Statement from Shift Action for Pension Wealth and Planet Health on climate-related financial risk in the Ontario Teachers’ Pension Plan’s 2020 annual report
Originally posted March 30, 2021 at https://www.shiftaction.ca/news-updates
For Immediate Release: March 30, 2021
Statement from Shift Action for Pension Wealth and Planet Health on climate-related financial risk in the Ontario Teachers’ Pension Plan’s 2020 annual report
Toronto, ON - All things considered, the Ontario Teachers’ Pension Plan (OTPP) weathered the pandemic storms of the past year effectively. However, the economic shocks from COVID-19 have revealed the growing long-term risks of the fund’s exposure to fossil fuel investments, and the growing financial benefits of shifting capital into climate solutions.
The global pandemic caused an unprecedented shock to oil demand over the past year. The impact of this sudden short-term drop was just a taste of how the expected terminal decline in global fossil fuel demand anticipated over the coming years will impact long-term investors like the OTPP.
Notably, despite otherwise strong results in navigating the challenges of the pandemic, the OTPP underperformed in areas linked to fossil fuels, a factor contributing to missing its benchmark by 2.1 per cent:
OTPP’s Natural Resources portfolio, which includes nearly $3.3 billion in oil and gas, fell by 11.2 per cent in 2020;
OTPP’s infrastructure portfolio, composed of nearly $2 billion in fossil gas pipeline infrastructure, returned just 2.6 per cent against a 7.5 per cent sector benchmark in 2020;
OTPP acknowledged that its portfolio of five airports faced particularly poor returns due to COVID-19, raising broader questions about the long-term prospects for aviation growth in a world racing to slash the emissions that are driving the climate crisis;
OTPP’s wise decision to reduce its exposure to the fossil fuels sector in its public equity portfolio paid off, with just 2 per cent of this portfolio in “energy” buoying overall strong returns of 15.2 per cent in 2020.
Thankfully, we are seeing a clear multi-year trend of the OTPP reducing the percentage of its portfolio allocated to fossil fuel investments and significantly increasing its capital allocation towards profitable and fast-growing climate solutions. This is a smart approach to reduce risk and increase exposure to growing clean sectors.
Despite its progress in managing the financial risks of climate change, the OTPP still hasn’t provided details on its 2050 net-zero emissions commitment or a roadmap and timeline to achieve it. Further, the OTPP provided teachers with essentially no information on some of its 2020 investment decisions that would appear to be incompatible with its net-zero commitment, including its joint purchase of the Abu Dhabi National Oil Company’s fossil gas pipeline network and a 70 per cent stake in Italy’s largest independent fossil gas pipeline system, as well as the decision by Bristol airport, wholly owned by the OTPP, to take a U.K. community to court over its rejection of the airport’s expansion plans.
The OTPP’s increasingly sophisticated management of climate risks and hedging against the poor financial performance of fossil fuels shows that it is starting to listen to the growing number of working and retired Ontario teachers who are demanding their retirement savings be aligned with a safe climate future. Over the last year, teachers and students worked together to call on the OTPP to stop investing in the oil, gas and coal that is fuelling the climate crisis.
Contact information for media requests:
Adam Scott, Director, Shift Action for Pension Wealth & Planet Health. adamscott@shiftaction.ca, 416-347-3858
Patrick DeRochie, 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 monitors the fossil fuel investments of Canadian pension funds and works to protect pensions and the climate by bringing together beneficiaries and their pension funds to engage on the climate crisis.
-30-
Originally posted March 30, 2021 at https://www.shiftaction.ca/news-updates