Statement on the Investment Management Corporation of Ontario’s commitment to net-zero by 2050
Statement from Shift Action for Pension Wealth & Planet Health on the Investment Management Corporation of Ontario’s net-zero by 2050 commitment
Toronto, ON - We are pleased to see IMCO join the growing ranks of global asset owners and managers committing to change their investment strategies to ensure the retirement savings of Ontario public employees are invested in a safe climate future. The climate crisis represents an existential threat to the long-term health of pension funds and the planet. Unprecedented action is required to protect pensions and the planet now.
IMCO is now the third pension manager in Canada to commit to net-zero emissions by 2050, after the Caisse de dépôt et placement du Québec and Ontario Teachers’. Canada’s other large pension funds, including the Canada Pension Plan, have not even taken this first step to aligning Canadian retirement savings with a safe climate future.
This announcement has significant implications for IMCO, which has not been a leader in managing climate-related financial risk to date. IMCO currently provides little transparency with regards to its investment strategy, its portfolio holdings, or its exposure to climate risk. Meeting the requirements of joining the Paris Aligned Investment Initiative will require significant improvement in IMCO’s asset disclosure, internal expertise and portfolio design.
IMCO must quickly develop a plan to achieve this pledge. Credible net-zero plans require:
aggressive interim targets for cutting emissions from its portfolio by 2025 and 2030;
clear transition plans for held companies, including bans on lobbying against climate policies;
screens on investments in fossil fuel companies and a phase-out timeline for current holdings;
a clear link between executive compensation and achievement of interim goals;
transparent timelines for dramatically increasing investment in profitable climate solutions;
the removal of conflicts of interest from governance structures and boards.
Background information on IMCO, its approach to climate risk, and fossil fuel investments
IMCO is the manager of Ontario’s $31 billion Public Service Pension Plan (PSPP), the pension fund for over 91,000 active and retired Ontario public servants. IMCO has $73.3 billion in assets under management, including the PSPP, the Provincial Judges’ Pension Board, and the insurance and benefit funds of the Workplace Safety and Insurance Board.
IMCO discloses very little information to pension plan members and the public, even compared to the low bar for disclosure in the Canadian pension industry.
As of December 31, 2020, 4% of IMCO’s portfolio, or $2.9 billion, was invested in “energy”, with another 3%, or $2.2 billion, in "utilities". IMCO does not provide further information on whether these energy and utility holdings are in fossil fuels or zero-carbon energy, making an estimate of IMCO’s fossil fuel holdings impossible.
IMCO holds a 5% co-ownership interest in Compañia Logistica de Hidrocarburos (CLH), the largest refined oil logistics operator in Spain that holds a dominant market share in the country’s network of oil and gas transportation and storage assets. IMCO has not reported on its ownership of or the performance of CLH since the Ontario Pension Board’s 2018 annual report.
In 2018, IMCO reported a loss from its co-ownership of Calon Energy, a United Kingdom-based electricity generation company that owns several fossil gas plants, “due to unfavourable developments in the U.K.’s energy market.” Calon’s net losses in 2018 stood at £103 million, or about CA$175 million. Since then, IMCO has not reported on its ownership of Calon or the company’s performance.
Based on regulatory filings with the United States Securities & Exchange Commission, as of December 31, 2020, IMCO held at least $61 million in shares in oil, gas and pipeline companies, including Suncor, Pembina Pipeline Corp, Imperial Oil, Fortis Inc, Enbridge, Cenovus, Canadian Natural Resources Ltd, TC Energy, and Teck Resources.
The current Chair of IMCO’s Board of Directors is Brian Gibson, a Director of Precision Drilling Corporation, the largest oil and gas drilling rig contractor in North America. This position could result in a potential conflict of interest when the Board is considering how to best address the financial risks of climate change to the pension fund. A director of an oil drilling company could have a conflicting duty to act in the best interests of a corporation reliant on the continued development of oil fields.
IMCO does not exclude investments based on ESG considerations alone, claiming that engagement is a more effective method for addressing ESG concerns such as climate change. In its 2020 Responsible Investing Policy, IMCO says that “if necessary, we will consider escalation of our engagement activities, which may include seeking governance improvements, collaborative engagement, or proxy voting. Divestment is also an option to be considered where there is a sustained risk to continuing the investment following ongoing unsuccessful engagement.” Similarly, OPB says that it “expects IMCO to consider divesting from investments where insufficient action is taken to address [problematic ESG issues].”
Contact information:
Adam Scott, Director, Shift Action for Pension Wealth & Planet Health
adamscott@shiftaction.ca
416-347-3858
Patrick DeRochie, Senior Manager, Shift Action for Pension Wealth & Planet Health
patrick@shiftaction.ca
416-576-2701
Shift Action for Pension Wealth and Planet Health is a charitable initiative that works to protect pensions and the climate by bringing together beneficiaries and their pension funds to engage on the climate crisis.