Working and retired public servants from across Ontario sent a letter today to their pension manager, the Investment Management Corporation of Ontario (IMCO), seeking clarity on its confusing policy for restricting and phasing out investments in fossil fuels.

While the Healthcare of Ontario Pension Plan’s (HOOPP) newly posted 2022 Real Estate Sustainability Report provides expanded disclosure of the fund’s approach to and challenges in real estate decarbonization, it also serves to highlight how little information HOOPP has made available regarding decarbonization of other asset classes.

Canada’s largest public pension funds claim that they need to stay invested in fossil fuels so that they can use their influence to help companies reduce greenhouse gas emissions. But an analysis of shareholder votes at recent investor meetings for big banks and fossil fuel companies shows most pension funds aren’t even doing the bare minimum. Pension funds are largely voting against climate-related shareholder proposals and allowing company directors to ignore growing climate-related financial risks. Some pension funds won’t even disclose to their members how they’re voting. 

Yesterday the Canada Pension Plan Investment Board (CPPIB) released its annual report for the fiscal year ending March 31, 2023. With $570 billion in assets under management, the CPPIB is making big and growing investments in climate solutions and taking a more sophisticated approach to managing climate-related financial risks. But a close read of its 2023 annual report shows Canada’s national pension manager continues to obscure its exposure to and prolongation of the fossil fuel economy while failing to understand that its mandate will be impossible to fulfill without urgent action to avert catastrophic climate change. The CPPIB has considerable work to do to establish a credible climate strategy. Read about the good, the bad and the ugly of the climate and energy highlights from the CPPIB’s 2023 annual report.

Last month, BCI released its 2022 ESG Annual Report, which provides further evidence that BCI is responding to calls from pension plan members for increased disclosure of how it is handling climate-related financial risks. In some ways, BCI is demonstrating climate leadership in the Canadian pension sector, but a close read shows that BCI’s strategy has an overreliance on false climate solutions like carbon capture, utilization and storage (CCUS) and carbon offsets, a fatally flawed approach to engaging fossil fuel companies, and a lack of a plan to disclose credible, science-based climate plans for its growing portfolio of fossil fuel assets.

For years now, Canada’s pension plans have told their beneficiaries that their active ownership of companies holds the key to solving the climate crisis and protecting pensions from climate-related financial risks. This year’s Annual General Meeting (AGM) season is an opportunity for them to prove it through their votes on climate-related resolutions brought by shareholders of two of Canada’s biggest climate polluters– Enbridge and Suncor.

This quarter turned up the heat on pension funds and climate, kicking off with Shift’s inaugural Canadian Pension Climate Report Card and winding up with CBC profiling pension fund beneficiaries calling on their pension funds to divest from fossil fuels. In between, pension funds reported annual results, updated proxy voting guidelines, and one released a climate plan. Read on for the full stories in Shift’s Climate Pension Quarterly.

Shift welcomes measures in the 2023 federal budget to leverage private investment to accelerate the decarbonization of Canada’s economy. But we are concerned that the government’s plans place too much priority on risky, unproven technologies that at best drive incremental emissions reductions while ignoring the need to rapidly transition away from oil and gas to meet Canada’s climate commitments under the Paris Agreement. The government’s decision to mandate the Public Sector Pension Investment Board (PSP Investments) to manage the Canada Growth Fund (CGF) underscores our concerns.

PSP’s updated Sustainable Investment Policy and Corporate Governance and Proxy Voting Principles , and 2022 Green Bond Impact Report are further evidence that PSP is becoming more proactive in managing climate-related financial risks and encouraging portfolio companies to develop credible climate plans, but overall, PSP is not yet treating “systemic climate change risk” like a global emergency that could make it impossible to meet PSP’s financial obligations and invest in the best interests of contributors and beneficiaries. 

For years now, Canada’s pension plans have told their beneficiaries that their active ownership of companies holds the key to solving the climate crisis and protecting pensions from climate-related financial risks. This year’s Annual General Meeting (AGM) season is the perfect opportunity for pensions to turn those words into action through their votes on key climate-related shareholder resolutions at Canada’s largest banks.

The Healthcare of Ontario Pension Plan (HOOPP)’s new Climate Strategy puts HOOPP in a position to take a major step forward, but a close look at the details demonstrates that these targets are not yet aligned with achieving the goals of the Paris agreement.

Financial stability depends on climate stability. Canada’s financial regulators will be unable to fulfill their role of ensuring financial stability and ensuring public confidence in the Canadian financial system, including protecting the hard-earned pensions of Canadians, without putting our financial sector on track for 1.5°C.

The Canada Pension Plan Investment Board’s (CPPIB) announcement last week of its investment in a major oil and gas producer was filled with alarming greenwash claims, but Shift sees a positive development in CPPIB’s public statements that production must wind down. The only credible transition pathway for an oil and gas asset in 2023 is a phaseout trajectory in line with a 1.5°C global heating scenario.

The Taxonomy Roadmap Report from the Sustainable Finance Action Council (SFAC), released today, fails to fully live up to its promise of ending greenwash and providing clarity in financial markets as Canada grapples with addressing a global climate emergency.

OMERS’ 2022 Annual Report, released February 27, 2023, shows that the pension fund is making progress in its approach to climate-related financial risk, although significantly more action still needs to be taken. Expectations are high for OMERS’ forthcoming Climate Action Plan.

Today, Shift released its inaugural Canadian Pension Climate Report Card, which reveals that Canada’s major pension funds are not on track to protect pensions from the worsening climate crisis or to align their portfolios with a safe climate future. 

With eight of Canada's largest pension funds having committed to net-zero financed emissions by 2050 (welcome to the club, OPTrust!), the focus for 2023 is shifting from setting the net-zero goal to developing and executing strategies to achieve it. However, all of Canada's large pensions continue investing in fossil fuels, even as an October report from IEFFA shows that investments in coal, oil and gas have lost their financial rationale, and the United Nations' High-Level Expert Group on the Net-Zero Emissions Commitments of Non-State Entities concluded, “Net zero is entirely incompatible with continued investment in fossil fuels.” Read Climate Pension Quarterly #6 for the full stories.

PSP’s 2022 Responsible Investment Report, released on November 10th, demonstrates that PSP is responding to calls from beneficiaries for increased disclosure of how it’s handling climate-related risks and putting in place the building blocks to execute its Climate Change Strategy. But a close read of these documents shows that despite clear and laudable signs of progress, PSP is still falling short.

Beneficiaries of BC’s public pension plans who have been waiting over four years for the British Columbia Investment Management Corporation (BCI) to update its 2018 Climate Action Plan will be disappointed with yesterday’s weak attempt at a credible climate strategy. BCI’s 2022 Climate Action Plan instills little confidence that the province’s public pension manager is on track to align its portfolio with a safe climate future or protect the interests of beneficiaries as the climate crisis worsens.

Today, the Investment Management Corporation of Ontario (IMCO) took a big step towards a credible plan that can put it on track to meet its “net-zero by 2050 or earlier” commitment. IMCO’s new Climate Action Plan underscores growing acknowledgement from Canadian pension managers that investments in fossil fuels must be phased out to protect the global climate and beneficiaries’ retirement security.