Canada’s largest retirement pension announced Wednesday it will invest $450 million in a company heavily invested in oil and gas interests, even as environmentalists continue to push fossil fuel divestment.
The Canada Pension Plan Investment Board (CPPIB) said the investment in LongPoint Minerals will be merited out over two to three years, which will allow the board to own most of the company.
“In owning royalty interests, we are able to participate in production revenues without the burden of associated capital or operating costs,” Adam Vigna, managing director and head of principal credit investments at CPPIB, told reporters.
A new study released in early June found the frictional costs associated with fossil fuel divestment could cost an endowment fund as much as $7.4 billion in value over a 20-year period.
The research was conducted by Arizona State University finance professor Hendrik Bessembinder, who thumbed through data from 30 universities of varying endowment sizes across the U.S. and found transactional costs are determined by the size of the endowment.
Bessembinder calculated and categorized data from small, medium and large institutions and estimated the endowments would lose between 2 and 12 percent of their value due to divestment over a 20-year period.
Mutual funds seriously complicate the mission for divestment crusaders to replace oil with green energy, as many private equity funds and mutual funds hold both renewable energy assets and fossil fuels. In fact, most of these commingled funds are not easily converted into cash, making it more difficult to sell them outright.
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