The ongoing debate about whether or not to invest in fossil fuels intensified recently as the State of California moved to prohibit the California State Teachers’ Retirement System from making new investments in oil and gas companies. For many asset owners, especially those in energy producing countries like Canada, divestment isn’t always a step in the right direction — in fact, it could present yet another disruption in the transition to a low carbon energy future.
The International Best Practices Forum, being held at the Delta Waterfront Hotel in Victoria, BC from October 11‑13, will dig into what energy economies are doing to stay vibrant and healthy moving — without pulling up stakes in their traditional resource companies. As part of that conversation, we are thrilled to welcome Angela Rodell, former CEO of the Alaska Permanent Fund and a member of the advisory board of the global project financing and consulting firm, Delphos. As an Alaskan and an investment leader, Rodell certainly understands the challenges faced by energy economies — in advance of the event, she took the time to answer a few of our questions about asset owners, oil and gas companies, and the transition to a low carbon future.
What’s the biggest challenge an energy economy like Alaska has moving forward?
I think the biggest challenge when you have an economy like Alaska’s is figuring out how we move away from an infrastructure and a workforce set up to support the oil and gas industry — how it will get used and what types of jobs will replace the existing workforce? What kind of industries can we attract knowing that we have a workforce made up of pipe fitters, welders, engineers, geologists, and petrochemical engineers. What do they do in a new energy economy if Alaska is going to see its oil and gas industry start to wind down?
Then, how do we, as a state, support that transition — what is the vision for that? I think coming up with that vision is actually one of the biggest challenges for an energy state like Alaska — to really try and think about what its next version is going to be.
Where do you see the state’s energy industry in the next decade?
The next step is going to be critically important. Because, by anyone’s measure, oil and gas is not going away — it will continue to be an important component of the global economy for the next 20, 30, 40 years to come. I think, as a U.S. state, we have a unique advantage because we are under U.S. law and U.S. regulation. The world still needs oil and gas. Developing it, through this transition period, in a place like Alaska — or even Alberta quite honestly — is key. It’s where there is rule of law and where companies can count on a workforce and a legal system that will support the industry, including clean development.
There’s a lot to be said for putting investment into places like that as opposed to questionable regions around the world that might not have the clean regulatory environment in which they need to operate — or that may not have the legal environment they need to operate in as well.
Having said that, I think it will also be important to work with these companies about their future plans because the big oil and gas manufacturers and developers are also going to look at how their business models will transition and how they will support the energy transition themselves. For example, what does this mean for refining capability or for alternative energy sources, whether it’s wind, solar, hydro, natural gas? What’s the role of natural gas in all of this?
We need to make sure we continue to partner and be involved in keeping these companies in Alaska and keeping them engaged. Because they aren’t looking to wind down their businesses either.
How should asset owners be thinking about the energy transition in their portfolios?
For me, divestment has never been an option because all you’re doing is creating the opportunity for someone else to come in and have a value play as this transition happens. As investors we all have obligations to our shareholders and our stakeholders in all of this — and we have to take that into account. Most of us — I would probably say, all of us — have a fiduciary responsibility to the ultimate owners of the assets that we are managing. It’s incumbent upon us to really be thinking about energy, what its role is in the global economy, what its role is with the individual companies that we’re investing with.
In saying that I don’t mean we should simply invest in ExxonMobil or BP or Royal Dutch Shell. Rather, it’s about the extent to which other companies that we invest in rely on those companies to be successful. For example, if we’re an investor in FedEx or Amazon, what role does energy play in their business model — what about the need for alternative fuels? Aviation and shipping are also prime examples of where we need to think about how we, as investors, can make an impact. How can we steer the conversations and the partnerships to move away from traditional fossil fuels and also work on alternative fuel systems that are less carbon intensive? Investing in companies that are on the frontlines of developing these alternatives is how investors like us can push forward the energy transition without losing returns, without taking undue risk, and in a meaningful way.
The 2023 International Best Practices Forum is being held in Victoria, British Columbia from October 11 to 13. Interested in joining us? Please contact Joanne Boccia at jboccia@leadershipcongress.ca.