B.C. pension fund targets Imperial Oil for Kearl spill, votes against two directors for re-election

Open this photo in gallery:

British Columbia Investment Management Corp., one of Canada’s largest pension fund managers, is expressing its displeasure with Imperial Oil Ltd.’s IMO-T handling of its environmental problems at its Kearl oil sands site by voting against two directors for re-election, including chief executive Brad Corson.

BCI says it’s voting against Mr. Corson, who also chairs the company’s board, because it wants to hold him accountable “for what we believe to be a lack of risk oversight that led to major controversies related to tailings integrity and engagement with Indigenous communities.”

BCI also voted against Miranda Hubbs, the chair of the board’s community collaboration and engagement committee, for what the pension plan believes is “a lack of oversight that led to major controversies related to insufficient engagement with Indigenous communities.”

Water tainted with dangerous levels of arsenic, dissolved metals and hydrocarbons has been seeping off the Kearl project onto Crown lands north of Fort McMurray, Alta., since May, 2022. Some of the runoff has been near a small fish-bearing lake, as well as tributaries to the Firebag and Muskeg rivers.

The federal government, local Indigenous communities and the public were not informed of the Kearl seepage until this February, after a separate incident spilled 5.3 million litres of industrial wastewater laced with pollutants from a drainage pond into the environment.

At an investor conference on April 19, Mr. Corson said he’s “profoundly apologetic” for the two incidents. Imperial Oil “should have been providing regular updates” to Indigenous communities, the CEO said, and the company is “providing all the resources that are necessary” to address the operational failures that led to the incidents and make sure they don’t happen again. Imperial Oil spokeswoman Lisa Schmidt declined to comment for this story.

The pension manager’s most recent investment holdings data showed it had a stake worth about $18.1-million as of March, 2022, a little less than 300,000 shares. That represents less than 1/100th of a per cent of the fund’s $211.1-billion in assets. (BCI declined to provide a more current ownership figure.)

Since Exxon Mobil owns nearly 70 per cent of Imperial Oil’s shares, the company’s seven directors will be re-elected at the company’s annual meeting Tuesday, no matter BCI’s opposition.

BCI also voted against Ms. Hubbs and two other members of the board’s compensation committee — David Cornhill and Matthew Crocker – because BCI feels the company hasn’t given enough weight to climate-related targets in its performance-based compensation plans.

BCI has also placed a shareholder proposal on Tuesday’s ballot asking for an audited report estimating the cost for the company to ultimately shut down all of its fossil-fuel assets under a Net Zero by 2050 scenario created by the International Energy Agency.

BCI believes it’s the first large Canadian pension plan to place a climate-related shareholder proposal on the proxy of a Canadian company. Imperial Oil opposes the plan, guaranteeing it will fail with Exxon’s “against” vote.

And BCI doesn’t necessarily have the support of its peers: Canada Pension Plan Investment Board, which had 311,230 Imperial Oil shares as of Dec. 31, voted against BCI’s environmental proposal, according to the plan’s publicly available proxy voting records.

Institutional Shareholder Services, the largest of the proxy advisory services that advises investors on voting, recommended against BCI’s proposal, saying that since no large Canadian integrated oil and gas companies have provided an estimation of effects of the IEA’s model, “support is not warranted at this time.”

Glass Lewis & Co., the other major service, recommended shareholders vote for it, saying “we believe the additional transparency would provide shareholders with decision-useful information concerning the company’s potential liabilities.”

Most energy companies are disclosing the potential costs of decommissioning “upstream” assets, which are the wells, rigs and equipment used to explore for and extract oil and gas. They are often not providing estimates on two other large segments of the energy business – the transportation and storage in the “midstream” stage or the refining and end-stage work known as “downstream.” BCI says that lack of information means “investors lack the requisite transparency to assess the financial impact associated with the energy transition.”

Anne-Marie Gagnon, BCI’s senior principal for environmental, social and governance issues, said “engagement is core to our approach as a long-term shareholder, and driving progress at companies like Imperial Oil takes time and persistence. BCI engages on climate risk disclosure across our portfolio and this shareholder proposal is a signal of our increasing expectations for the broader industry.”

In opposing the BCI proposal, Imperial said it “is committed to solutions to help society reach its net-zero ambitions” and it is a founding member of the Oil Sands Pathways to Net Zero Alliance. However, it says viewing the IEA’s “aggressive decarbonization scenario as the only realistic future state would be unreasonable and would not acknowledge the range of potential outcomes of the energy transition.”

BCI is one of many shareholders that have filed climate and environmental proposals with companies this spring. Institutional investor group Climate Action 100+ is tracking nearly two dozen major proposals, including BCI’s. That’s just a fraction of what’s up for vote across the world: Exxon alone has 13 proposals on its ballot, the majority of which deal with climate or environmental matters.

Institutional investors who are fighting these battles have chosen to keep their energy holdings and engage with the companies to be more climate friendly. Another option is to divest. Caisse de dépôt et placement du Québec committed to exit from oil producers by the end of 2022. “Therefore we don’t participate in shareholder meetings for this type of company anymore,” spokeswoman Kate Monfette said in an e-mail.

BCI voted against a total of four Imperial Oil directors this year for additional governance issues beyond environmental matters. BCI is a long-time Imperial Oil shareholder, and like other pension plans, it’s withheld votes from the company’s directors for a variety of reasons in past years, such as Imperial Oil not having an independent board chairman and refusing to hold a non-binding shareholder advisory vote on compensation, known as “say on pay.”

Mr. Corson’s pay came under attack in Parliament as he testified April 20 on the Kearl matter, after The Globe and Mail reported his compensation nearly doubled in 2022 to $17.34-million, making him the top-paid CEO among the major companies in the Canadian energy industry.

“If you were to ask any of the First Nations and Métis communities that have been impacted by the Kearl spill, they may suggest that $17.3-million dollars a year is inappropriate for the performance that you’ve provided for Imperial Oil,” NDP MP Heather McPherson (Edmonton-Strathcona) said.

With reports from Emma Graney and Marieke Walsh