Canada’s largest pension funds, which maintain trillions of {dollars} in property mixed, are trailing behind lots of their worldwide counterparts with regards to shifting away from investments in fossil fuels, a brand new report has discovered.
The report, launched Tuesday by the advocacy group Shift Motion for Pension Wealth and Planet Well being, evaluated the insurance policies of 11 of the nation’s largest pension managers towards worldwide greatest practices, in addition to international targets to cut back greenhouse fuel emissions.
The report discovered some progress for the reason that group’s first evaluation, launched final yr, however on the entire discovered that the majority of Canada’s pension managers nonetheless lag with regards to local weather commitments.
“What we’re seeing is progress, which is nice to see, however the tempo of that progress simply is not quick sufficient to guard pensions and to align extra broadly with local weather objectives,” Adam Scott, govt director of the advocacy group, stated in an interview.
Local weather change considerations are vital to many Candians however some are calling out pension funds for persevering with to spend money on the fossil fuels sector.
Local weather activists in Canada and past have been growing stress on pension managers to steer away from fossil gasoline investments towards renewable power.
Some pension funds in different jurisdictions have already begun divesting from fossil fuels.
Massive adjustments overseas
The report cites New York Metropolis pension funds, in addition to others in France and Netherlands, as examples of the right way to be extra clear about investments, assist fund the renewable power sector and use shareholder resolutions to demand local weather motion from firms.
Earlier this month, one other Dutch fund, PFZW, divested its holdings in Europe’s greatest oil and fuel firms, saying they are usually not decreasing emissions quick sufficient.
In Canada, in contrast, 4 of the 11 pension funds listed nonetheless don’t have emissions reductions targets for each 2030 and 2050, in line with the report.
A part of the issue could also be “entanglements” on the board degree between the pension sector and oil and fuel manufacturing in Canada, the report’s authors argued.
Seven of the 11 pension funds have no less than one director or trustee who can be the director or govt of a fossil gasoline firm, the report stated.
Quebec pension fund scores excessive
For the second yr in a row, the Caisse de dépôt et placement du Québec (CDPQ) scored highest in local weather management among the many funds analyzed, with the College Pension Plan (UPP) in Ontario inserting second.
The CDPQ, which has internet property totalling $434 billion, utterly divested from oil manufacturing, refining and coal mining in 2022 and elevated its investments in low-carbon property to $47 billion, in line with the report.
UPP, a smaller fund representing college staff with about $11 billion in internet property, was praised for its transparency with beneficiaries and for working towards having a net-zero portfolio by 2040.
The most important enhancements got here from the Ontario Municipal Staff Retirement System (OMERS) and the Healthcare of Ontario Pension Plan (HOOPP), funds that had been beforehand far behind however launched local weather methods in 2023.
The Alberta Funding Administration Company (AIMCo), which holds $158 billion in property, ranked lowest for the second consecutive yr.
Based on the report, it “failed once more to decide to measurable objectives that might align its portfolio with local weather security.” It additionally stated AIMCo has not but launched what it referred to as a reputable local weather plan.
AIMCo didn’t instantly return a request for remark Tuesday.
“It is our job to spend money on locations the place we will become profitable for our shoppers, to not impose our values on our shoppers’ cash,” Evan Siddall, AIMCo’s CEO, instructed the Monetary Submit in December. “And so we’ll proceed to spend money on oil and fuel, which has paid off.”
In early February, AIMCo introduced a brand new $1-billion fund devoted to the power transition and decarbonization.
“AIMCo has been strategically evaluating local weather change dangers and alternatives for the final decade,” Marlene Puffer, its chief funding officer, stated on the time.
$2.2T in property
The 11 pension funds within the report collectively handle greater than $2.2 trillion in retirement financial savings on behalf of greater than 27 million Canadians. In whole, Canadian pension funds maintain greater than $4 trillion in property, the report stated.
The huge sums of cash at stake has spurred debate over whether or not pension funds have an obligation to take local weather objectives into consideration, or whether or not their fiduciary obligation rests solely in maximizing returns for beneficiaries.
New York Metropolis municipal staff sued pension funds final yr, arguing the managers had been placing the local weather over their funding returns.
Scott rejected the concept divesting from fossil fuels might jeopardize retirement financial savings.
He pointed to a 2023 evaluation by the College of Waterloo and the environmental group Stand.earth that discovered six main U.S. public pension funds would have seen a return on their investments that was 13 per cent greater on common, or $21 billion US extra, had they divested from fossil fuels a decade in the past.
In Scott’s view, pension funds are in a novel place within the monetary sector to assist drive the transition away from fossil fuels and towards renewable power.
“They personal everyone, together with banks. They personal firms, they personal the entire actual economic system they usually’re long-term buyers. So that they have a special perspective,” he stated.
Julie Segal, who focuses on monetary regulation on the advocacy group Environmental Defence, stated the report reveals the necessity for higher regulation of the monetary sector in order that establishments are required to set clear, measurable local weather targets. Different jurisdictions, notably the European Union, have gone additional on this regard, she stated.
“Canada may be very far behind on setting these guidelines for the monetary sector and we want climate-aligned finance coverage,” Segal stated.
A latest World Financial institution report concluded that the worldwide pension trade, whose property totalled an estimated $44 trillion US in 2018, play “a vital function within the transition to a low-carbon local weather resilient economic system.”
It concluded that pension funds should “reinvent themselves to adjust to their international presence and a definition of fiduciary obligation aligned with right now’s challenges.”
