Canada’s second largest pension fund joins Harvard, the MacArthur Foundation in divestment away from fossil fuels

The Caisse de dépôt et placement du Québec (CDPQ),  the second largest pension fund in Canada, announced on September 28 that it will exit oil production investments at the end of 2022. The new, complete Climate Strategy document is here, and is built on four “vital and complementary pillars, as summarized in a press release

  • Hold $54 billion in green assets by 2025 to actively contribute to a more sustainable economy. 
  • Achieve a 60% reduction in the carbon intensity of the total portfolio by 2030.
  • Create a $10-billion transition envelope to decarbonize the main industrial carbon-emitting sectors. 
  • Complete our exit from oil production by the end of 2022.

Reaction from pension  activist group ShiftAction states that the : “move to exclude investments in oil producers from its portfolio by the end of 2022 is a welcome and significant move that improves the CDPQ’s position as a climate leader among Canada’s major financial institutions. It is amazing that it took until 2021 for a Canadian pension fund to finally recognize that protecting our retirement savings from the worsening climate crisis inevitably requires abandoning market exposure to high-risk fossil fuels…. To achieve climate safety, investment in fossil gas production and infrastructure must also be urgently phased out…… The CDPQ’s progress stands in stark contrast to the Canada Pension Plan, whose CEO said earlier this year that the Canada Pension Plan has no plans to institute a blanket screen on oil and gas during his tenure.”   (Neither does the Ontario Teachers Pension Plan, as quoted in the Toronto Star article,  “Canada’s oil industry dealt a financial blow as pension giant divests itself of investment in fossil fuel”) .

New Canadian campaign demands information from pension fund managers

On September 29, letters were delivered to the boards and executive of Canada’s 10 largest pension fund managers, asking for specific and detailed answers by December, about how the funds are meeting their legal fiduciary obligations in the face of the global climate crisis. According to a Greenpeace press release , the letters were coordinated with ShiftAction and Ecojustice. The letters were signed by members of the respective pensions funds, along with some of their union representatives , and were accompanied by appendices of analysis and a legal brief. The 9-page letter to the Ontario Municipal Employees Retirement System, co-signed by Fred Hahn, President of CUPE-Ontario serves as an example.

Global divestment momentum

All of this is part of the growing momentum of the divestment movement in the lead-up to COP26.  On September 10, after years of resisting activist campaigns, Harvard University announced that its $42 billion endowment will bar any future investments in coal, oil and gas.  Stand.earth states: “this landmark announcement marks a tipping point that will cascade throughout mainstream endowments and financial institutions globally.”   On September 22, Reuters reported “MacArthur Foundation joins investment shift away fossil fuels”, stating that the $8.2 billion fund “is the largest foundation in the world to commit publicly to fossil-fuel divestment to date.” Bill McKibben, one of the architects of the global divestment movement, sums it all up, including the new Caisse de dépôt climate policy, in his article “Starving the Beast” (Crucial Years, Sept. 29).

U.K. guide to pension fund divestment includes a role for unions

Divesting to protect our pensions and the planet:  An analysis of local government investments in coal, oil and gas was released in February by Platform, Friends of the Earth Scotland and Friends of the Earth England Wales and Northern Ireland.

The report details the extent of fossil fuel investment by local governments in the U.K., and their progress in divestment. However, of broader interest, it summarizes the financial status of the declining fossil fuel industry, explains the process which lead to stranded assets, and describes the financial dangers for all pension funds in quite understandable terms:  “pension funds exposed to the fossil fuel system in the coming decade will face a rollercoaster ride of disruption, write-downs, financial instability and share price deratings as markets adjust.”  In an explanation very relevant to Canadians, whose own Canadian Pension Plan Investment Board still clings to the “staying invested and ‘engaging’” approach –    the report uses the example of investing in Blockbuster videos vs. Netflix, to debunk the “engagement” approach: “The argument for ‘engagement’ tends to be one made by asset owners who employ investment managers who won’t or can’t accept that there is a technology-driven transition occurring. …. this approach of ‘we’ll decarbonise when markets decide to decarbonise’ is clearly not a risk management strategy. It is a ‘do nothing, and hope a few meetings will help’ strategy.”   

Divesting to protect our pensions and the planet offers practical steps for local councillors, community members, and labour unionists.  For unions, it points to the leadership of the Trades Union Congress (TUC), which passed a climate action motion in 2017 which included support for divestment, based on a motion by their constituent unions representing food workers, communication workers, fire brigades, train drivers, and other transport workers.  Unison, the primary union representing U.K.  government workers, also passed a strong divestment motion in 2017 – meaningful because in the U.K., union members in government workplaces are usually entitled to some form of representation on their pension fund committee and board. The report urges union members to become knowledgeable about financial issues and to speak up in committee meetings – advocating for divestment and re-investment in lower-carbon, socially just funds which benefit their local communities and economies, especially after Covid.  The report cites inspiring examples, such as investment in wind farms by Manchester and London Councils, the U.K.’s first community-owned solar power cooperative by Lancashire County Council, and social housing in the Forth Valley and in London Councils.

An earlier guide for unions was Our Pensions, Our Communities, Our Planet: How to reinvest our pensions for our good? published by the Trade Union Group within Campaign against Climate Change.  The 6-page, action-oriented fact sheet lacks all the up-to-date statistical detail in Divesting to protect our pensions and the planet but makes many of the same arguments for divestment, and includes links to U.K. resources, as well as a model motion for local unions.

Canadian university pension funds unite for low carbon goals, and public sector pension funds across the country act on sustainability

With the goal to leverage their collective financial clout, Canadian university endowment funds and pension plans launched the University Network for Investor Engagement (UNIE) on February 18.  Working through SHARE, Canada’s leading not-for-profit in responsible investment services,  “The UNIE initiative will focus on key sectors where advocacy can make the biggest difference, including finance, transportation, energy and utilities, and manufacturing, focusing both on reducing greenhouse gas emissions and accelerating the transition to a low carbon economy.”  Initial participants include Carleton University, Concordia University, McGill University, McMaster University, Mount Alison University, Université de Montreal, University of St. Michael’s College, University of Toronto Asset Management, University of Victoria, and York University.

This development  follows on a number of statements and initiatives by Canadian pension administrators – most of which reflect this general strategy to prefer  engagement as shareholders over divestment from fossil fuel holdings. Some examples:

In November 2020, the CEOs of Canada’s eight major pension administrators, with approximately $1.6 trillion in assets under management, issued a press release announcing their joint position statement, Companies and investors must put sustainability and inclusive growth at the centre of economic recovery.  The text  calls on companies to provide consistent and complete environmental, social, and governance (ESG) information, and continues: “For our part, we continue to strengthen our own ESG disclosure and integration practices, and allocate capital to investments best placed to deliver long-term sustainable value creation.”  The signatories included: AIMCo, BCI, Caisse de dépôt et placement du Québec, CPP Investments, HOOPP, OMERS, Ontario Teachers’ Pension Plan, and PSP Investments.

Why are Ontario pensioners investing in future Alberta stranded assets?” (in Corporate Knights, December 16, 2020)  describes investment by OP Trust (which holds the pension funds of Ontario civil servants, teachers and healthcare workers) in a natural gas electricity-generation plant in Alberta.  The authors summarize the growing global realization that fossil fuel investments are financially risky and conclude, “The people at OPTrust have begun to recognize this. They’ve created multiple reports, with pretty graphs and rosy statements about supporting the Paris Agreement. But this statement rings out: “Emission reduction targets are not today’s objective.” Like many other organizations, they are unwilling to walk the talk.”

Similarly, a Net Zero Emissions Commitment  released by the Ontario Teachers Pension Plan on January 21 has been criticized as possible greenwashing.   An article in The National Observer,  “Breaking down Ontario Teachers’ 2050 net-zero emissions promise” (Feb. 4)  states: “With no clear definition for what net-zero means or how it will alter investment decisions, the commitment runs the risk of becoming a cynical example of greenwashing……If OTPP is serious about adopting a globally significant climate-safe investment strategy, it needs a plan to exclude all new oil, gas and coal investments; a timeline for phasing out existing fossil fuel holdings; a commitment to decarbonize its portfolio by 2030; ambitious new targets for increasing investments in profitable climate solutions; and a requirement for owned companies to refrain from lobbying activities that undermine ambitious climate policy, set corporate timelines for reducing emissions, and link executive compensation to measurable climate goals.”   These goals reflect the position of the authors, who are members of ShiftAction for Pension wealth and Planet Health, which outlines the same demands in their  Open Letter campaign for teachers . (In the FAQ statement accompanying the Net Zero statement, the OTPP states:  “We favour engagement over divestment, since selling our stakes simply passes on the problem and causes us to lose our ability to influence for positive change.” )

On February 19, the British Columbia Investment Management Corporation (BCI), which manages pensions for B.C. public sector workers, announced  that it “will target a cumulative $5 billion investment in sustainability bonds by 2025 …. and reduce the carbon exposure in its global public equities portfolio by 30 per cent by 2025”  from 2019.  BCI was a  founding signatory to the Principles for Responsible Investment (PRI) in 2006, has supported the TCFD recommendations, and issued its own Climate Action Plan in 2018. The Energy Mix summarized the B.C. developments in this February 22 article .

Alberta public sector pensions lose more control over pension savings  

A joint press conference by union leaders protested the January 4 2021 Ministerial Orders which build on Bill 22 in 2019 by further weakening the  decision-making powers of the Alberta Teachers Retirement Fund . From the unions’ press release: “….. not only will AIMCo be the monopoly provider of investment management services, they will also be able to ignore the wishes of the pension plans when it comes to decisions about how the retirement savings of workers and retirees should be invested……We think Jason Kenney’s end game is to use the retirement savings of hundreds of thousands of Albertan to prop up oil and gas ventures in the province that are having an increasingly difficult time raising money from global investors and international markets …. To be clear: we are not opposed to all oil and gas investments. What we ARE opposed to is a system in which the government gives itself the power to invest other people’s money in risky ventures without their permission.”  The Alberta Teachers Association is preparing a legal challenge to the Ministerial Order, according to a CBC report.  The back story is described in  “Alberta’s United Conservative Party Has Seized Control of Its Public-Sector Pension Funds”  (Jacobin, Feb. 2), an interview with Alberta Teachers Retirement Fund Board Chair Greg Meeker .

Climate Risk consultations by Canadian pension fund regulator

On January 11, 2011, the Office of the Superintendent of Financial Institutions     (OSFI), Canada’s regulator of banks and pension plans,  announced a three-month consultation on the climate change risks to financial stability, based on a discussion paper, Navigating Uncertainty in Climate Change: Promoting Preparedness and Resilience to Climate-Related Risks.

Climate change and health: U.K. National Health Service launches new campaign for greener health care; more medical associations divest from fossil fuels

England’s National Health Service (NHS) is the country’s largest employer with 1.3 million staff, and its operations are responsible for approximately 4-5% of England’s carbon footprint. On January 25, the Chief executive officer of the NHS announced a new campaign to tackle the global climate change health emergency through a greener health care system.  A website for the new campaign, “For a Greener NHS”, focuses on a goal of a net zero national health service, with an Expert Panel to compile experiences and make recommendations in an interim report due in summer 2020, and a final report scheduled for Fall 2020.  In the meantime, the Greener NHS campaign will encourage such initiatives as switching from coal or oil-fired boilers to renewable heat sources for buildings; switching to less polluting anaesthetic gases and better asthma inhalers in treatment; and introducing technological solutions to reduce the number of patient visits and travel miles.

Another part of the initiative is a grassroots campaign for front-line workers, supported by the UK Health Alliance on Climate Change – which includes representative bodies covering over 650,000 NHS staff, including the union UNISON . The NHS press release quotes UNISON:  “Involving staff is crucial if the NHS is to help the UK meet its emissions targets in good time. They know more than anyone how the health service ticks and so are best placed to make practical green suggestions to get the NHS to where it needs to be.”  Examples of existing staff-oriented programs are described in case studies :  reducing the use of disposable plastic gloves;  an electric bike courier system for delivery of medical and laboratory samples; and a sustainable travel initiative  to encourage staff use of transit, shuttle buses, bicycles and walking for journeys to work.

British medical associations and organizations are also acting at the societal level. In January, the prestigious British Medical Journal (BMJ) published an editorial: “Investing in humanity: The BMJ’s divestment campaign” , which calls on individuals and organizations to act immediately, stating: “Divestment offers health professionals and medical organisations, for the duty is both individual and collective, an opportunity to influence politicians and industry towards behaviours that are better for the planet and people’s health.”  While urging divestment, the BMJ states: ” we will not accept advertising or research funded by companies that produce fossil fuels. We will also explore how else our business might be dependent on fossil fuel companies and take steps to end any such reliance. The BMA has no direct holdings in tobacco or fossil fuel companies.”  (Note that The Guardian newspaper in the U.K. also announced in February 2020 that  it will ban any fossil fuel advertising. ) According to a press release from the UK Health Alliance on Climate Change, six constituent groups of the Alliance have announced an intention, or are already divesting, from fossil fuels:  the British Medical Association, the Royal College of General Practitioners, the Faculty of Public Health, the Royal College of Emergency Medicine and the Royal College of Paediatrics and Child Health,  and in January 2020, the Royal College of Physicians .   The Canadian Medical Association has also divested from fossil fuels.

Answering Mark Carney: What are the climate plans for Canada’s banks and pension funds?

On December 18, the Bank of England was widely reported  to have unveiled a new “stress test” for the financial risks of climate change. That stress test is a proposal contained in an official BoE Discussion Paper,  2021 biennial exploratory scenario (BES) on the financial risks from climate change , open for stakeholder comments until March 2020.  Mark Carney, outgoing Governor of the Bank of England, has led the BoE to a leadership position on this issue in the financial community and will continue  in his new role as United Nations special envoy on climate action and climate finance in 2020.  In a December BBC interview reviewing his legacy, he warned the world yet again about stranded assets and asked: “A question for every company, every financial institution, every asset manager, pension fund or insurer: what’s your plan?”

What are the climate plans for Canada’s pension funds ?

shift action pension report 2019In their June 2019 report, Canada’s Pension Funds and Climate Risk: A Baseline For Engagement  , ShiftAction concludes: “Canadian pension funds are already investing in climate solutions, but at levels that are far too low relative to the potential for profitable growth, consistent with levels required to solve this challenge.” The report provides an overview, and importantly, offers tips on how to engage with and influence pension fund managers.

Since then…..

The sustainability performance of  the  Canada Pension Plan Investment Board (CPPIB) continues to be unimpressive, as documented in  Fossil Futures: The Canada Pension Plan’s failure to respect the 1.5-degree Celsius limitreleased in November ccpaFossilfuture2019 by the Canadian Centre for Policy Analysis-B.C. (CCPA-BC).  According to the CPPIB Annual Report for 2019, (June 2019) the CPPIB is aiming for full adoption of the Task Force on Climate-related Financial Disclosures recommendations by the end of fiscal 2021 (page 28).

Canada’s second largest pension fund, the Caisse de dépôt et placement du Québec (CDPQ), announced in November that CEO Michael Sabia will retire in February 2020 and move to the University of Toronto Munk School of Global Affairs and Public Policy. The press release credits Sabia with leading the Caisse to a position of global leadership on climate change, beginning in 2017 with the launch of an investment strategy which aims to increase low-carbon assets and reduce the carbon intensity of investment holdings by 25%. In 2019, the Caisse announced that its portfolio would be carbon-neutral by 2050.   Ivanhoé Cambridge ,the real estate subsidiary of the Caisse de dépôt, has a stated goal to increase low-carbon investments by 50% by the year 2020 and to reduce greenhouse gas emissions by 25% by the year 2025. In December 2019, Ivanhoé Cambridge announced that it had issued a $300 million  unsecured green bond to finance green initiatives – the first real estate corporation in Canada to do so. Shawn McCarthy reviewed Sabia’s legacy in “Canada’s second largest pension fund gets deadly serious about climate crisis”, in Corporate Knights in December.

AIMCo, the Alberta Investment Management Corporation is a Crown Corporation of the Government of Alberta, with management responsibility for the public sector pensions funds in Alberta, along with other investments. In November 2019, the Alberta government passed Bill 22, which unilaterally transfers pension assets from provincial worker plans to the control of AIMCo (see a CBC summary here ). The Alberta Federation of Labour and the province’s large unions protested in a joint statement, “Union leaders tell UCP: ‘The money saved by Albertans for retirement belongs to them, not to you!’” (Nov. 20) . The unions state: “we’re worried that what you’re attempting to do is use other people’s money to create a huge slush fund to finance an agenda that has not yet been articulated to the public – and which most people would not feel comfortable using their life savings to support.” And in December 2019, those worries seem to come true as AIMCo announced  its participation in a consortium to buy a 65% equity interest in the controversial LNG Coastal GasLink Pipeline Project from TC Energy Corporation. Rabble.ca reported on the demonstrations at AIMCo’s Toronto offices regarding the Coastal Gas project in January .

On January 8, the Toronto Star published  “Toronto asks pension provider: How green are our investments?” – revealing that the city has asked for more details from the Ontario Municipal Employees Retirement fund (OMERS). OMERS, with assets of over $100 billion, manages the pension savings of a variety of Ontario public employees, including City of Toronto and Toronto Police, Fire, and Paramedics. On January 8, OMERS announced the latest consolidation of Toronto pension plans with its consolidation of the Metropolitan Toronto Pension. Its Sustainable Investment Policy statement is here .

What are the climate plans for Canada’s private Banks?  

The 10th annual edition of Banking on Climate Change: the Fossil Fuel Finance Report Card was released in October 2019 by Banktrac, Rainforest Alliance Network and others . It states that $1.9 trillion has been invested in fossil fuels by the world’s private banks since the Paris Agreement, led by JPMorgan Chase, Wells Fargo, Citi and Bank of America. Canadian banks also rank high in the world: RBC (5th), TD (8th), Scotiabank ( 9th), and Bank of Montreal (15th).  Also in October, the World Resources Institute green-targets2published Unpacking Green Targets: A Framework for Interpreting Private Sector Banks’ Sustainable Finance Commitments , which includes Canadian banks in its global analysis and provides guidance on how to understand banks’ public documents.  “How Are Banks Doing on Sustainable Finance Commitments? Not Good Enough”  is the WRI blog which summarizes the findings.

Since then….

On September 14, the Canadian Imperial Bank of Commerce announced the release of their first climate-related disclosure report aligned with the Task Force on Climate-Related Financial Disclosures. Building a Sustainable Future highlights the CIBC’s governance, strategy, and risk management approach to climate related issues. It provides specific metrics and targets, especially for its own operational footprint, but also a commitment: “to a $150 billion environmental and sustainable finance goal over 10 years (2018-2027).”

Scotiabank also announced climate-related changes in November, including “that it would “mobilize $100 billion by 2025 to support the transition to a lower-carbon and more resilient economy”; ensure robust climate-related governance and reporting; enhance integration of climate risk assessments in lending, financing and investing activities; deploy innovative solutions to decarbonize operations; and establish a Climate Change Centre of Excellence “to provide our employees with the tools and knowledge to empower them to act in support of our climate commitments. This includes training and education, promoting internal collaboration, and knowledge and information sharing.”  Their 4-page statement on climate commitment  is here. Their  2018 Sustainable Business Report (latest available) includes detailed metrics and description of the bank’s own operations, including that they use an Internal Carbon Price of CAD$15/tonne CO2, to be reviewed every two years.

RBC, ranked Canada’s worst fossil-fueling bank in the 2019 edition of Banking on Climate Change , released a 1-page statement of their Commitment to Sustainable Finance (April 2019)  and an undated Climate Blueprint  with a target of $100 billion in sustainable financing by 2025.  However, in their new research report,  Navigating the 2020’s: How Canada can thrive in a decade of change , the bank characterizes the coming decade as “Greener, Greyer, Smarter, Slower”, but offers little hope of a change in direction. For example, the report states “ Canada’s natural gas exports can also play a role in reducing emissions intensity abroad. LNG shipments to emerging economies in Asia, where energy demand is growing much faster than in Canada, can help replace coal in electricity production, just as natural gas is doing here in Canada. …As climate concerns mount, Canada’s challenge will be to better sell ourselves as a responsible, cleaner energy producer.”

Financial giants targeted by new U.S. divestment campaign; Youth challenge the Davos elites to stop investing in the fossil fuel economy immediately

stop the money pipeline targetsLaunched at Jane Fonda’s final #FireDrillFriday event in Washington D.C. on January 10, the Stop the Money Pipeline , according to a Sierra Club press release , will consolidate a number of existing divestment campaigns and target the worst climate offenders in each part of the financial sector. The first campaign round consists of three major targets: amongst banks:  JP Morgan Chase;  amongst  insurance companies: Liberty Mutual;  and amongst asset managers, BlackRock. Groups involved in Stop the Money Pipeline are: 350.org,  Rainforest Action Network (RAN), Sierra Club, Greenpeace USA, Sunrise Project, Future Coalition, Divest Ed, Divest-Invest, Native Movement, Giniw Collective, Transition U.S., Oil Change International, 350 Seattle, EarthRights International, Union of Concerned Scientists, Majority Action, The YEARS Project, and Amazon Watch.

The Stop the Money Pipeline website  has archived some of the arguments for their campaign – including Bill McKibben’s September Commentary in the New YorkerMoney Is the Oxygen on Which the Fire of Global Warming Burns”, and “Why Big Banks Are Accused Of Funding The Climate Crisis” in  HuffPost  in October 2019.  The campaign launch has been described in “Climate Movement Takes Aim at Wall Street, Because ‘Money Is Only Language Fossil Fuel Industry Speaks‘” in Common Dreams (Jan. 9);   , and  in  “Want to do something about climate change? Follow the money” in the New York Times  on Jan. 11. In that Opinion piece, Bill McKibben and Lennox Yearwood Jr.  describe their arrest at a sit- in at the Chase Bank which was part of the campaign launch. Democracy Now also covered the events in  “Stop the Money Pipeline”: 150 Arrested at Protests Exposing Wall Street’s Link to Climate Crisis  on January 13 .

Are campaigns having any effect?

Perhaps it is just coincidence, but on January 9,  BlackRock announced it is signing on to  Climate Action 100+, a global investor network formed in 2015 and which includes California Public Employees’ Retirement System (CalPERS), HSBC Global Asset Management, and Manulife Asset Management.   BlackRock also announced a new investment strategy, summarized in  “BlackRock Will Put Climate Change at Center of Investment Strategy”   in the New York Times (Jan. 14) . The NYT article emphasizes the company’s influence as the world’s largest investment fund with over $7 trillion under management, and states that “this move … could reshape how corporate America does business and put pressure on other large money managers to follow suit.”  The new strategy is outlined in two Annual Letters from BlackRock’s CEO Larry Fink:  Sustainability as BlackRock’s New Standard for Investing , the letter to corporate clients states, “Our investment conviction is that sustainability-integrated portfolios can provide better risk-adjusted returns to investors”.  The second letter, titled A Fundamental Reshaping of Finance, acknowledges that  protests have had an impact on their position: Climate change has become a defining factor in companies’ long-term prospects. Last September, when millions of people took to the streets to demand action on climate change, many of them emphasized the significant and lasting impact that it will have on economic growth and prosperity – a risk that markets to date have been slower to reflect.”   He continues: “…. awareness is rapidly changing, and I believe we are on the edge of a fundamental reshaping of finance.… climate change is almost invariably the top issue that clients around the world raise with BlackRock. ….   In the near future – and sooner than most anticipate – there will be a significant reallocation of capital.”  However, this urgency seems somewhat at odds with another statement in the Letter to CEO’s: “…. While the low-carbon transition is well underway, the technological and economic realities mean that the transition will take decades. Global economic development, particularly in emerging markets, will continue to rely on hydrocarbons for a number of years. As a result, the portfolios we manage will continue to hold exposures to the hydrocarbon economy as the transition advances.”

Other divestment developments:

Urgency is a key theme in a new public call by Greta Thunberg and other youth leaders.  “At Davos we will tell world leaders to abandon the fossil fuel economy” – an Opinion piece carried by The Guardian on January 10,  directed to the world’s economic elite scheduled to gather at the World Economic Forum in Davos at the end of January. The core message is urgent:  “We call upon the world’s leaders to stop investing in the fossil fuel economy that is at the very heart of this planetary crisis. Instead, they should invest their money in existing sustainable technologies, research and in restoring nature.. …Anything less than immediately ceasing these investments in the fossil fuel industry would be a betrayal of life itself. Today’s business as usual is turning into a crime against humanity. We demand that leaders play their part in putting an end to this madness. Our future is at stake, let that be their investment. An article in Common Dreams on January 10 highlights the youth campaign and notes that it aligns with Stop the Money Pipeline .

C40 Cities released a new toolkit on January 7:  Divesting from Fossil Fuels, Investing in Our Future: A Toolkit for Cities.   The toolkit is directed at city officials, outlining steps required to divest their pension funds from fossil fuels. It includes eight successful case studies –  from Auckland, Berlin, Copenhagen, London, MelbourneNew York City, Oslo, and Stockholm – all of whom have divestment experience and none of whose city pension funds were negatively impacted by divestment.  C40 Cities is a network of 94 municipalities with a population of over 700 million people, active in promoting climate change action at the municipal level.

Norway municipal pension fund divests from Canada’s oil sands

On October 7, the National Observer reported  “Norway public pension fund severs final link with Canada’s oilsands” . The article describes that KLP, which manages the pensions of Norway’s 900,000 nurses, firefighters and other local and state government employees, has sold off US$33 million worth of equity holdings and US$25 million in bonds from Canada’s Cenovus Energy, Suncor Energy, Imperial Oil (majority owned by ExxonMobil) and Husky Energy, as well as Russia’s Tatneft PAO. This follows the June 2019 vote by the Norwegian Parliament to to tighten the coal exclusion criteria of Norway’s Government Pension Fund Global (GPFG), and the October 1 decision by the GPFG to divest from oil exploration companies (although it still maintains investment in downstream and integrated ventures).  The moves are seen as reflective of the instability of oil and gas investments, and it is notable that the KLP fund has had a 22.8 percent return so far this year, 1.5 per cent ahead of its benchmark.

In contrast to the Norweigian pension administrators, the Canada Pension Plan Investment Board (CPPIB) as recently as March 2019  invested $1.34 billion in a joint venture which will expand fracking in the western Marcellus and Utica shale basins of the U.S.. The CPPIB manages $400 billion to support the public pensions of Canadians, and continues to hold hundreds of millions of dollars in oil and gas companies, including Enbridge , Suncor  and Pembina Pipeline.   The Green Party of Canada platform in the 2019 election  commits to “regulate the CPP Investment Board to require divestment of coal, oil and gas shares and ensure that all investments are ethical and promote environmental sustainability.”

Another recent, high-profile divestment:  The University of California announced that by the end of September, the university’s $70 billion pension fund and $13.4 billion endowment  fund will have divested all investments related to fossil fuel extraction.  The reason given:  “The reason we sold some $150 million in fossil fuel assets from our endowment was the reason we sell other assets: They posed a long-term risk to generating strong returns for UC’s diversified portfolios.”  A September 18 article in Vox is one of many reporting on this high-profile decision.

 

New report calls on B.C. Pension Fund management to divest from fossil fuels, reinvest in renewables

ccpa-bc_fossilpensions_june2018-thumbnailThe British Columbia Investment Management Corporation (BCI) is the fourth largest pension fund manager in Canada,  and controls capital of $135.5 billion, including the pension funds of the province’s public employees.  A June report asks the question: is BCI investing funds in ways that support the shift to a two degree C global warming limit?  The answer is “no”, and in fact, fossil fuel investments have been increasing, according to the authors of  Canada’s Fossil-Fuelled Pensions: The Case of the British Columbia Investment Management Corporation   . For example, BCI boosted its investment in Kinder Morgan, owner of the Trans-Mountain pipeline, to $65.3 million in 2017 from $36.7 million in 2016.

An article in the Victoria B.C. Times Colonist newspaper  summarizes the study and includes reaction from one of  the authors, James Rowe, an associate professor at University of Victoria.  Rowe  states: “BCI claims to be a responsible investor. …But we find some hypocrisy in that we don’t find any good signs they are investing with climate change in mind.”  The article also quotes an email from BCI,  which defends the investment in Kinder Morgan, as “a passive investment held inside funds designed to track Canadian and global markets.”  Further, it states, “BCI does invest in oil and gas companies, but that particular sector accounts for a significant portion of the Canadian economy. It’s about 20 per cent of the composite index on the Toronto Stock Exchange.”  For more from BCI,  see their website which  provides their  2017 Responsible Investing Annual Report , as well as a Responsible Investing Newsletter, with the most recent issue (Oct. 2017) devoted to “Transparency and Disclosure”.

Canada’s Fossil-Fuelled Pensions: The Case of the British Columbia Investment Management Corporation   makes the following recommendations so that  BCI can align its investments with the 2°C limit:

  1. “A portfolio-wide climate change risk analysis to determine the impact of fossil fuels on BCI’s public equity investments in the context of the 2°C limit. And, subsequent disclosure of all findings to pension members.
  2. Divestment. The surest way to address the financial and moral risks associated with investing in the fossil fuel industry is to start the process of divestment: freezing any new investment and developing a plan to first remove high-risk companies from portfolios, particularly coal and oil sands producers, and then moving toward sector-wide divestment.
  3. Reinvest divested funds in more sustainable stocks. The International Energy Agency estimates that trillions of dollars of investment are needed in the renewables sector to support the transition away from fossil fuels.”

The report is part of the Corporate Mapping Project (CMP), jointly led by the University of Victoria, the Canadian Centre for Policy Alternatives, and Parkland Institute. CMP is  a research and public engagement initiative investigating power dynamics within the fossil fuel industry.

Unions supporting Pension Plan Divestment with practical guides

In Spring 2018,  the Labor Network for Sustainability and DivestInvest Network  jointly released a new guide: Should your union’s pension fund divest from fossil fuels? A guide for trade unionists  .  The guide begins with an introduction to union pension plans in the U.S., including how they are governed, and the legal and administrative safeguards designed to protect members’ money.  It also recounts the role of union pension fund divestment in the South African struggle against Apartheid, describes the current global campaign for divestment from fossil fuels, and how and why unions are participating in that movement. The final section of the guide provides practical guidelines for union divestment campaigns.

Inspiration and a practical example of such a campaign can be found in the article “How New York City Won Divestment from Fossil Fuels”.  The article, originally posted in Portside, is written by by Nancy Romer, a member of the Environmental Justice Working Group of the Professional Staff Congress of the City University of New York and an activist in the divestment campaign which led to the January 2018 decision by New York City to divest $5 billion of its pension funds (and to sue ExxonMobil, Shell, BP, Chevron, ConocoPhillips).

The Guide and Nancy Romer’s article are available at a new Divest/Invest Hub on the LNS website, with plans for more campaign case studies and sample resolutions to be added.   Guides with similar aims have been  produced in the U.K.:  for public sector unions:  Local Government Pension Funds – Divest From Carbon Campaign: A UNISON Guide  (January 2018) ; in  2017, Friends of the Earth-U.K. published  Briefing: Local government pensions: Fossil fuel divestment  and Friends of the Earth- Scotland published  Divest Reinvest: Scottish Council Pensions for a Future worth living in .  The Public and Commercial Services Union published  Divest to Reinvest in 2016.

UNISON launches a campaign for pension fund divestment with a Guide for Local Unions

uk MONEYOn January 10, 2018,  the U.K. union UNISON launched a campaign to encourage members of local government pension schemes to push for changes in the investment of their funds – specifically, to “explore alternative investment opportunities, allowing schemes to sell their shares and bonds in fossil fuels and to go carbon-free.”  A key tool in this campaign: Local Government Pension Funds – Divest From Carbon Campaign: A UNISON Guide, which states:  “Across the UK there are nearly 50 divestment campaigns targeting local government pension funds ….. In September this year, it was revealed that a total of £16 billion is invested in the fossil fuel industry by Local Government Pension funds.”  The new Guide explains how the U.K. pension system works for local government employees, and provides case studies of existing divestment campaigns.  In addition, it provides “Campaign Resources”, including a model campaign letter, a glossary of pension and investment terms,  and it reproduces the Pensions and Climate Motion passed at the 2017 UNISON Delegates conference.  The Guide was written by UNISON, in collaboration with ShareAction – a registered U.K. charity that promotes responsible investment practices by pension providers and fund managers.

Greener Jobs AllianceInformation about the divestment campaign, as well as information about the National Auditor’s Report re the U.K. Green Investment Bank,  is included in the January-February issue of the newsletter of the  Greener Jobs Alliance , a U.K.  partnership of “trade unions, student organisations, campaigning groups and a policy think tank.” The Greener Jobs Alliance is part of the Campaign against Climate Change Trade Union Group, which is organizing an event on March 10 in London: Jobs & Climate: Planning for a Future that Doesn’t Cost the Earth

U.K. Rolls out Green Policies, including Fighting Plastics, Phasing Out Coal, and Encouraging Divestment

Theresa May 2018 Facing criticism for recent  policy reversals which have resulted, for example, in falling investment in clean energy in the U.K. in 2016 and 2017 , the government has recently attempted a re-set with its policy document:  A Green Future: Our 25 Year Plan to Improve the Environment , released on January 11.    “Conservatives’ 25-year green plan: main points at a glance” (Jan. 11) in The Guardian summarizes the initiatives, which focused on reducing use of plastics (in line with a recent EU decision), encouraging wildlife habitat, and establishment of an environmental oversight body.  Specifics are promised soon; the Green Alliance provides some proposals in “Here’s what Theresa May should now do to end plastic pollution” (Jan. 11). George Monbiot is one of many critics of the government policy, in his Opinion Piece.

In the lead-up to the long-term Green Future policy statement, other recent developments have  included: 1.  Changes to investment regulations to encourage divestment.    “Boost for fossil fuel divestment as UK eases pension rules”  appeared in The Guardian on December 18 , stating:  “in what has been hailed as a major victory for campaigners against fossil fuels, the government is to introduce new investment regulations that will allow pension schemes to ‘mirror members’ ethical concerns’ and ‘address environmental problems.’    The rules are expected to come into force next year after a consultation period and will bring into effect recommendations made in 2014 and earlier this year by the Law Commission. ”

2. Coal Phase-out:  Also, on January 4, the British government responded to a consultation report by announcing CO2 limits to coal-fired power generation.  By imposing emissions limits, the government seeks to phase out coal-fired power by 2025, but still to allow flexibility for possible carbon capture operations, and for emergency back-up energy supply. The consultation report, Implementing the end of unabated coal: The government’s response to unabated coal closure consultation  , capped a consultation period which began in 2015.    The government’s policy response is  summarized in the UNEP Climate Action newsletter here  (Jan. 5).

 

New York City and State announce plans to divest pension funds; Canadian Public Pension fund holds on to coal

I love new yorkNew York City Mayor Bill diBlasio captured headlines on January 10 2018 for his announcement that New York City will divest from fossil fuels and will sue Exxon and other oil companies for the damages of Superstorm Sandy.   Yet  it was actually on December 19 that New York City Comptroller Scott Stringer and New York State Governor Andrew Cuomo  first announced separate proposals to freeze current fossil fuel investments, divest New York’s public pension funds from fossil fuels, and reinvest in renewable energy.    Common Dreams summarized the announcements in ” ‘Undeniable Victory’: Cheers Follow Proposals to Divest Massive New York Pensions From Fossil Fuels”Reaction from 350.org (Dec. 19)  emphasized the importance of five years of citizen activism , and quoted Bill McKibben, who emphasized the symbolic importance of New York’s announcement:  “Coming from the capital of world finance, this will resonate loud and clear all over the planet. It’s a crucial sign of how fast the financial pendulum is swinging away from fossil fuels.”   (As further proof, in November, administrators of Norway’s $1 trillion sovereign wealth fund recommended no further investment in fossil fuels and  divestment from existing oil and gas shares , and in the U.K., legal changes are in the works to ease divestment for pension funds.)

At the state level,   Governor Cuomo’s press release  states:  “Governor Cuomo and Comptroller DiNapoli will work together to create an advisory committee of financial, economic, scientific, business and workforce representatives as a resource for the Common Retirement Fund to develop a de-carbonization roadmap to invest in opportunities to combat climate change and support the clean tech economy while assessing financial risks and protecting the Fund.” The New York Common Fund of the state manages approximately $200 billion in retirement assets for more than one million New Yorkers and is  heavily invested in fossil fuels, with nearly $1 billion invested in ExxonMobil alone.

At the city level, officials have set a goal of divesting the city’s  funds from fossil fuel companies within five years , according to the press release from the Office of the Comptroller,  which also highlights the complex process involved.  In February 2017,  the Office of the Comptroller had issued a  press release  stating,  “the Trustees of the New York City Pension Funds … will conduct the first-ever carbon footprint analysis of their portfolios and determine how to best manage their investments with an eye toward climate change. In the 21st century, companies must transition to a low-carbon economy, and a failure to adapt to the realities of global warming could present potential investment risks.”  The New York City pension fund includes municipal employees, teachers, firefighters and police.

Related reading re New York activism : The Divest NY website;  “How New Yorkers won fossil fuel divestment”  from the Indypendent (Jan. 12); and Noami Klein’s article in The Intercept (Jan. 11).

Contrast the New York divestment announcements with the continued fossil fuel investment of the Canadian Pension Plan Investment Board (CPPIB), revealed in two new reports.  In early December, Friends of the Earth Canada, as part of its ongoing campaign,  released  Canadian Coal Investment: Powering Past the Coal Alliance, and Urgewald, a German organization, released Investors vs. the Paris Agreement.  The two reports “present a compelling picture of entrenched investors holding onto the old dirty economy and its growing risks at a time when politicians are committing to the phase out of coal.” – specifically, the Powering Past Coal Alliance launched by Canada and Great Britain at COP23 in Bonn in 2017.  The Powering Past Coal Declaration commits governments to phasing out existing traditional coal power and placing a moratorium on any new traditional coal power stations without operational carbon capture and storage, and commits all partners to supporting clean power through their policies and investments, as well as restricting financing for traditional coal power stations without operational carbon capture and storage. In an October 2017  press release,  Friends of the Earth representatives asked, “Why is the CPPIB ignoring government policy and undermining Canada’s diplomatic efforts to lead a global phase-out of coal?” . To date, there has been no public statement adjusting  the Sustainable Investing position of the CPPIB to bring it in line with the Powering Past Coal Alliance Declaration.

Canadian Coal Investment: Powering Past the Coal Alliance calculates the CPPIB’s total investment in coal at $12.2 billion Cdn., with $267 million of that in new coal projects . In a global ranking in Investors vs. the Paris Agreement, Urgewald found that Canada is the 8th largest investor in new coal development, and names several Canadian institutions in its Top 100 Investors list, including SunLife  (ranked #31 with $895 million invested); Power Financial Corporation (#53 with $631 million invested); Caisse de dépôt et placement du Québec ( #71 with $433 million invested); Royal Bank (#86 with $356 million invested); and Manulife Financial ( #98 with $282 million invested).

Also of interest:  “Failure to Launch” in Corporate Knights  magazine (Jan. 15 2018), which provides a serious discussion of the problems of pension plan regulation as the answer to its tagline question: “Why are Canadian pension funds dragging their feet when it comes to climate change?”

 

 

Quebec Pension fund leads the way in low-carbon investing in Canada

The  Caisse de dépôt et placement du Québec (CDPQ) is Canada’s second largest pension fund, with $286.5 billion under management for the  public and parapublic pension plans of  Quebec workers. On October 18, the Caisse burnished its existing reputation as a responsible investor by releasing  “Our Investment Strategy to address Climate Change”,    a detailed strategy document which pledges to factor climate change into every investment decision.   The CDPQ will increase its low-carbon investments by 50% by 2020, and reduce the carbon intensity of its portfolio by 25% by 2025 across all asset classes.   According to an article in the Montreal Gazette , “the Caisse is the first fund in North America, and only the second in the world — after the New Zealand Superannuation Fund — to adopt this type of approach.” That article also notes that investment managers’ compensation will be tied to the emissions performance of their investments:  investment teams will be given fixed carbon budgets, “and their performance will be evaluated and remuneration linked to how well they stick to these budgets.” The announcement was also covered by the Globe and Mail  .

In contrast, the Canada Pension Plan Investment Board , entrusted with the funds to support the public pensions of 20 million Canadians (the CPP), continues to invest in oil and gas ventures – and according to Bloomberg Research , is currently involved in a bidding process for an Australian coal operation owned by Rio Tinto .  Friends of the Earth Canada is advocating against the bid as part of its ongoing campaign, Time to Climate-Risk-Proof the CPP  .  The CPPIB describes its investment strategy regarding climate change here  .

It is worth noting that the Labor Convergence on Climate event  organized by the Labor Network for Sustainability in September included a discussion of how union leaders and rank and file members can work through their pension funds to join the movement to divest from fossil fuels and make green investments .

The role of the banking and investment community is important in policy development also; the case is most recently made in  “Three suggestions for for B.C.’s Climate Solutions and Clean Growth Advisory Council” in the National Observer (Oct. 26). The article concludes:  “If the Advisory Council wants to see money move to support its policy aspirations they will have to find genuinely committed allies in the asset management and banking community. Action on climate change is great economic opportunity for British Columbia and Canada, and the financial sector must be brought into the discussion in order to accelerate the transition to a low-carbon energy system.”

How receptive is the Canadian investment community to considering and disclosing climate change risks and stranded assets? Two reports  by the UN-affiliated Principles for Responsible Investment ( PRI )   are relevant to this question. Fiduciary duty in the 21st century: Canada roadmap (Jan. 2017) makes recommendations for how Canadian pension fund and investment managers can catch up with the international community and implement the recommendations of the Taskforce on Climate Related Financial Disclosures (TCFD) . The PRI Canada country review (June 2017) describes the current regulatory framework for environmental and social governance disclosure .  The Responsible Investment Association has  also published the 2016 Canadian Responsible Investment Trends Report .

Actors within Canada include the Canadian Securities Administrators , which began their own  review on climate-related financial disclosure practices in March 2017 , but have not yet reported.   A group of Canadian Chief Financial Officers launched  the CFO Leadership Network in March 2017, to focus on the role CFO’s play in integrating environmental and social issues into financial decision making. The Canadian CFO Leadership Network is the Canadian Chapter of The Prince of Wales’s Accounting for Sustainability (A4S) CFO Leadership Network; in Canada, it operates in partnership with Chartered Professional Accountants of Canada , with support from The Prince’s Charities Canada.

Finally, SHARE (Shareholder Association for Research & Education), is a Vancouver-based organization which actively promotes sustainable and responsible investing. On October 12, it announced  that it is participating in an investor-led initiative which has written to the CEO’s of sixty of the world’s largest banks, including six Canadian banks, calling on them to adopt the landmark recommendations of the Taskforce on Climate Related Financial Disclosures (TCFD), released by the Financial Stability Board in December 2016 .  Specifically, they call for disclosure in four key areas: climate-relevant strategy and implementation, climate-related risk assessments and management, low-carbon banking products and services, and banks’ public policy engagements and collaboration.

 

Ontario Teachers Pension Plan invests in clean technology

The  Ontario Teachers’ Pension Plan acknowledges that “ Climate change risks have global impacts that affect multiple sectors and companies. On the other hand, climate change will also present new investment opportunities, such as innovative technologies.”  The embodiment of that approach came with the  OTPP announcement  on March 9 that it has partnered with Anbaric, a developer of clean energy transmission and microgrid projects from Wakefield Massachusetts.  According to the Boston Globe newspaper  , Ontario Teachers  will invest $75 million  initially to gain a 40 percent stake in Anbaric, creating a new management company, called Anbaric Development Partners  . Potential exists to invest a further $2 billion in clean energy projects.   The OTPP press release  states,  “Ontario Teachers’ investment in Anbaric creates an attractive launching pad for generating innovative energy jobs and boosting local economies while replacing our deteriorating and outdated fossil fuel-oriented grid with new and sustainable energy alternatives. This includes sophisticated high-voltage direct current (HVDC) transmission technology and microgrid projects that will bring renewables online with greater efficiency.” The Ontario Teachers Pension Plan controlled $171.4 billion in net assets at December 31, 2015 on behalf of  the province’s 316,000 current and retired teachers.

As a sophisticated, global investor, it has examined the risks of climate change, and in Fall of 2016, published  Climate Change: Separating the real risks for investors from the noise   , which, like the Canadian Pension Plan Investment Board ,   seems to acknowledge the reality and complexity of climate risk, while rejecting divestment of fossil fuel assets.  The report states that “Investors need a toolbox of solutions to help manage physical and regulatory risks across their portfolios, both in the short and longer term. Portfolio carbon footprints are only one tool, and they have limitations. Divestment should be the outcome of a well informed and thoughtful investment process, rather than a wholesale approach to a single sector. “   And further  –  “ Engagement with policy makers and companies provides investors with key pieces of information and could be the impetus for governments and companies to be more proactive in climate change mitigation or adaptation. “

Divestment decision at University of Toronto amid further financial warnings

At the end of March, the President of the University of Toronto issued an official response  to the Advisory Committee on Divestment from Fossil Fuels, which had reported in December 2015. The University rejected a blanket divestment strategy and opted to pursue a targeted approach which will incorporate environmental, social, and governance-based factors (ESG) in investment decisions. It states that the core mission of the university, research and teaching, will be used as its main contribution to the fight against climate change. The statement  is summarized in a  Globe and Mail article (March 30) .  On April 12, the New York Times reported  that Yale University had also found a compromise position regarding investment strategies for its endowment fund, rather  than outright divestment.  Arguing against such approaches: from researchers at the London School of Economics,  “Climate value at risk’ of global financial assets” in Nature Climate Change online (April 4)  which uses models to estimate the impact of twenty-first-century climate change on the present market value of global financial assets, and concludes that “losses could soar to $24tn, or 17% of the world’s assets, and wreck the global economy”.  An article in The Guardian   (April 4) summarizes this and other studies.  Even the Harvard Business Review (April 14)  is sounding the alarm, based on the latest research.   An article in Corporate Knights magazine, “Defending Divestment”   (April 6) considers the financial and moral arguments about divestment.

Pension Fund Managers Get It

Climate Change and the Fiduciary Duties of Pension Fund Trustees in Canada    was written by the Toronto law firm Koskie Minsky LLP for SHARE (Shareholder Association for Research and Education)  . Released on September 8, it examines the legal responsibilities of pension trustees, with an emphasis on British Columbia, and considers the interface with public policy and governments . Concurrently, SHARE and NEI Investments issued a public letter to the Premier of Alberta, stating “We encourage the Government of Alberta to keep carbon pricing as a central tenet of future carbon policy.” It also urges the government to diversity the economy and to invest in renewable energy and energy efficiency initiatives. The letter was signed by institutional investors and related bodies representing over $4.6trillion in assets under management, most notably the British Columbia Investment Management Corporation, the B.C. Teachers Federation, California State Teachers’ Retirement System, the Pension Plan for the Employees of the Ontario Public Service Employees Union, Pension Plan for the Employees of the Public Service Alliance of Canada, and investment and financial officials from churches around the world and across denominations.

Pension fund managers have lots to think about, as business-oriented reports continue to warn about the financial risks of climate change and stranded assets. The Koskie Minsky paper acknowledges the influence of the analysis of Mercer Investment Consulting , Investing in a time of Climate Change (2015), and an earlier 2011 Mercer report. Publications over Summer 2015 include: Carbon Asset Risk Discussion Framework   (published by World Resources Institute and the UNEP Finance, partly funded by the Bank of America Foundation, Citigroup, JPMorgan Chase Bank N.A., and Wells Fargo Foundation); The Cost of Inaction: Recognising the value at risk from climate change ( from the Economist Intelligence Unit); and Energy Darwinism II: Why a Low Carbon Future Doesn’t Have to Cost the Earth , (from  a division of Citi Bank).

A recent report by Trillium Asset Management found that California’s public pension funds, CalPERS and CalSTRS, had incurred a massive loss of more than $5 billion last year from their holdings in the top 200 fossil fuel companies. Legislation passed the California Assembly on September 2  to force CalPERS and CalSTRS to divest their holdings in coal; Governor Brown has until October to sign the Bill.