Climate Pension Quarterly - Issue #15

Protecting our retirement savings from Trump’s planet-wrecking agenda

Canada’s pension funds are confronted by reactionary forces that seek to redraw global trade routes and trample early progress on climate. The Guardian reports that U.S. president Donald Trump is taking his “drill, baby, drill” agenda beyond U.S. borders—using American tariffs and military aid as leverage to keep other countries hooked on fossil fuels.

Canada’s Big Six banks have pulled out of international net-zero alliances, as have many major US asset managers. The European Union may be in the process of somewhat weakening its world-leading regulatory framework for sustainable finance. And the destabilizing on-again off-again tariffs from Canada’s largest trading partner, the U.S., have once again sparked empty chatter about building new oil and gas export infrastructure (which is neither financially viable, nor compatible with Canada’s climate obligations). 

Carbon Tracker founder Mark Campanale summed up the political moment when he told Canada’s National Observer in February that the prevailing sentiment in climate finance right now is fear:

“Most investors are smart — they know that climate catastrophe has to be avoided. They also know the clean energy revolution is happening at scale and will drive out fossil fuels. But to say so is career suicide at this juncture.”

While this political turmoil creates noise and doubt in financial circles, it has no impact on the accelerating financial momentum of the global energy transition or the harsh realities of climate science. Anyone with a long-term view has no choice but to double down on investing in a safe climate future. 

Pension funds have the expertise and influence to provide leadership at a time of political instability

Shift’s 2024 Canadian Pension Climate Report Card, released on February 19, reminds pension fund directors and executives that “The climate crisis is subject to the laws of physics and not to four-year election cycles” and points out that “As global asset owners sitting at the top of the financial food chain, pension funds are well-positioned to provide leadership at a time of political instability.” As detailed in the report, all of the examined Canadian pension funds have acknowledged the risks posed by the climate crisis, but the funds vary greatly in their willingness to publicly push governments, asset managers and portfolio companies toward climate alignment.

It is encouraging to see several leading pension funds show, through words and actions, that they are willing to embrace this role. In a high-profile example of an asset owner responding to US asset managers’ retreat from climate ambition, the People’s Pension, one of the UK's largest pension funds, pulled £28 billion from State Street and handed it instead to asset managers “with a focus on responsible investment”.

In Canada, Bertrand Millot, head of sustainability for the Caisse de dépôt et placement du Québec, emphasized the inevitability of climate action because “the planet is going to keep reminding us that something needs to be done.” The Quebec pension manager’s $10-billion acquisition of the renewable energy company Innergex can be seen as an example of Millot’s description of the role that “patient capital” can play in the energy transition.

Canada’s national pension manager continues implementing its fundamentally flawed decarbonization thesis

Some Canadian pension funds are still betting on climate failure. According to Shift's analysis of the fund’s most recent quarterly results, the Canada Pension Plan Investment Board invested US$807 million in fossil fuel expansion in the United States in the final quarter of 2024. Canada’s largest pension fund is also a key backer of a proposed fossil gas export project on Louisiana’s Gulf Coast that has been revived by the Trump administration after seeing its approvals paused under Joe Biden.

Meanwhile, OPTrust seems to be flagrantly violating the spirit of its climate commitments. Its portfolio company Kineticor Holdings LP #3 has announced plans to develop a massive 1,800-megawatt gas-fired power plant near Edmonton that would lock in the use of fossil gas in Alberta for decades to come. This, despite the Ontario pension fund stating in its 2024 Funded Status Report, released on March 11, that “Climate change represents a pervasive threat that demands urgent action, and we are committed to building a resilient portfolio aligned with the global economy’s path towards net zero” (p.33) and saying on its Responsible Investing webpage that, “As the world transitions to new energy sources and is impacted by extreme weather events, keeping environmental considerations at the forefront of investment decision-making is key to long-term success.”

Canada’s pension fund managers should not allow near-term political and economic uncertainty to obscure the enormous climate risks to their portfolios. The UK’s Institute and Faculty of Actuaries recently warned that, without immediate action from political leaders, the global economy could see GDP losses of 50% between 2070 and 2090—the years when today’s youngest workers will be entering retirement. And, in a reminder of looming transition risks, Australia’s energy regulator has rejected a Canadian-pension-owned gas utility’s bid to charge customers an extra AUS$70 million to recover the cost of pipeline assets left stranded by a state government’s electrification policies.

These are a few of the stories covered in this issue of the Climate Pension Quarterly. Click here to read the full issue.

-Kevin Philipupillai, Research Lead, Shift