Unnatural Disasters Show Pension Funds’ Exposure to Climate-Related Risks
In an op-ed published in Canada’s National Observer, Shift’s Laura McGrath writes that unnatural disasters like the wildfire in Jasper illustrate how pension fund assets are exposed to climate-related risk:
The Fairmont Jasper Park Lodge, for example, is owned by the Ontario Municipal Employees Retirement System (OMERS). The Lodge holds a special place in the hearts of people around the world, who are relieved to hear that while damage is still being assessed, “many of the resort's most historically significant structures have been spared.” For OMERS pensioners, there’s another element to this relief: thankfully, they didn’t see their retirement savings go entirely up in smoke.”
But pensions stand to lose if the climate crisis keeps getting worse. It’s not just OMERS and Jasper: most of Canada’s big pensions are trying to understand and protect their assets from similar climate risks. B.C.’s public pension investment manager, British Columbia Investment Management Corporation (BCI), is noting the risks the climate crisis poses to its real estate assets, reporting that since 2021 it has sold $1.2 billion of properties facing physical climate risk.
BCI, its Alberta counterpart the Alberta Investment Management Corporation (AIMCo), and federal public service pension manager PSP Investments are joint owners of a forestry company that lost 100 hectares of forest to a wildfire last year. And BCI, OMERS, AIMCo and the Ontario Teachers’ Pension Plan (OTPP) are seeing companies in their infrastructure portfolios adapt to a new climate reality: a Washington State utility co-owned by these pension funds is warning customers it may shut off power to certain high-risk areas to avoid sparking wildfires.
It’s not a leap to say that our pension funds are going to find their mandates increasingly difficult — and eventually impossible — to fulfill in a world of climate breakdown. And that’s why they should be the first major Canadian financial institutions to put capital toward climate solutions and to stop investing new money into the primary cause of the climate crisis: fossil fuels.