Beneficiaries warn Canada’s largest pensions of legal duty to manage climate-related financial risks
Beneficiaries warn Canada’s largest pensions of legal duty to manage climate-related financial risks
For Immediate Release: September 29, 2021
Letters to 10 biggest pension funds request transparency and a plan to meet legal obligations regarding climate risk management
Toronto, Vancouver, Ottawa, Montreal - Letters were delivered today to the boards and executive of Canada’s 10 largest pension fund managers requesting information on how the funds are meeting their legal fiduciary obligations to beneficiaries in the face of a worsening global climate crisis. These pension funds together have nearly $2 trillion in assets under management (AUM).
Each letter is signed by beneficiaries of the respective funds. Signatories include working and retired healthcare professionals, teachers, scientists, elected officials, young Canadians, university professors, and public servants and their union representatives, such as the president of CUPE Ontario and the president of the Public Service Alliance of Canada.
The letters were drafted in collaboration with Shift: Action for Pension Wealth & Planet Health, Environmental Defence, and environmental law charity Ecojustice, and include a new legal backgrounder explaining the fiduciary duty fund managers have to act decisively to address the climate crisis in the best long-term interest of their beneficiaries. Letters also include a list of questions for the funds to answer about their approach to managing climate-related risks.
“I won’t be able to collect CPP until well after 2050. The climate crisis is worsening, and I just don’t know if my pension is prepared for what’s coming,” says Chloe Tse, a student at the University of Toronto and contributor to the Canada Pension Plan. “The CPP doesn’t fully disclose our holdings, it’s still investing billions of dollars in fossil fuels, and it doesn’t seem to have a credible climate plan. I need to know if my pension is prepared for the economic and financial disruption the climate crisis will bring in my lifetime.”
Pension fund administrators and managers have a well-established legal duty to ensure the fund is invested in the best long-term interest of fund beneficiaries. In spite of clear advice from legal experts requiring administrators and managers to actively manage climate risks, many funds continue to behave as if fiduciary duty somehow prevents them from changing their investment strategies. Many of Canada’s largest pension funds inadequately disclose their investments and climate risks, and continue to offer only weak or incomplete strategies to address those risks.
“Pension funds must assess and act decisively to limit their exposure to climate risks or else potentially face legal consequences,” says Andhra Azevedo, Ecojustice lawyer. “Pension fund beneficiaries are asking their pension funds to be transparent about their policies and actions to date so beneficiaries can determine if their fund is meeting these requirements.”
The climate crisis is an established threat to the future value of Canadian pension fund investments. Companies face growing and unprecedented financial risks from the physical impacts of a warming world, and the necessary but challenging transition away from fossil fuels to carbon-free energy. Some companies may also carry substantial reputational, regulatory and legal risks after years of significantly contributing to greenhouse gas emissions, blocking climate policy and misleading the public about the harm caused by their products. Beyond the risks to individual funds, collective failure to rapidly stabilize global temperature increases is expected to undermine the growth of the global economy and threaten the stability of the entire global financial system. The global economy is expected to face unacceptable levels of instability and risk if humanity fails to limit global heating to 1.5 degrees Celsius.
“Without significant action to manage climate risks and align investments with climate safety immediately, I worry that pension funds will be unable to pay the full pensions of thousands of dedicated municipal workers when they retire,” says Fred Hahn, President of CUPE Ontario, which represents over 125,000 members of the Ontario Municipal Employees Retirement System (OMERS).
Canada’s pension regulator, the Office of the Superintendent of Financial Institutions (OSFI) has also warned that directors and administrators of federally regulated pension plans may be exposed to liability risk for failing to fulfill their legal/fiduciary duties with respect to the climate crisis.
The beneficiary letters say that meeting these obligations requires funds not only to defensively manage climate risks, but also to proactively align their investment strategies with a pathway to achieving broader climate safety, in order to protect the best interests of their beneficiaries.
Legal action has been undertaken successfully in Commonwealth countries to force action from pension funds. A 25-year-old Australian pension beneficiary brought a legal challenge in 2018 against his superannuation managers for failing to adequately disclose and manage climate risk (McVeigh v. Retail Employees Superannuation Trust). The superannuation agreed to a settlement agreement requiring implementation of a net-zero carbon footprint by 2050, as well as climate risk disclosure and portfolio transparency measures.
Beneficiaries have asked their pension funds to respond with detailed, credible answers to climate-related questions by December 31, 2021. The funds that have received letters are:
Alberta Investment Management Corporation (AIMCo) - $123.4 billion AUM
British Columbia Investment Management Corporation (BCI) - $199.6 billion AUM
Caisse de dépôt et placement du Québec (CDPQ) - $390 billion AUM
Canada Pension Plan Investment Board (CPP Investments) - $519.6 billion AUM
Healthcare of Ontario Pension Plan (HOOPP) - $104 billion AUM
Investment Management Corporation of Ontario (IMCO) - $73.3 billion AUM
Ontario Municipal Employees Retirement System (OMERS) - $114 billion AUM
OPSEU Pension Trust (OPTrust) - $23 billion AUM
Ontario Teachers’ Pension Plan (OTPP) - $227.7 billion AUM
Public Sector Pension Investment Board (PSP Investments) - $204.5 billion AUM
Pension funds are facing increasing pressure to create and implement investment strategies aligned with the goals of the Paris Agreement. The COP26 climate talks begin on October 31 and institutions, companies and countries around the world are being called upon to step up with meaningful commitments on climate action.
A pdf copy of the letters, appendices and legal backgrounder can be found here.
Additional quotes from pension fund beneficiaries and letter signatories:
“As an expert in the political economy of climate and energy policy, I am seriously concerned about my pension fund manager’s overexposure to the fossil fuel industry in general, and the Alberta oil and gas sector in particular. From its stake in the high-risk proposed Coastal GasLink pipeline to its massive holdings in tar sands producers, AIMCo is deeply invested in companies that face financial risks due to their incompatibility with Paris-aligned climate targets and failure to respect Indigenous rights to self-determination. I’ve seen nothing that suggests AIMCo has a handle on these massive problems.”
-Laurie Adkin
Professor, Faculty of Arts - Political Science Department, University of Alberta
Member of the Universities Academic Pension Plan, a client of the Alberta Investment Management Corporation (AIMCo
“As a former municipal councillor, I saw how the economic, social and health impacts of the climate crisis harmed B.C. communities first-hand. Yet the manager of my Municipal Pension Plan won’t even disclose how much it has invested in the primary cause of the crisis-- fossil fuels. I’ve worked my entire life to prepare our communities for the growing risks of climate change, and I expect the same from my pension manager.”
-Andrea Reimer
Adjunct Professor of Practice, School of Public Policy and Global Affairs, University of British Columbia
Former Councillor, City of Vancouver
Member of the B.C. Municipal Pension Plan, a client of the British Columbia Investment Management Corporation (BCI)
“The climate crisis is a health crisis. Healthcare workers are trying to do our part to protect the health of our communities. Unfortunately, by neglecting to disclose the entirety of its holdings in oil, gas, coal and pipelines, HOOPP doesn’t appear to be doing its part. Our pension savings are seemingly working against our future health and well-being, contradicting the purpose of the pension, which is to protect our retirement.”
-Michael Kurz, P.Eng
Member of the Healthcare of Ontario Pension Plan
“As the province’s Environmental Commissioner, I held Ontario to account for years on the progress and shortcomings of its plans, policies and investments to mitigate a worsening climate crisis. Yet when it comes to my retirement savings, IMCO has given me very little indication that it understands the risks of climate change to both my pension and the planet. IMCO has disclosed almost nothing abouts its investments in fossil fuels, and its board chair is the Director of an oil and gas drilling contractor. This is unacceptable in 2021.”
-Dianne Saxe
Environmental Lawyer, Saxe Facts
Former Environmental Commissioner of Ontario
Member of Ontario’s Public Service Pension Plan, managed by the Investment Management Corporation of Ontario (IMCO)
“As a climate action group, Clean Air Partnership wants a pension fund that understands the challenges we face, as well as the tools and policies we need, to mitigate and adapt to the climate emergency. Last year, OPTrust financed the construction of a gas plant and declared it to be climate action. That doesn’t coincide with what the science says we need to move investments away from fossil fuels and towards low and zero carbon actions. Investing in gas plants is not climate action. I want and need to see increased transparency and a credible climate plan from my pension fund to protect both my retirement savings and a safe climate future.”
-Gaby Kalapos
Executive Director, Clean Air Partnership
Member of OPTrust Select
“As an Ontario teacher, I work hard to prepare young people for the challenges of the future. In a world ravaged by the climate crisis, that cannot mean only teaching, mentoring and coaching. It also means doing my part to ensure that students will graduate into a world with a livable climate. It’s unacceptable to me that my pension contributions are used to finance companies and infrastructure that directly undermine the future of the young people I teach.”
-Teri Burgess
Grade 8 teacher, Marathon, Ontario
Member of the Ontario Teachers’ Pension Plan
“Hundreds of thousands of working and retired federal employees are counting on PSP Investments to protect their retirement savings from the financial risks of climate change and invest in a safe climate future for them and their families. But I’ve seen little evidence that PSP is aligning our pension portfolio to address the worsening climate emergency. No Paris-aligned targets, no timelines, no net-zero plan, and billions invested in fossil fuel companies and infrastructure.”
-Chris Aylward
National President, Public Service Alliance of Canada
For interview requests:
Adam Scott, Director, Shift Action for Pension Wealth & Planet Health
adamscott@shiftaction.ca
416-347-3858
Sean O'Shea, Communications Specialist, Ecojustice
soshea@ecojustice.ca
416-368-7533 ext. 523
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. Shift is a project of MakeWay Canada.
Ecojustice uses the power of the law to defend nature, combat climate change, and fight for a healthy environment. Its strategic, public interest lawsuits and advocacy lead to precedent-setting court decisions and law and policy that deliver lasting solutions to Canada’s most urgent environmental problems. As Canada’s largest environmental law charity, Ecojustice operates offices in Vancouver, Calgary, Toronto, Ottawa, and Halifax.
Environmental Defence is a leading Canadian environmental advocacy organization that works with government, industry and individuals to defend clean water, a safe climate and healthy communities.
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