Ontario Teachers’ pension fund invests in Abu Dhabi oil pipelines

The Ontario Teachers’ Pension Plan (OTPP), has outdone the May decision of AimCo in Alberta to invest in the Coastal GasLink pipeline,  with its announcement on June 23d that it is part of a consortium which has invested $10.1 billion  in a  gas pipeline network under development by the state-owned Abu Dhabi National Oil Company.  Details appear in the Globe and Mail    and Energy Mix on June 23.  The consortium partners are Toronto-based Brookfield Asset Management, New York-based Global Infrastructure Partners (GIP), and investors from Singapore, South Korea, and Italy.  The Ontario Teachers Pension Plan  is quoted by the Globe and Mail, stating: “This strategic transaction is attractive to Ontario Teachers’ as it provides us with a stake in a high-quality infrastructure asset with stable long-term cash flows, which will help us deliver on our pension promise.”

Advocacy group Shift Action for Pension Wealth and Planet Health responded with a scathing statement , which says:

“Investments like the OTPP’s in fossil fuel infrastructure are betting the hard-earned retirement savings of thousands of Ontario teachers against the long-term safety of our climate… Ensuring the growth of pensions in the long-term requires ending investments that lock-in fossil fuels and redeploying massive pools of finance into climate solutions like renewable energy and clean technology.”

Shift also links to a 25-page Toolkit for OTPP members on the risks of fossil fuel investment of their pension funds. (May 2020).   The OTPP Statement on Responsible Investing for 2019 is here.

Alberta Pension fund invests in Coastal GasLink pipeline, the latest risky fossil fuel investment

Carbon Tracker, the group which originated the term “stranded assets, published two new reports about the financial risks of fossil fuel investment in June:  It’s Closing Time: The Huge Bill to Abandon Oilfields Comes Early  and Decline and Fall: The Size & Vulnerability of the Fossil Fuel System on June 4 .  Banking giant Goldman Sachs also released a new report, Carbonomics: The Future of Energy in the age of climate change , which sees a fundamental shift from fossils to renewable energy investments.

Yet even as the drumbeat of fossil fuel decline continues, the public sector pension funds of Alberta and South Korea purchased a majority ownership stake in the Coastal GasLink pipeline from TC Energy on May 25,  using  the  retirement savings of millions of individuals.  “Alberta and South Korea’s pensions just bought the Coastal GasLink pipeline: 8 things you need to know” in The Narwhal (June 10) analyses the situation and cites a report from Progress Alberta :  Alberta’s Failed Oil and Gas Bailout , with this subtitle provided: “How AIMCO invested more than a billion dollars of pensioners and Albertans money into risky oil and gas companies with more than $3 billion in environmental liabilities and how the people running those companies got rich through huge salaries, share buybacks, dividends and conservative political connections.” Besides exposing the political shadows and environmental liabilities of many AimCo energy investments, the report makes recommendations, including for a public review of the investment performance and governance of Aimco; to divest from risky fossil fuel investments; to allow pension plans whose funds are being managed by AIMCo to appoint representatives to its board ; and to allow pension funds the freedom to leave AIMCo.

The recommended reforms are necessary because of the changes made by the Kenney government in November 2019,  described by WCR here and by Alberta unions in:  Union leaders tell UCP: ‘The money saved by Albertans for retirement belongs to them, not to you!’    Alberta’s Failed Oil and Gas Bailout   report urges: “The mismanagement of pensions and the Heritage Fund today offers opportunities for unions, political parties, civil society groups and organizers to engage and activate people who otherwise might never get involved in political collective action. People’s retirements and Alberta’s savings fund from its fossil fuel wealth are at stake.”

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.”

Moral failure and financial risk at the Canada Pension Plan Investment Board

Mark Carney will leave his role as Governor of the Bank of England in January 2020 and return to live in Canada as he takes up his new job as the United Nations’ special envoy on climate action and climate finance.  According to the BBC,  “Mr Carney will be tasked with mobilising private finance to take climate action and help transition to a net-zero carbon economy for the 26th Conference of the Parties (COP) meeting in Glasgow in November 2020. This will include building new frameworks for financial reporting and risk management, as well as making climate change a key priority in private financial decision making.”

fossil futures ccpaRequired reading on the topic:  Fossil Futures: The Canada Pension Plan’s failure to respect the 1.5-degree Celsius limit, released on November 19 by the Canadian Centre for Policy Analysis-B.C. (CCPA-BC).   The report reveals new evidence in the long-standing criticism of the management of the Canada Pension Plan Investment Board (CPPIB), which manages the fund on which all Canadians rely when they retire.  Fossil Futures’ major finding is that the CPPIB is failing to consider the Paris agreement target of 1.5 degrees C., stating:  “Within its public equities portfolio, it has over $4 billion invested in the top 200 publicly traded fossil fuel reserve holders (oil, gas and coal). To stay within 1.5 degrees, these companies can extract only 71.4 billion tonnes of carbon dioxide, yet the companies the CPPIB is invested in have 281 billion tonnes in reserve, meaning they have almost four times the carbon reserves that can be sold and ultimately burned to stay within 1.5 degrees. Since reserves are factored into current company valuations, this means the CPPIB has invested billions of dollars in companies whose financial worth depends on overshooting their carbon budget.”  This aspect of the report was highlighted in an article in The Narwhal .

Fossil Futures also considers why the CPPIB has lagged the rest of the world in climate responsibility, stating that “the board of directors and staff are entangled with the oil and gas industry. For example, one of the CPPIB’s managing directors of energy and resources sits on the board of nine oil and gas companies.”  And as for its traditional position that it has not divested from fossil fuel companies so that it can influence their direction on environmental issues, Fossil Futures concludes: “The CPPIB’s attempts to draw on proxy voting as a central tool to address climate in its portfolio appears ineffective at best, but at worst may misinform beneficiaries expecting a more stringent and meaningful climate strategy.”

Fossil Futures makes recommendations for both the CPPIB and the Canadian government:

  • The CPPIB should: 1. Carry out a portfolio-wide risk analysis in the context of the climate emergency and disclose all findings to pension members. 2. Divest and reinvest. The surest way to address the financial and ethical risks associated with investment in the fossil fuel industry is to start the process of divestment. This means freezing any new fossil fuel investment, developing a plan to first remove highrisk companies from portfolios such as coal, oil sands and fracked gas producers, and finally, moving toward sector-wide divestment and reinvestment of capital into renewable energy sources. 3. Advocate for strong climate policy. Scientific and economic experts predict that climate change beyond 1.5 degrees will result in widespread political, social and economic decline, with the attendant impacts on pension returns. While pension plans are incapable of preventing such changes on their own, managers of these plans can become strong advocates for climate policy that is in alignment with their intergenerational fiduciary duty.

 

  • The Canadian government should: 1. Require full public disclosure of climate risk—including disclosure of all fossil fuel holdings—for all pension funds. California recently passed a law requiring that its major public pensions disclose climate risk. The Canadian government should do the same with the CPPIB. 2. Provide regulatory clarity to ensure that executing fiduciary duty means avoiding shortterm economic gains that imperil long-term climatic security for Canadians and the global community. 3. Revise the CPPIB’s “investment-only” mandate so that social and ecological values are better represented in investment decisions. It is unclear that securing retirement income by investing in tobacco companies, weapons manufacturers, private prisons and the fossil fuel companies responsible for the climate emergency is aligned with the interests of current or future beneficiaries.

 

Is+your+pension+part+of+the+solution+-+Shift+graphicAction item:   Tides Canada campaign has launched a new campaign, called Shift your Pension, for individuals who are concerned about their pensions – both the financial health and the impact on the climate crisis.  It allows you to send your own message to the CPPIB as well as provincially-managed public sector pension funds.

Alberta government proposes to snatch away joint governance of public sector workers’ pension funds

The UCP government in Alberta has made the unilateral decision to consolidate Alberta public sector pensions under the control of the Alberta Investment Management Corporation, a crown corporation administered by the provincial government . According to an article in the Calgary Herald,  “Unions blast provincial decision to shift billions in public sector pension funds” : “(The) government intends to reverse the option of public sector pension plans leaving AIMCo as a fund manager. Moreover, the Alberta Teachers Retirement Fund, Workers’ Compensation Board and Alberta Health Services will be expected to transfer funds to AIMCo for management, reducing redundant administration.” More details appeared  in  “Government contemplates changes to management of more than 400,000 Alberta workers’ pension plans” in the Edmonton Journal (Nov. 1) which summarizes the opposition  by the Alberta public sector unions on the grounds that the decision reverses a recent change that gave more than 351,000 public sector employees joint control of their pension funds, through  a joint governance model that had been authorized by 2018 legislation and which only took effect in March 2019.  The Edmonton Journal article also states that police and firefighter pensions might also be included in the government plans.  “Alberta’s public unions prep for a fight, whether in the streets or the courts” is a broader overview from CBC Calgary which discusses the pension consolidation, as well as the wage cuts and workforce reduction included in Bill 21 of the new budget under the new UCP government.

ccpa-bc_fossilpensions_june2018-thumbnail (1)The attempt to shift Alberta workers’ pension funds brings to mind the 2018 report, Canada’s Fossil-Fuelled Pensions: The Case of the British Columbia Investment Management Corporation by the Corporate Mapping Project.  The report found that  despite its statements that it was a climate responsible investor, BCI had actually increased its  fossil fuel investments – for example, by boosting investment from $36.7 million in 2016 to $65.3 million in 2017  in Kinder Morgan, owner of the Trans-Mountain pipeline.  And although the new publication by the Corporate Mapping Project,  Big Oil’s Political Reach: Mapping fossil fuel lobbying from Harper to Trudeau, examines the power of the fossil fuel industry at the federal level, some might argue that its influence could also extend to Alberta’s pension management decisions.