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.

Landmark New York State divestment will begin with Canadian oil sands investments

The New York State Comptroller’s office announced on December 9 that it will begin a systematic review of the holdings of the New York State Common Retirement Fund in early 2021, with the ultimate goal to achieve decarbonization of all investments by 2040. The New York State Common Retirement Fund is the third largest pension fund in the U.S., valued at $226 billion, and provides retirement benefits for 1.1 million state and municipal workers.

The review will examine all investment holdings over a period of four years, beginning with what are judged the riskiest – oil sands investments such as Imperial Oil, Canadian Natural Resources, Husky Energy, Suncor Energy, and Cenovus Energy –  followed by companies in oil and gas, fracking, oil services and pipelines.   Details of the companies to be reviewed are in a Backgrounder by Divest NY; details are also provided in the press release from the Comptroller’s Office.  As described in  “New York State Just Set a New Standard for Fossil Fuel Divestment”  in Gizmodo:  “With the state of New York and New York City now ready to divest, it puts enormous pressure on polluting companies. As the beating heart of capital, the city and state’s pension funds—which together total around $500 billion—no longer going to fossil fuels sends a huge signal to Wall Street and the fossil fuel industry. But it also turns up the heat on other institutional investors, notably California’s pension funds, which are the largest in the nation, to catch up.”

Bill McKibben, founder of 350.org and divestment leader, wrote an Opinion piece in the New York TimesYou should have listened, New York Tells Big Oil” . McKibben characterizes this divestment decision as a victory in an 8-year battle, and the latest development in the declining economic and political power of Big Oil.

Canada Pension Plan continues to risk Canadians’ retirement savings – this time, fracking investments in Colorado

The Canadian Pension Plan Investment Board continues to display a hypocritical disregard for its own sustainability principles, as reported in  “CPPIB’s fracking operation in U.S. raises questions” in the Toronto Globe and Mail on September 27. The Globe and Mail describes the fracking activities and political donations of Crestone Peak Resources, a company 95% owned by the Canada Pension Plan Investment Board, and formed out of the ashes of Encana. The article reports that Crestone spent more than US$600,000 to support pro-business candidates who opposed tougher regulation of fracking in the 2018 Colorado state elections. Friends of the Earth Canada were involved in the Globe and Mail investigation and has posted unique information here .

The Energy Mix also published “’Canadians Don’t Want This: Fracking Company Owned By Canada Pension Plan Spent $600,000 To Influence Colorado State Elections” (September 30).The article quotes  Professor Cynthia Williams, Osler Chair in Business Law at Osgoode Hall Law School in Toronto, who states:  “It’s a “perfectly correct statement of corporate law” to say that CPP and Crestone are separate companies”, …. But it’s “an imperfectly correct answer to the ethical questions about CPPIB using its heft, based on the involuntary monetary contributions of millions of citizens and other people working in Canada, to try to shape politics to support its oil and gas investments, in Colorado, even as the Government of Canada has committed to working to transition to a low-carbon economy.”

Professor Williams  is the author of  Troubling Incrementalism: Canadian Pension Plan Fund and the Transition to a Low-carbon Economy , published in September by the Canada Climate Law Initiative.  The report discusses CPPIB investments in fossil fuels in the last six years in detail, including fracking companies in Ohio and the Crestone company in Colorado, as well as oil sands expansion in Alberta and Saskatchewan. The report concludes by calling on CPP Investments to fundamentally re-evaluate its role, stating:

“Our view is that CPP Investments should be, and could be, making a substantial contribution to Canada’s future economy by supporting new technologies, new companies, and the just transition to a low-carbon economy. We argue that doing so would be more consistent with its statutory mandate to manage the assets of the CPP Fund in the best interests of the twenty million Canadian contributors and beneficiaries than is its current approach. It would also be more consistent with its common-law fiduciary duties, which require intergenerational equity.”

What can Canadians do to move their pension funds away from fossil fuels?

Friends of the Earth Canada offers an online letter to Heather Munroe-Blum (Chair, Canada Pension Plan Investment Board) and Mark Machin (CEO), with five recommendations arising from the Crestone investigation. FOE is also conducting open informational meetings about the CPP investments throughout Canada in October.

Shift Action  is a project of Tides Canada which advocates for environmentally-responsible pension management.  Their press release (Sept. 29) cites the Crestone investment, highlights the nearly $12 billion invested in Chinese coal mines and other fossil fuel companies (double its clean energy investments),  and warns: “The CPP is betting Canadian retirement savings against the unstoppable transition to a clean energy economy, and fueling the global climate crisis in the process.”  In an interview published in The Energy Mix , Shift Action’s Executive Director, Adam Scott urges Canadians:  “One of the best ways to have an impact in this crisis is to make sure the funds that are invested on your behalf are invested in solutions to climate change, not in the problem. There’s a tool on our website that makes it easy for all Canadians to send a note to their pension funds asking what they’re doing on climate risk and how they’re investing.”   Shift Action published a detailed guide to engagement in June 2019, Canada’s Pension Funds and Climate Risk: A Baseline For Engagement . It concludes with tips which include:  “Each of Canada’s major pension plans has a different structure for governance and accountability. Beneficiaries should understand this structure and have a clear sense of their pension plan’s sponsors and governance model. Beneficiaries should engage with all relevant points of contact, for example a union pension representative or a government appointed pension trustee.”

And finally, for pension fund trustees, the Canada Climate Law Initiative  flagship initiative is the Canadian Climate Governance Experts program, which offers “pro bono sessions on effective corporate governance to address climate-related financial risks and opportunities to corporate boards of directors and Canadian pension fund boards.”

 

 

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.”