Statement from Shift on CPP's Net-zero by 2050 Commitment
For Immediate Release: February 10, 2022
STATEMENT FROM SHIFT ACTION FOR PENSION WEALTH & PLANET HEALTH ON CPP’S NET-ZERO BY 2050 COMMITMENT
Toronto, ON - CPP Investments (CPP) has taken an important step today in recognizing that the long-term success of our national retirement fund is directly linked to addressing the climate crisis.
While Shift is relieved to see the CPP finally catch up with its peers in making this essential net-zero commitment, the fund does not yet have a credible plan for achieving it.
The CPP’s announcement today and its existing climate strategy fail to recognize the obvious reality that not every company or sector has a credible or profitable pathway to achieving zero emissions in line with the urgency of the Paris climate agreement. In particular, the CPP is heavily exposed to the fossil fuel sector, reporting that 3.53% of its portfolio, or over $17 billion, was invested in hydrocarbon-dependent assets as of March 31, 2021.
Making ‘active investments’ and engaging with high-carbon companies to make a rapid transition can absolutely be an effective strategy for achieving climate goals and protecting pension wealth in specific circumstances. We expect pension funds to have a robust engagement programme. However, many companies, in particular those based on the production and transportation of coal, gas and oil, do not have viable or profitable pathways to zero emissions and are exposing the retirement savings of Canadians to unacceptable levels of climate-related financial risk. Investment managers must be prepared to divest from companies that do not respond to engagement or expose the fund to undue financial risk.
The question of the CPP holding onto high-risk fossil fuel assets is not a political one. Pension managers have a legal fiduciary responsibility to invest in the best long-term interests of their beneficiaries. The best interests of Canadians are not served by holding or making new investments in assets that face rapid, structural, and inevitable decline from growing climate-related transition risks. They’re also not served by investing in companies that are expanding fossil fuel production while lobbying to block, delay and weaken critical and ambitious government climate policy. Continuing to hold these assets in the long-term is not in the best interest of the CPP’s beneficiaries.
Using Canada’s national pension savings to finance growth in the production of oil, gas and coal also undermines our ability to achieve domestic and global climate targets. The CPP has repeatedly failed to acknowledge this reality in its climate policies, and continues to hold a number of assets which greenwash their actions and are taking us further from Canadian and international climate goals.
For example, the CPP frequently touts its ownership of Wolf Midstream, which operates the Access Pipeline System and Alberta Carbon Trunk Line (ACTL), as a carbon capture and sequestration company focused on reducing emissions. The CPP neglects to mention that $2.3 billion of its total investment in Wolf went to the transportation of bitumen and diluent to oil storage facilities, while the majority of the carbon transported by the ACTL is delivered to enhanced oil recovery projects, thereby increasing oil production and emissions. Similarly, the CPP owns a 26% stake in Civitas Resources, the largest producer of oil and gas in Colorado. Civitas says it is Colorado’s ‘first carbon-neutral oil and gas producer’, a false claim that covers only Scope 1 and 2 emissions and relies on carbon offsets. Civitas refused to disclose the origin of its offsets and explicitly said it should not be responsible for Scope 3 emissions.
The CPP’s commitment to increasing its holdings of ‘green and transition assets’ to $130 billion by 2030 is the right move, but its definition of ‘transition assets’ is not clear enough and the pension fund’s track record of conflating ‘transition assets’ with credible climate solutions is troubling. The CPP’s apparent belief that it can eliminate Scope 3 emissions from its oil, gas and coal assets is a fantasy. These examples show that the CPP either fundamentally lacks the required expertise to protect our national retirement fund from growing climate risks, or is complicit in the greenwashing of its high-carbon investments. Achieving this commitment will require a credible and transparent transition investment framework with clear interim emissions targets and an escalatory approach to engagement with high-carbon companies.
For further information about the CPP’s approach to managing climate risk and an inventory of its investments in climate solutions and fossil fuels, please see this briefing note.
Contact information:
Adam Scott, Director, Shift Action for Pension Wealth & Planet Health
adamscott@shiftaction.ca
416-347-3858
Patrick DeRochie, Senior Manager, Shift Action for Pension Wealth & Planet Health
patrick@shiftaction.ca
416-576-2701
Shift Action for Pension Wealth and Planet Health is a charitable initiative that works to protect pensions and the climate by bringing together beneficiaries and their pension funds to engage on the climate crisis.