Climate Pension Quarterly - Issue #14
Handwringing about greenhushing
We can now count the days of winter lost due to climate change. Snowy days are turning into rainy days, and outdoor skating and skiing are seeing their seasons cut short. It’s yet another reminder that the climate crisis is real, it’s here, and it’s affecting every part of our lives.
It’s affecting business too. Corporations can’t ignore the fact that their strategies must change in the face of climate-related risks. Unfortunately, we’ve seen a slew of corporations pretend to change their strategy without the evidence to back it up. That’s corporate greenwashing, and it doesn’t get to the root of the problem. That’s why our pension funds and other institutional investors should embrace new rules intended to put an end to the practice.
Investors, governments and the public are demanding more corporate action on the climate crisis. But as expectations have risen, so too has greenwashing. Rather than actually changing their business models to align with climate science, some companies have found it easier to just pretend.
Here are three quick examples, each of which drew formal greenwashing complaints:
‘We’re making clear strides to net-zero’ – Oil Sands Pathways Alliance (2023).
”Sustainable energy options” – Fortis BC (2023).
“See how we can achieve net-zero together” – RBC (2021).
In an effort to end the greenwashing, Canada’s Competition Bureau called for stronger regulations. The federal government responded with Bill C-59, amending the Competition Act to grant the agency more powers to assess greenwashing complaints and levy penalties.
Oil and gas companies panicked. They scrubbed all sustainability content from their platforms and posted disclaimers on their websites. The industry and its backers claimed this was due to uncertainty around the rules (the details are still being ironed out) and protested that Bill C-59 was an attempt to silence the industry. The crocodile tears just kept flowing.
This knee-jerk reaction was an ‘own goal’. These companies knew they couldn’t stand behind the sustainability information they were providing if there were real repercussions. They had to retreat. Oil sands companies have never provided a credible path for achieving net-zero. They’ve refused to invest their own profits in reducing their absolute emissions, and they’re still aggressively fighting regulations which would simply hold them to their own promises. Their net-zero claims were obviously greenwash, and now they’ve admitted as much.
All fall, the financial sector whispered vague complaints about the “unintended consequences” of Bill C-59, worrying that companies would stop reporting sustainability information altogether. But let’s be clear that only one sector stopped reporting sustainability information: the oil and gas industry, which was unable to back up its sustainability claims.
Investors, for whom reliable, transparent reporting is not optional, should be grateful that Bill C-59 is forcing this clarity.
Investors have to be highly discerning about where they allocate capital to manage risks and opportunities. Companies that withhold basic sustainability information will get cut from portfolios or loanbooks, and see lower valuations and higher costs of capital. That’s how markets are meant to work. Far better that companies say nothing at all and face real consequences, than continue misleading markets and the public about their climate impacts, their ability to transition, and ultimately the scale of their financial risks.
Pension plan members are waiting to see how their pension funds will respond in the face of flagrant corporate greenwashing—and they’re alert to the possibility that their funds themselves might brush up against the greenwashing line.
Members of pension funds managed by the British Columbia Investment Management Corporation will be interested to note that the investment manager has reportedly reached out to select Canadian fossil fuel companies that removed their sustainability disclosures to express concerns.
Members of Ontario’s University Pension Plan may be even more encouraged to see that the fund recently announced it is “reviewing” information from 11 oil and gas companies and “will refine [its] position” in these companies as appropriate.
Conversely, the 22 million members of the Canada Pension Plan will have to decide if they can swallow CPP Investments’ saying that “climate change is an existential threat… the biggest investment risk that we face… one that we are extremely preoccupied with” in a year in which our national pension manager has committed at least $3.3 billion to new oil, gas, coal and pipeline assets.
In a sea of potential greenwash, Shift’s final Climate Pension Quarterly of 2024 brings you the scoop on how our public pension funds are managing climate-related risks and the latest news from the companies in which they invest. Click on the button below to download the issue and read all the details.
– Adam, Executive Director, Shift
P.s. As we put the finishing touches on this issue of the Quarterly, OMERS released a new Climate Taxonomy. The taxonomy provides a simple and clear categorization of assets with the purpose of “applying a climate lens” to the fund’s portfolio. OMERS rightly separates out electrical transmission and distribution utilities from the broader utilities sector, as they play a key role in the energy transition by facilitating electrification. We expect, based on this taxonomy, that OMERS would clarify that oil and gas exploration and production companies and gas utilities are off limits for both new investment and for its $3-billion transition sleeve, as the only credible transition pathways for such companies is the phase-out of production or early retirement of assets.