Analysis of BCI's 2022/2023 Annual Report
BCI, the $233 billion pension manager for 725,000 public sector employees, including teachers, health care workers, college and university staff, and provincial and municipal public servants, released its 2022-2023 Annual Report last week. Here’s a recap:
The Good:
BCI strengthened its proxy voting guidelines on climate, including a requirement that public companies integrate climate assumptions and risk evaluations into their audited financial statements (82). BCI cast votes against 261 directors across 197 companies for reasons including inadequate disclosure of climate-related financial risks or lacking a strategy to manage climate risks (82).
In April 2023, BCI filed a shareholder proposal aimed at Imperial Oil, asking for a financial assessment of the company retiring its fossil fuel assets in line with meeting a net-zero by 2050 pathway.
In September 2022, BCI made a joint submission to Environment and Climate Change Canada regarding emissions from the oil and gas sector, urging the government “to adopt the most practical and effective regulatory changes, in order to incentivize emission reduction innovation and implementation to further limit climate change and to reduce systemic risk in our portfolios.”
BCI calculates its “climate-related opportunity exposure” as $11.1 billion, an increase of almost a billion dollars over 2021. BCI’s new methodology has loopholes as it would allow companies who generated as little as 10% of their revenue from a climate-aligned product to be counted toward BCI’s climate-related opportunity exposure.
The Bad:
BCI’s disclosure makes it impossible for pension plan members to understand how exposed their portfolio is to oil, gas, coal and pipelines.
In January 2023, BCI completed its joint acquisition of a 60% stake in National Gas Transmission, a 7,600-km network of fossil gas pipelines in the UK. This acquisition raises serious questions about BCI’s understanding of the need to phase out fossil gas, particularly in regard to the role of hydrogen in the transition away from fossil fuels and the economic risks associated with owning potentially stranded assets (23).
BCI has not yet committed to achieving net-zero across its portfolio. However BCI is reducing the emissions intensity of its public equities portfolio in line with its target (a 30% emissions intensity reduction by 2025 below 2019 levels).
BCI has not yet begun calculating its portfolio’s scope 3 emissions, which are the largest source of emissions for many businesses, particularly oil, gas and pipeline companies (87).
BCI’s lack of a net-zero emissions commitment, failure to implement a fossil fuel exclusion, and continued investment in fossil fuels and related infrastructure demonstrate that the fund is not yet aligned with the goals of the Paris Agreement. BCI acknowledges that “over the long term, an orderly transition to a low-carbon economy that is aligned with a net-zero (1.5 °C) scenario will ultimately benefit client portfolios” (79). In order to fulfill its mandate, BCI must make investment and asset management decisions that actively contribute to achieving this scenario.