Press Release - Pension plan members ask IMCO for clarity on its confusing fossil fuel exclusion policy
Toronto, ON | Traditional territories of the Wendat, Anishnaabeg, Haudenosaunee, Chippewas and Mississaugas of the Credit First Nation - Working and retired public servants from across Ontario sent a letter today to their pension manager, the Investment Management Corporation of Ontario (IMCO), seeking clarity on its confusing policy for restricting and phasing out investments in fossil fuels.
Members of Ontario’s Public Service Pension Plan, which is managed by IMCO, are asking the investment manager to answer six simple questions about its Climate Action Plan, released in November 2022. IMCO’s plan includes “climate guardrails” to “limit (IMCO’s) exposure to investments that are incompatible with a net-zero future” and “phase out new investment commitments in development of new unabated fossil fuel assets, in line with appropriate global, science-based scenarios and limit exposure to investments in thermal coal mining and arctic drilling”.
“As an environmental lawyer with decades of experience in climate and energy policy, I am totally unimpressed by IMCO’s so-called ‘climate guardrails’,” says Dianne Saxe, a Toronto City Councillor, environmental lawyer, former Environmental Commissioner of Ontario, and member of Ontario’s Public Service Pension Plan. “IMCO’s ‘climate guardrails’ don’t protect our retirement savings because IMCO is still investing hundreds of millions of dollars in companies that are producing the very fossil fuels that cause climate change and wildfires– and IMCO doesn’t intend to stop. In 2023, there is no responsible excuse for greenwashing and indecisiveness from IMCO, which has a legal duty to invest in the best long-term interests of 90,000 Ontario public servants. That includes giving us a fair chance to live in a survivable world.”
Pension plan members thanked IMCO for its commitment to net-zero emissions by 2050 or sooner, noting the $73.3 billion investment manager’s membership in the Paris Aligned Investment Initiative, pledge to invest 20% of its portfolio in climate solutions by 2030, and ambitious interim emissions intensity reduction targets. Plan members were pleased to see that IMCO also cites several science-based net-zero pathways in its Climate Action Plan, such as those developed by the Intergovernmental Panel on Climate Change and International Energy Agency. These authoritative international bodies are unambiguous: limiting global temperature increase to 1.5°C and avoiding the worst impacts of the climate crisis requires no new investment in fossil fuels and a rapid phase-out of existing production.
But IMCO’s climate guardrails dance around this scientific imperative and raise some unavoidable questions:
By how much and by when does IMCO want to limit its exposure to investments that are not compatible with a net-zero future?
What does it mean to “phase out new investment commitments”?
What does IMCO mean by “unabated fossil fuel assets”?
Why limit exposure to investments in coal mining and arctic drilling, but not other fossil fuel production activities?
“I’m hoping to collect my pension and enjoy my retirement many years from now, but that won’t be possible if our governments and financial institutions keep investing in the oil, gas, coal and pipeline companies that are causing the climate crisis,” says Ewa Shields, an Ontario public servant and member of Ontario’s Public Service Pension Plan. ”IMCO says its Climate Action Plan is consistent with limiting global temperature increase to 1.5°C, but its ‘climate guardrails’ are so weak, wordsmithed and watered down that they appear to be meaningless.“
Pension plan members also expressed conflict of interest concerns regarding the role played by IMCO’s Board Chair in reviewing and approving the Climate Action Plan and climate guardrails, noting that the Chair has a concurrent legal duty as a Director of one of North America’s largest oil and gas drilling companies.
The letter was sent to IMCO’s President & CEO, Vice-President for Responsible Investing and Board Chair, as well as the President & CEO and Chair of the Ontario Pension Board. Pension plan members are asking for a response from IMCO by July 31, 2023.
Here is the text of the letter:
Investment Management Corporation of Ontario
16 York Street, Suite 200
Toronto, ON M5J 0E6
Attn:
Bert Clark, President and CEO, IMCO
Hyewon Kong, Vice-President, Responsible Investing, IMCO
Brian Gibson, Chair of the Board, IMCO
Mark J. Fuller, President & CEO, Ontario Pension Board
Geri Markvoort, Chair of the Board, Ontario Pension Board
RE: Seeking clarity on IMCO’s “climate guardrails”
Dear Mr. Clark and Mr. Fuller,
We are writing as members of Ontario’s Public Service Pension Plan who hope to enjoy a secure retirement in a future that limits the global temperature increase to 1.5°C and avoids the worst impacts of the climate crisis.
We appreciate that IMCO fully supports this goal, through its membership in the Paris Aligned Investment Initiative, its commitment to achieve net-zero emissions by 2050 or sooner, and its Climate Action Plan released in November. We also appreciate the leadership that IMCO has demonstrated by committing to invest 20% of its portfolio in climate solutions by 2030, setting ambitious emissions intensity reduction targets, and prioritizing engagement activities and external investment managers that focus on the management of climate-related financial risk.
We were relieved to see that IMCO’s Climate Action Plan includes “climate guardrails” to “limit (IMCO’s) exposure to investments that are incompatible with a net-zero future” and “phase out new investment commitments in development of new unabated fossil fuel assets, in line with appropriate global, science-based scenarios and limit exposure to investments in thermal coal mining and arctic drilling”.
However, we are confused by this wording, and IMCO’s 2022 annual report did not provide further clarification. We are asking you to provide clarity on the climate guardrails, specifically:
1) What exactly does IMCO mean by “limit(ing) its exposure to investments that are incompatible with a net-zero future"?
a) By how much, in percentage of AUM or dollar terms, does IMCO plan to limit this exposure?
b) By what date does IMCO plan to limit this exposure?
c) Which categories of investments does IMCO consider to be incompatible with a net-zero future?
2) What does it mean to “phase out new investment commitments in development of new unabated fossil fuel assets”?
a) Presumably, “new investment commitments” are those that have not yet been made. If that’s the case, how can IMCO “phase out new investment commitments”?
b) By what date does IMCO plan to phase out these new investment commitments?
3) What does IMCO mean by “unabated fossil fuel assets”?
a) Are there fossil fuel assets in the IMCO portfolio that are currently “unabated”?
b) Are there fossil fuel assets in the IMCO portfolio that are currently “abated”?
4) Why do the climate guardrails focus on “limit(ing) exposure to investments in thermal coal mining and arctic drilling” in particular?
a) What exactly does IMCO mean by “limit(ing) its exposure”? Limit by how much?
b) What rationale is IMCO using to differentiate investment in thermal coal mining and arctic drilling from investment in other fossil fuel production activities?
c) What are the thresholds IMCO is using to define investments in thermal coal mining and arctic drilling?
5) IMCO states that its “interim emission reduction target is aligned with science-based net zero pathways developed by the Intergovernmental Panel on Climate Change (IPCC), International Energy Agency (IEA), Networking for Greening the Financial System (NGFS), and One Earth Climate Model (OECM)” (p.12). Are these the same net-zero pathways IMCO is using to inform its climate guardrails?
a) If so, why don’t IMCO’s climate guardrails explicitly screen for new investment in companies expanding fossil fuel production (as these net zero pathways unambiguously state that limiting global average temperature increase to 1.5°C requires no new oil and gas production projects)?
6) IMCO’s Chair of the Board, Brian Gibson, concurrently serves on the Board of Directors of Precision Drilling. Precision states that it’s “prepared to help usher in a new era of global energy production”(1) and reported a significant increase in oil and gas drilling activity, service rig operating hours, drilling services, and production services in recent years.(2) Precision’s business model and capital expenditures appear to directly contradict IMCO’s net-zero commitment and the science-based net zero pathways that IMCO says are guiding its Climate Action Plan. We perceive Mr. Gibson’s legal duty to make decisions in the financial interest of Precision Drilling’s shareholders to be in conflict with his fiduciary duty to oversee investments in our best long-term interests, which includes approving and overseeing the implementation of IMCO’s Climate Action Plan.
a) As Chair of IMCO’s Board of Directors, what role did Mr. Gibson play in developing, writing, reviewing or approving IMCO’s Climate Action Plan and climate guardrails?
b) Did Mr. Gibson recuse himself from discussions and decisions related to IMCO’s Climate Action Plan and climate guardrails?
Again, we appreciate the progress and leadership that IMCO has demonstrated with its net-zero commitment and Climate Action Plan. But we are seeking answers to these questions so we can have peace of mind that IMCO is fulfilling its fiduciary duty to identify, assess and manage climate-related financial risks and invest our retirement savings in our best long-term interests.
We would appreciate a response by July 31, 2023.
Background information:
IMCO’s Climate Action Plan (November 2022)
Shift’s statement on IMCO’s Climate Action Plan
Shift’s detailed climate and energy analysis of IMCO
For interview requests:
Adam Scott, Executive Director, Shift Action for Pension Wealth & Planet Health. adamscott@shiftaction.ca. 416-347-3858
Patrick DeRochie, Senior Manager. 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. Shift is a project of MakeWay Canada.
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