OMERS Climate Action Plan builds credibility, but more bold action will be required
SHIFT ACTION FOR PENSION WEALTH & PLANET HEALTH
For Immediate Release: September 7, 2023
Statement from Shift on OMERS’ Inaugural Climate Action Plan
OMERS Climate Action Plan builds credibility, but more bold action will be required
Toronto, ON | Traditional territories of the Huron-Wendat, Anishnaabeg, Haudenosaunee, Chippewa and Mississaugas of the Credit First Nation
Members of OMERS, Ontario’s municipal pension plan, will be relieved that their fund has released its inaugural climate action plan. 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.
OMERS’ plan provides some much-needed details about how the fund will work towards its commitment to achieve net-zero greenhouse gas emissions across its total portfolio by 2050. However, further detail, ambition and action will be required in future– in particular, action to end the relatively small amount of finance OMERS continues to provide for fossil fuels.
With the introduction of this plan, OMERS has significantly improved its position amongst Canada’s largest pensions on climate. OMERS received an overall D+ in Shift’s 2022 Canadian Pension Climate Report Card last January due to the fund’s lack of disclosed details regarding its handling of climate-related financial risk. While OMERS members will be glad to know their fund has been advancing its approach behind the scenes, beneficiaries want their pension fund to go further.
“I want a world where my children don’t suffer in 35°C days throughout the summer,” said OMERS member Ben Gomberg. “I want my pension fund to do everything possible, and to go faster, and not beat around the bush with just a limit on investing in coal. We must stop burning fossil fuels, and pension funds must stop financing them while pretending they’re part of a responsible future.“
Highlights of OMERS’ Climate Action Plan include:
Climate-compensation link: A formal link between compensation and climate change performance measures, including progress on implementing the Climate Action Plan, for relevant Executive Leadership Team members and all Investment Team Leads;
Credible transition plans: A commitment that the 20 companies which contribute most to OMERS’ financed emissions intensity have credible net-zero transition plans in place by 2030;
Green investment: A commitment to reach $30 billion in green assets by 2030, with reference to “some or all” of these assets’ economic activity being aligned to taxonomies such as the International Capital Market Association Green Bond Principles and Climate Bond Initiative Taxonomy. However, this target appears only to signal expected growth in the value of existing assets, not significant new allocations to climate solutions;
Transition sleeve: Increased detail regarding OMERS’ $3 billion plan to finance companies making the required transition to zero emissions: in order to be eligible for investment, transition sleeve companies must be high-carbon, pursuing decarbonization, and aligned to a net zero 2050 pathway;
Limitations on carbon offsets: A critical statement on the limitations of carbon offsets and an important commitment that carbon offsets and credits will not count towards the achievement of OMERS’ interim targets;
Coal exclusion: OMERS will exclude direct investment in companies that generate more than 25% of revenues from thermal coal. While this exclusion is a step in the right direction, OMERS remains behind its peers that have already excluded coal and oil (Caisse de dépôt et placement du Québec), announced more stringent coal exclusions (Ontario’s University Pension Plan), committed to phase out investment in unabated fossil fuel assets and limit exposure to thermal coal and Arctic drilling (Investment Management Corporation of Ontario) or promised to end direct private investment in coal and oil beginning in 2025 (Healthcare of Ontario Pension Plan).
Areas for further improvement:
Provide a credible accounting for OMERS’ fossil fuel assets. A climate plan that fails to mention OMERS’ private fossil fuel assets is incomplete. OMERS’ Climate Action Plan does not account for how its private co-ownership of fossil fuel companies like crude oil pipeline owner BridgeTex, Czech gas distributor Net4Gas, and oil pipeline and storage operator Exolum, which lack credible or profitable transition pathways, align with this plan.
Recognize that the fund’s mandate does not include balancing fossil fuel supply. OMERS rightly recognizes the “necessity to move away from fossil fuel dependency,” yet makes a questionable claim that it must acknowledge a “balance between reducing fossil fuel supply and addressing society’s demand for affordable, sustainable, and secure energy.” A pension plan’s fiduciary responsibility to its beneficiaries does not include adopting unacceptable levels of financial and societal risk to curate a false ‘balance’ in energy supply. Continuing to finance fossil fuels exposes plan beneficiaries to unacceptable levels of financial risk, and contributes to increasing systemic climate risks globally.
Place oil and gas on par with coal. Protecting pensions and the climate requires that OMERS place exclusions on and sell or wind down investments in all coal, oil, gas and related infrastructure. OMERS treats coal differently from gas, yet gas is equally climate-damaging.
Face up to the failures of investor attempts to engage fossil fuel companies. OMERS members, many of whom work in municipal planning, climate mitigation and adaptation and as first responders, increasingly see through OMERS’ claim that “divesting completely would mean that we lose our voice and influence.” Institutional investors have vastly overstated their ability to influence fossil fuel companies. The time for engagement is over. OMERS has already lowered its public equity exposure to fossil fuel companies, with just under $800 million in shares remaining as of June 30, 2023. Clearly the fund is quietly recognizing the growing financial risk and dwindling hope of fossil fuel companies profitably aligning with net-zero. OMERS should skate to where the puck is going and exclude the high-risk oil, gas and coal companies that face inevitable decline and undermine a safe climate future for OMERS members.
Formalize an Indigenous rights policy. While OMERS’ President and CEO writes in the Climate Action Plan that Canada’s energy transition must ensure “the rights and livelihoods of workers and Indigenous peoples,” OMERS has not formalized a policy requiring companies to demonstrate the Free, Prior and Informed Consent of Indigenous Peoples for projects that affect their traditional lands and waters.
OMERS members and staff should be proud that the pension fund has taken the important step of crafting an inaugural climate action plan, but plan members will continue to hold their pension fund to account. OMERS’ next climate announcement should build out its commitments to a just transition and Indigenous rights, acknowledge the limits of engagement with fossil fuel companies, and institute required exclusions.
Background information
OMERS, with $127.4 billion in assets under management as of June 30, 2023, has 559,000 active and retired members from employers including Ontario municipalities, school boards, transit systems, electrical utilities, emergency services and children’s aid societies.
This statement builds on Shift’s previous analysis of OMERS’ approach to climate, including:
Proxy Voting Analysis (June 2023)
Statement on OMERS’ 2022 Annual Report (February 2023)
Canadian Pension Climate Report Card - OMERS scorecard (January 2023)
Contact information for interview requests:
Adam Scott, Executive Director, Shift: Action for Pension Wealth & Planet Health
adamscott@shiftaction.ca
416-347-3858
Laura McGrath, Pension Engagement Manager, Shift: Action for Pension Wealth & Planet Health
laura@shiftaction.ca
647-862-7877
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.
-30-