In this Climate Pension Quarterly: a Climate Approach from AIMCo, OMERS’ 2023 Annual Report, updated proxy voting guidelines from OTPP and UPP, updates on the Canada Pension Plan’s oil and gas companies, and much more.

CPPIB has tens of billions invested in fossil fuel companies that are expanding and prolonging the use of oil and gas. The actions of these companies do not appear to align with the CPPIB’s climate commitments, and expose our national retirement savings to unacceptable risk as the fossil fuel industry faces terminal decline and the energy transition accelerates.

Here’s what some of the CPPIB’s fossil fuel companies have been up to in the last quarter.

OMERS took a significant step forward in 2023 by releasing its Climate Action Plan. But the pension manager still has work to do to strengthen its ambition, demonstrate actual emissions reductions in its portfolio and the real economy, improve its climate engagement and disclosure, safeguard significant investments from physical and transition risks, and place exclusions on new fossil fuel investments. Shift looks forward to OMERS improving on these measures and providing further updates to its beneficiaries.

Today, Shift released its annual Canadian Pension Climate Report Card, an independent benchmark for evaluating the quality, depth and credibility of climate policies for 11 of Canada’s largest pension managers.

This second edition finds that despite incremental progress, Canadian pension funds remain off track, especially compared to international peers. Far more work is needed to ensure Canadian pension managers fulfill their fiduciary duty to invest in plan members’ long-term interests and protect Canadians’ retirement security in a pathway aligned with the Paris Agreement goal of limiting global heating to 1.5°C.

The recent actions of four companies, on whose boards Ontario Teachers’ Pension Plan Director Deborah Stein sits, are indicative of an oil and gas industry that is expanding fossil fuels, lobbying to block government climate action, and fighting tooth and nail to prolong the use of fossil fuels. These companies are acting in ways that directly undermine the OTPP’s commitment to net-zero emissions and the rapid transition away from fossil fuels that is required to protect the retirement security of working and retired Ontario teachers. A year after Ms. Stein joined the OTPP Board, let’s take stock of what the companies on whose boards she sits have been up to in 2023.

In this Climate Pension Quarterly: a new Climate Transition Investment Framework and Climate Stewardship Plan from UPP, a climate change strategy update from OPTrust, and a busy quarter for the CPPIB, which highlighted its growing oil and gas investments on the first day of COP28, an international conference at which the world agreed to transition away from fossil fuels. All that and much more in this edition of the Quarterly.

With its Climate Transition Investment Framework, UPP continues to ignore the scientific imperative to phase out fossil fuels. Ongoing failure to name the primary cause of the climate crisis and clearly signal to markets the need for a phase-out of fossil fuels will undermine the important climate leadership UPP is otherwise demonstrating in Canada’s financial sector.

Climate Engagement Canada’s (CEC) first Net-Zero Benchmark company assessments reveal how off-course Canada’s top carbon emitters are in aligning with climate safety and respect for Indigenous rights. With this valuable data in hand, CEC investors must double down to engage companies forcefully and with escalation. At the same time, investors should not waste their time trying to engage the oil and gas sector, which has no profitable or credible pathway to net-zero other than phasing out production.

As the scientific imperative to phase out fossil fuels dominates discussions at the global climate conference, CPPIB highlights its growing oil and gas investments

While some encouraging elements are included, OPTrust’s Climate Strategy update and 2022-2023 TCFD report demonstrate a process-heavy approach that has resulted in few hard climate targets and no progress toward excluding new investments in fossil fuels, thus demonstrating that the fund is still struggling to align its $25-billion portfolio with the goals of the Paris Agreement.

The University Pension Plan’s new Climate Stewardship Framework represents one of the strongest approaches to climate-related engagement and stewardship in the Canadian pension sector, reaffirming UPP’s position as a climate leader. But UPP shies away from taking the necessary and Paris-aligned step of excluding fossil fuels from its portfolio, something that its members, including sustainable finance experts and climate scientists, have demanded since the plan’s inception.

Read the op-ed from Patrick DeRochie, Shift’s Senior Manager, in Corporate Knights.

“By pledging to grow its portfolio of oil and gas assets, CPPIB is making an alarming bet on the world failing to limit global heating to safe levels, putting the CPP at risk from an accelerating energy transition and our retirement security at risk from catastrophic climate change.”

Yesterday's Fall Economic Statement (FES) from the Government of Canada included several noteworthy updates in the world of sustainable finance, climate change and pensions.

In this Climate Pension Quarterly: a new climate plan from OMERS, the riskiness of carbon markets (attention: Canada Pension Plan Investment Board), and the foreseeable climate-related financial risks for Canadian pension funds who stocked up on European gas pipelines (attention: British Columbia Investment Management Corporation and Ontario Teachers’ Pension Plan).

At a quick glance, HOOPP members might mistakenly assume that HOOPP’s climate plan and net-zero emissions commitment mean that their retirement savings are no longer invested in the coal, oil, gas and pipeline companies whose products are fuelling the climate crisis. But that’s not the case.

After the hottest summer in recorded history, with municipalities across Canada facing wildfire evacuations, air quality warnings, extreme heat and flooding, it is encouraging to see OMERS taking many required steps to protect pensions and the climate in the face of the worsening climate emergency.  However, further detail, ambition and action will be required – in particular, action to end the relatively small amount of finance OMERS continues to provide for fossil fuels.

Working and retired public servants from across Canada sent a letter today to Prime Minister Justin Trudeau and his Cabinet asking them to remove Imperial Oil Director Miranda Hubbs from the board of the Public Sector Pension Investment Board (PSPIB) with cause. 

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. 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.

The reputation of some of Canada’s largest public pension funds as responsible investors with a record of due diligence, strong corporate governance and environmental oversight is being challenged this summer by the collapse of Thames Water, the United Kingdom’s largest water utility that services 15 million people. Partly owned by OMERS and BCI, Thames Water has become a poster child for a British water industry under fire for its poor environmental record and financial mismanagement.

A company privately owned by the Canada Pension Plan Investment Board (CPPIB) announced this morning that it’s spending CA$6.2 billion to increase its oil production by 60%. Ongoing, reckless investment in fossil fuel expansion by Civitas Resources (Civitas) makes a mockery of the CPPIB’s net-zero emissions commitment and gambles the retirement savings of millions of Canadians on climate failure.