Did your pension manager vote for better climate disclosure?
This post was updated on July 2, 2024 to add newly reported votes from PSP Investments.
Pension members asked their pension funds to vote for climate-related resolutions at companies the pensions own. Find out how your pension voted.
The ten largest public pension funds in Canada control over $2 trillion in assets across the global economy. That’s what makes pensions such an important lever in moving the world toward a zero emissions future.
In the spring of 2024, pension plan members used Shift’s online tools to encourage their pension funds to use this influence. Pension members asked their funds to use their ownership stakes and vote for better climate disclosure at the annual general meetings (AGMs) of Toronto-Dominion Bank (TD), Royal Bank of Canada (RBC) and Enbridge. Information about the resolutions can be found here and here.
The type of climate disclosure called for in the resolutions is essential information for your pension manager. Comprehensive climate disclosure provides credible, decision-useful information to investors, who need to understand the risks that their investments face as the climate crisis intensifies and the energy transition accelerates.
Here’s how the climate resolutions turned out at each AGM, and a recap of how each pension fund voted.
The RBC shareholder proposal reached a resolution before the meeting and did not go to a vote.
BCI, CDPQ, CPPIB, IMCO, OTPP and UPP voted for the proposal at TD. AIMCo, OMERS and PSP voted against it.
BCI, CDPQ, IMCO, OMERS and UPP voted for the proposal at Enbridge. AIMCo, CPPIB and PSP voted against it.
THE LEADERS
In general, the following pension managers voted in line with the relatively strong climate expectations they’ve set out in their proxy voting guidelines:
British Columbia Investment Management Corporation (BCI)
Caisse de dépôt et placement du Québec (CDPQ)
Investment Management Corporation of Ontario (IMCO)
Ontario Teachers’ Pension Plan (OTPP)
Ontario’s University Pension Plan (UPP).
While some pension funds disclose votes in real time, and some provide the rationale for their votes, UPP deserves special mention for putting a number of elements together in its approach to proxy voting, including:
voting in line with its strong and publicly stated climate expectations;
publicly reporting votes in real-time;
providing Paris-aligned rationale for its votes (e.g. “UPP supports this proposal because it is requesting initiatives and/or targets aligned with the goals of the Paris Agreement, including pursuing efforts to limit the temperature increase to 1.5 degrees Celsius above pre-industrial levels”); and
voting against directors on climate-related grounds (for example, UPP voted against ten of 12 Enbridge directors, explaining, “UPP does not support the election of this nominee because there appears to be misalignment between the company’s climate-related advocacy and the goals of the Paris agreement, including pursuing efforts to limit the temperature increase to 1.5°C above pre-industrial level”).
Voting against directors is an essential escalation tactic for managing climate-related risks, but UPP must acknowledge the limits of engagement with oil and gas companies, which have no credible pathway to decarbonization other than the phase-out of production and early retirement of assets. Rather than spend precious climate engagement resources on a sector that cannot or will not align with climate safety, UPP and its peers should follow the lead of international pension funds that have acknowledged that engagement of fossil fuel companies has not worked and will not work, including:
Europe’s largest pension fund, ABP, which exited oil, gas and coal investments, saying that this step was necessary “after efforts to engage with fossil fuel producers and get them to reduce their greenhouse gas emissions proved ineffective” and that fossil fuel returns have been “easy to replace ... Anyone who looks back about 10 years will see that investments in oil and gas producers did not perform exceptionally during that period;”
The Dutch healthcare pension, PFZW, whose decision “to exit fossil fuel companies that were not meaningfully pursuing a net zero transition followed a lengthy period of engagement with the sector, including through the collaborative engagement initiative Climate Action 100+;”
The Denmark public pension fund for academic employees, AkademikerPension, which concluded, “After several years, where we together with other investors have tried to get these companies to change their climate course, we have to realize that the top management in the oil and gas sector simply refuse to do so in a manner consistent with the goals of the Paris agreement.”
The Church of England Pensions Board, which found that “There is a significant misalignment between the long term interests of our pension fund and continued investment in companies seeking short term profit maximisation at the expense of the ambition needed to achieve the goals of the Paris Agreement.”
THE LAGGARDS
Our national pension fund investment manager, Canada Pension Plan Investment Board (CPPIB); the Alberta public pension manager, Alberta Investment Management Corporation (AIMCo); and the federal Public Sector Pension Investment Board (PSP or PSP Investments) all failed to vote for oil and gas pipeline company Enbridge to fully account for the emissions that will result when its customers use the fossil fuels that flow through its pipelines.
CPPIB did not provide a rationale for its vote, which is at odds with the pension manager’s acknowledgement of scope 3 disclosure gaps. In June, CPPIB joined all the Maple 8 pensions (except AIMCo—see below) in submitting joint comments on the Canadian Sustainability Standards Board’s (CSSB) proposed disclosure standards – comments which underline the importance of scope 3 disclosure for investors and “strongly encourage issuers to not delay the measurement and reporting of Scope 3 emissions.”
AIMCo, the only one of its Maple 8 peers that failed to sign on to joint comments on the CSSB standards, said it did not support the climate-related resolution because it is “currently satisfied with [Enbridge’s] disclosure.” AIMCo’s votes against climate disclosure resolutions at TD and Enbridge, combined with the pension manager’s notable absence from its peers’ joint CSSB comments, undermines the ability of stakeholders to trust AIMCo’s claims that it will “Support shareholder proposals that are in favour of improving climate reporting and other climate-related initiatives" and “Through proxy voting, vote against directors when climate action or disclosure is deemed insufficient for portfolio companies” (AIMCo’s Climate Approach, p.11).
PSP also voted against the resolutions at both TD and Enbridge. It is difficult to reconcile these votes with PSP’s public rhetoric on engaging companies on climate. PSP states in its Green Asset Taxonomy white paper that engagement milestones for owned companies include, in the near term, the development of a Paris-aligned strategy and science-based emissions reduction targets, and in the long term, “ensuring companies have a business model consistent with net-zero emissions and an effective transition plan to achieve this by 2050” (p.8). The pension manager’s Corporate Governance and Proxy Voting Principles (February 2023) state that PSP “will generally support shareholder proposals seeking enhanced climate-related disclosures”(p.16). PSP (along with BCI and AIMCo) has not yet made a commitment to reach net-zero financed emissions.
THE OPAQUE
The Healthcare of Ontario Pension Plan (HOOPP) does not disclose its individual proxy votes, despite the pension fund’s claims that it is engaging companies on climate. PSP lags on voting disclosure, with its votes for meetings that took place in April and May not publicly posted until July 2024.
Are Canadian pension funds living up to their promises to engage public companies on climate?
All Canadians who participate in the Canada Pension Plan should be concerned about our national pension manager’s failure to vote for essential climate disclosure from Enbridge. CPPIB’s vote seems in keeping with the ongoing financial support and public relations work that the fund appears to be doing on behalf of the oil and gas industry (as documented in Shift’s Industry Capture? CPPIB is not shy about spouting oil industry talking points and CPPIB Watch).
Albertans with pension funds managed by AIMCo will likely be unsurprised to see AIMCo’s votes against climate resolutions. The pension manager is still sitting at the back of the pack on climate, with no credible climate strategy and no commitment to reach net-zero emissions.
PSP members and beneficiaries can rightly ask pointed questions about why their pension manager is voting against resolutions for better climate disclosure when the fund’s own statements on climate engagement suggest that the fund would have supported these resolutions.
Members of pension funds managed by BCI, CDPQ, IMCO, OTPP and UPP should be pleased to see their pension funds managing climate-related financial risks by voting for better climate-related disclosure. However, a timebound, escalatory climate engagement process should spell out next steps for companies that fail to meet engagement milestones or demonstrate a credible transition pathway. In the case of Enbridge in particular, pension funds must now acknowledge failed attempts at engagement, learn from the company’s refusal to disclose its scope 3 emissions, and eliminate their exposure to Enbridge and its significant level of transition risk.
Credible climate engagement is just one aspect of a strong climate strategy. Encouragingly, a number of pension funds are beginning to flex their climate engagement muscles—these funds must escalate their engagement according to timebound outcomes, such as by bringing forward climate-related resolutions, predeclaring votes, voting against directors, and even limiting their positions. They must also acknowledge that they cannot “engage” the fossil fuel sector out of its core business model. Their portfolios will be better served long-term by eliminating exposure to coal, oil, gas and related infrastructure.