors, customers and citizens at large will see what is happening south of the border and will add to the still-budding pushback movement in our own country. It’s time.

Gina Pappano is executive director of InvestNow and was formerly head of market intelligence at the Toronto Stock Exchange (TSX) and TSX Venture Exchange (TSXV).

This article originally appeared in the Western Standard

The Canadian Senate, according to the old saying, is the house of “sober second thought,” where proposed laws are supposed to receive careful consideration before they’re passed. Well, having recently testified before a Senate Committee about a piece of environmentalist legislation, I can’t help wondering if that is still accurate. Because nothing about this bill is sober.

The legislation in question is Bill S-243, the “Climate-Aligned Finance Act,” which was introduced by Senator Rosa Galvez. According to Senator Galvez, its goal is “to align our financial sector with climate commitments and set us on an ambitious path to a climate-safe future.” Which is a flowery way of saying that Bill S-243 is designed to make it extremely difficult for financial institutions to invest in hydrocarbon energy, or give loans to companies in that field.

Bill S-243 multiplies the number of hoops that banks have to jump through to do business with oil and gas companies, making it much more expensive and less lucrative to do so. And it meddles with the internal governance of all federal financial institutions so they are aligned against Canadian energy.

The bill mandates, for instance, that the board of all such institutions must include at least one member who is an expert in “climate change science,” “who has acute lived experience related to the physical or economic damages of climate change,” or who has expertise in “Indigenous ways of knowing, being and doing.” Whatever that means.

It forbids banks from appointing a single board member who “controls any capital, shares, stock” or is involved in an organization that is not “in alignment with climate commitments.” To be considered “in alignment, “an organization must be dedicated to “avoiding new fossil fuel supply infrastructure and exploring for new fossil fuel reserves and instead planning for a fossil fuel–free future.” So if the geological firm you work for does any work on pipeline construction or locating natural gas deposits, you couldn’t even be considered for the board of a Canadian bank.

These provisions would be an outrageous intrusion by the government into the internal governance of financial institutions. Their goal is to ensure that no one with any relevant experience in Canadian hydrocarbon energy can serve on one of these boards, while insisting that each board will have at least one member who is only there because he is ideologically opposed to oil and gas, and wants the entire sector to disappear.

That would be a disaster for all of us, because oil and gas is Canada's most productive sector — by leaps and bounds, according to a recently released study by Philip Cross and Jack Mintz. Oil and gas drives Canadian exports, incomes, and government revenue.

That goes a long way towards answering a key argument Senator Galvez makes for her bill. When she complains that Canadian banks invest more than other nations in oil and gas, the reason is because our country has been abundantly blessed with those resources. Oil and gas is, Cross and Mintz argue, our “golden goose.”

As the Executive Director of InvestNow, a not-for-profit which stands up to the anti-oil and gas “divestment” movement in Canada, I was invited to testify against this legislation where I made all of these points. But I was one of the few. And those testifying in favour of the bill included bigwigs like Eric Usher, who heads the U.N.’s Environment Program Finance Initiative; and Mark Carney, the former Bank of Canada governor who is frequently mentioned as a possible successor to Justin Trudeau as leader of the Liberal Party of Canada.

So as bad as this bill would be for our economy, it has some very powerful defenders. That’s why it is important for regular Canadians to speak up against this extreme legislation. Because these days we are the sober ones, not our representatives in Ottawa. We are the only ones with sense enough to say, “This bill is bad for Canada.”

Gina Pappano, executive director of InvestNow, was head of market intelligence at the Toronto Stock Exchange (TSX) and TSX Venture Exchange (TSXV.)

This article originally appeared in the Financial Post.

Banks are essential institutions for participating in modern life. Without a bank account it’s hard to be part of society. Of all institutions banks therefore need to be truly inclusive. Which means they should be held to a standard of strict political neutrality, looking after the interests of their clients and shareholders in a nonpartisan, non-ideological way. So long as their clients are abiding by the law, banks should be open to all potentially profitable businesses — for the good of the bank’s own shareholders and the health of the economy.

This article originally appeared in the Western Standard. 

Canada’s energy sector is a major national security asset, a fact which should be made abundantly clear by the recently declared war between Israel and Hamas.

The potential for escalation of this conflict is already casting uncertainty over global energy markets due to the centrality of the Middle East to global energy production and transport routes.

You don’t have to be a market analyst to see what’s happening.

In the wake of the Hamas attacks, European natural gas and oil futures jumped 14%. With instability in the region growing, this uncertainty will continue to drive fluctuations due to concern over reliability of supply.

Canada, well-known for its political stability and with a reputation for responsible natural resource development, should be positioned as a bulwark against these threats.

Unfortunately, despite these merits, the Canadian oil and gas industry finds itself entwined in a manufactured paradox. It stands as a stable supplier of fossil fuels amidst global conflicts, yet simultaneously faces unrealistic regulatory demands and misguided pushback from groups set on imposing ever accelerating Net-Zero policies. Their goal is the eventual extinction of Canada’s natural resource sector.

These policies — including federal and provincial carbon taxes and other forms of government imposition — are already making life harder for Canadians; elevating food, energy and heating prices. They are also making it increasingly difficult to produce Canadian energy and get it to market.

Meanwhile, threats to global supply will only drive prices higher. The world is going to continue to consume oil and gas and if our resource sector is hobbled by unnecessary regulation and reductions in domestic investment, that energy will gladly be provided by nations far less concerned about our cost of living, human rights, or CO2 emissions.

With Canadian suppliers being prevented from pursuing opportunities to supply international markets, our EU partners have been forced to look elsewhere. Last week for example, France’s state energy firm, TotalEnergies, signed a 27-year agreement to purchase natural gas from Qatar, beginning in 2026.

The notion of abandoning investments in Canadian oil and gas threatens not only our domestic economic prospects but it also propagates risks on a global scale by eroding a politically stable and secure source of energy amid an unpredictable geopolitical environment.

The case for divestment from Canadian oil and gas rests on the idea that it serves some long-term aspirational goal.

But what it actually accomplishes is increased global dependence on the regimes of Russia, Venezuela and the member nations of OPEC. It undermines confidence in the industry and exposes Canada — and Canada's allies — to dangerous vulnerabilities through energy supply shocks.

Canadian banks, investment funds, corporations and individual shareholders have a responsibility to ensure our energy sector is appropriately financed to encourage production, distribution and yes, the innovation necessary to drive emission reduction efforts in our energy sector.

Not only do our economy and the environment benefit from a robustly financed Canadian energy sector, but recent events have made clear that our national security and the security of our global partners depend on it.

Gina Pappano is Executive Director of InvestNow, a Canadian not-for-profit dedicated to raising awareness of the dangers of divestment in Canada’s energy sector.

This article originally appeared in the Financial Post. 

The British banking system has just gone through a major scandal. Though it hasn’t received much coverage on this side of the Atlantic we would all do well to pay attention. The worrying incident at the centre of the scandal — what’s now known as “de-banking” — looks a lot like a kind of cancellation increasingly common here in Canada.

The scandal involves British politician and media personality Nigel Farage, formerly head of UKIP, the U.K. Independence Party, and a leader of the Yes side in the 2016 Brexit referendum. Earlier this summer, Mr. Farage announced that his bank — Coutts & Co — had notified him his account was being terminated. He made an issue of this in public, suggesting the closure was politically motivated. The bank denied it, going so far as to claim the actual reason was that he didn’t have enough money in the account. But eventually Mr. Farage was proven right. He got his hands on internal communications showing Coutts was closing his account because his political positions didn’t “align with their values.”

What followed was the resignation of Alison Rose, CEO of NatWest Group, the parent company of Coutts, quickly followed by the departure of Peter Flavel, CEO of Coutts.  Even U.K. Prime Minister Rishi Sunak became involved and is now considering new regulations that would prevent banks from denying customers service due to their politics. Farage was ultimately offered his Coutts account back, but he has not yet clarified if he will accept the offer to keep his accounts open. He has made clear, however, that he sent a legal litigation letter to Coutts demanding full apologies and compensation for his costs.

This whole episode should raise alarm bells for all of us. The idea of banks, which are key institutions of modern life, becoming ideological actors and deciding to deny service to otherwise eligible individuals because of their political opinions is more than a little disconcerting.

Of course, banks are already engaging in forms of cancellation that are not unlike what happened to Mr. Farage. Financial institutions, including banks, now regularly decide to stop investing in or providing services to oil and gas companies, both in order to appeal to climate activists and to improve their Environmental, Social, and Governance (ESG) scores with environmentalist and other advocacy groups.

InvestNow, the organization I head, has stepped up and presented shareholder proposals to Canadian banks to counter these prosperity-destroying campaigns, whose ultimate objective is to shut down Canada’s oil and gas industry. We are the first to present such proposals to Canada’s banks. Our goal is to prevent them from giving in to political and ideological pressure and becoming complicit in schemes to undermine Canada’s energy sector.

Why do banks exist? The Bank Act, which regulates Canada’s chartered banks, has three main goals: protecting depositors’ funds, ensuring the maintenance of cash reserves and promoting the efficiency of the financial system through competition.

Banks require a charter from the government in order to do business. That charter grants a privilege, but it also imposes a responsibility: to hold and manage the investments of all Canadians. It is not a licence to act as social activists.

Banks have many of the attributes of public utilities. They must not become the financial enforcement arm of any given moral position. Citizens, and especially shareholders, should carefully examine what our banks are signalling through their policy statements and ensure they are wisely and prudently managing their investments, not being co-opted by special interests. The weaponization of banking as a political tool needs to stop. Banking should be about banking, not climate, income distribution or whatever.

The Canadian banking system is among the most well-managed, well-regulated, and well-capitalized in the world. It is important that Canadians have confidence in their financial institutions. But that confidence rests on the knowledge that all of us have access to the benefits of our system, not just those who hold officially favoured political and ideological positions.

Gina Pappano, executive director of InvestNow, was head of Market Intelligence at the Toronto Stock Exchange (TSX) and TSX Venture Exchange (TSXV).

This article originally appeared in the Hamilton Independent.

“The Canadian banking system is well-known for its strength and stability and the sector is an essential contributor to the country’s economic growth and well-being. Canadians rely on sound, stable banks to help them purchase a home, save for retirement, support the growth of small businesses, and drive the economy, which generates economic benefits to all Canadians.” — Canadian Bankers Association

But what happens when the banks follow ideologies and policies that hurt a sector that is central to Canada’s economy and prosperity? Over the past several years, shareholder proposals calling for the banks to stop all investments in oil and gas have been presented by activist shareholders and well-funded non-profit organizations.

To counter these, this year InvestNow stepped up and presented our own shareholder proposals to three Canadian banks, asking for explicit commitments to continue to invest in and finance Canadian oil and gas and to step away from policies that hurt the sector. This is the first time shareholder proposals of this nature have been presented to Canadian banks.

The shareholder proposal is one of the most common and most powerful tools available to influence corporate policy. Shareholders submit proposals for consideration at a corporation’s annual general meeting, allowing them to have a say in board direction and management positions and policies.

We believe strongly that our banks cannot be part of a scheme designed to strangle a sector of vital importance, not only to our citizens, but the democratic world. The Canadian oil and gas sector fuels our economy. It provides livelihoods not only for the hundreds-of-thousands across Canada who work in the sector, but the millions – that is all of us – who depend on it in so many ways.

Encouraging divestment puts our economy at risk. Moreover, it will result in the growing demand for oil and gas around the world being met by other less democratic, less environmentally responsible suppliers.

The dogmatic narrative that eliminating our oil and gas sector is going to somehow “help” Canada and reduce CO2 emissions couldn’t be more wrong. Over eighty percent of the primary energy needs of the world are met by oil, natural gas, and coal. Global demand is increasing, not decreasing. The International Energy Agency just reported that world oil demand is scaling record highs.

If our banks go down the divestment path, Canada will lose its ability to influence the global energy conversation and we will see direct hardship for everyday Canadians. Our economy will be hobbled, industry will shut down, people will lose their jobs, and energy poverty will grow.

Canadians live the way we do because we have one of the most productive, innovative, and responsible energy industries in the world. Our shareholder proposals called on the banks to come onside and to signal to the investment community, and to the world, that they are committed to the Canadian oil and gas sector. In fact, they have an economic and moral imperative to do so.

Nothing happens without oil and gas. This sector is essential for the functioning of the economy, for jobs, for innovation – and for global emissions reductions.

InvestNow will continue fighting for investment in Canada’s oil and gas sector through shareholder proposals and other work.

Gina Pappano is executive director of InvestNow Inc., a non-profit dedicated to demonstrating that investing in Canada’s resource sectors helps Canada and the world. Join the movement and pass the InvestNow resolution at investnow.org. 

This article originally appeared in the Financial Post. 

Attacks on the oil and gas sector are coming from all fronts. Celebrities, internet influencers, radical activist shareholders, ideologically driven financial alliances and well-funded non-profit organizations are all calling for “divestment” and promoting elimination of the Canadian oil and gas sector in the next 20 years.

After 15 years in market intelligence at the Toronto Stock Exchange and TSX Venture Exchange, I can say that divestment is an exercise in magical thinking. It may sound innocuous, but it isn’t: it is the active throttling of access to capital for Canada’s most important industry. To divest from the oil and gas sector is to hurt Canada and everyday Canadians.

The oil and gas sector is central to Canada’s economy and prosperity. Investing in it means investing in an industry that fuels everything we do. It means investing in the livelihoods, not just of the hundreds of thousands who work in the sector, but of the millions — all of us — who depend on it for heating, eating, driving, essentially all aspects of life.

Divestment activists may believe that eliminating our oil and gas sector will somehow “help” Canada and reduce CO2 emissions, but the facts suggest the opposite. Today 82 per cent of the world’s primary energy needs are met by oil, natural gas and coal. Global demand for these fuels is increasing, not decreasing.

If the oil and gas the world wants and needs is not supplied by Canadian energy companies, it will be supplied by authoritarian regimes in poorly regulated, undemocratic countries that are less responsible and less environmentally friendly. Emissions will go up and environmental performance will go down. There will be more hardship for everyday Canadians as our economy is hobbled, businesses and industries shut down, people lose their jobs and energy poverty grows.

Proponents of divestment in the Canadian energy sector are marching toward elimination of the oil and gas sector as part of the transition to a long-term aspirational “green” target, believing this a net positive. But it isn’t.

That’s why the organization I lead, InvestNow, is stepping up to present shareholder proposals to the Canadian banks, asking them for explicit commitments that they will continue to finance and invest in the Canadian oil and gas sector. This is the first time proposals of this nature have been presented to Canada’s banks.

A shareholder proposal, one of the most common and powerful tools for influencing corporate policy, is a recommendation or requirement that a company or its board of directors consider and vote on at the annual general meeting of the company’s shareholders. InvestNow is using it to try to counter destructive campaigns calling for the elimination of Canada’s oil and gas sector.

We presented shareholder proposals at this year’s annual general meetings of CIBC, BMO, and TD Canada Trust. All were voted on and while they did not pass, we are in this for the long haul and are going to continue to stand up for Canadians. We’ll be back next year.

Our contention with these proposals is that it is the responsibility of Canada’s banks to signal to the investment community and to the world in general that they are committed to the country’s oil and gas sector. In fact, they have an economic and moral imperative to be so. Nothing happens without oil and gas. The sector is essential for the functioning of the economy, for jobs, for innovation, and, in fact, for global emission reductions.

The banks cannot permit themselves to be part of a scheme to strangle a sector that is of vital importance, not only to our own citizens, but to the whole democratic world. Our banks need to be clear that they will continue to support, invest in and finance Canadian oil and gas. Anything less is an exercise in magical thinking.