Shift Action for Pension Wealth and Planet Health

Today Shift released its second 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. Canada's largest pension funds are moving too slowly to address the climate crisis. Despite 2023 being a year of devastating climate impacts, our pension funds are making only incremental progress in protecting our retirement savings from climate risks. This second edition of the report card finds 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. Not a single Canadian pension fund has acknowledged the need to phase out fossil fuels, despite the scientific consensus that this is necessary to limit global heating to relatively safe levels. While leading Canadian pension funds, including Caisse de dépôt et placement du Québec (CDPQ), University Pension Plan Ontario, Investment Management Corporation of Ontario (IMCO) and Ontario Teachers' Pension Plan, made helpful but modest tweaks to their climate strategies in 2023, the most significant progress came from funds that were previously far behind, particularly OMERS and HOOPP (Healthcare of Ontario Pension Plan). Others, like PSP Investments, BCI and OPTrust, made incremental progress. The Canada Pension Plan Investment Board (CPP Investments | Investissements RPC) is the only pension fund to receive a lower score in any category in 2023, due to a continuing pattern of troubling public statements and fossil fuel investments that are inconsistent with a credible, science-based net-zero plan. And Alberta Investment Management Corporation (AIMCo) sits alone at the bottom of the ranking, having failed again to commit to measurable goals that could align its portfolio with climate safety.    As the global climate crisis worsens and the energy transition ramps up, Canada’s pension managers must rethink the ways they invest the retirement savings Canadians entrust to them. Managing the escalating risks of climate change requires pension managers to develop and implement credible climate plans and policies that defensively guard against losses, proactively capture opportunities, and fully align their overall investment and stewardship strategy with climate science. There is no retirement security without a safe climate future to retire into. Global greenhouse gas emissions must be slashed in nearly half in just six years. When it comes to the climate crisis, winning too slowly is the same as losing. It’s time for Canada’s pension funds to acknowledge this stark reality. Read the report and individual pension fund analyses here. https://lnkd.in/ggCruxgs

A new report from the Climate Policy Initiative finds that while positive strides have been made in European pension fund’s climate progress, a significant gap remains between commitment and action. The analysis calls for pension funds to significantly increase their direct investments in renewable energy and stresses the need for transparency, regulatory leadership, and engagement with asset managers to drive real economic change. “The impacts of (climate action by pension funds) are still far from being realised at scale, with the levels of direct and indirectly enabled investment in clean energy supply still insufficient for a Paris-aligned world when compared with similar fossil-fuel energy investments, and at odds with the COP28 agreement on transitioning away from fossil fuels,” the CPI report stated. Given their sheer scale, pension funds have a critical role in enabling a net zero transition, and by acting now, can mitigate risk exposure to stranded assets, investment devaluation, and stakeholder concern over sustainability in the face of climate change, the CPI stated. “It is clear that public sector finance alone will not be sufficient to fill the funding gap we face. Private capital can and must play a critical role if we are to achieve our climate goals. For this reason, the implementation and impact of the financial sector’s climate commitments are of paramount importance and critical to the delivery of the Paris Agreement." Read the report here: https://lnkd.in/geAvQBQn Media coverage here: https://lnkd.in/gS5y-sqd

There is no retirement security without a safe climate future to retire into. It could become impossible for our pension funds to fulfil their mandates if the world fails to rapidly phase out fossil fuels and limit the worst outcomes of climate change. It's past time that our pension funds acknowledge this stark reality and invest our retirement savings in a safe climate future.

Encino Acquisition Partners (EAP), an oil and gas holding company owned by the Canada Pension Plan Investment Board (CPPIB, or CPP Investments | Investissements RPC), is part of an industry lobby group behind an aggressive plan to finance Donald Trump's election campaign, elect Republicans in key Senate races, and secure the White House's comprehensive reversal of landmark federal climate initiatives advanced during the past four years. https://lnkd.in/dmCVbFDj A recent investigation by the Washington Post exposes how the Trump campaign pursued members of the American Exploration and Production Council (AXPC), an industry association made up of 30 oil and gas producers, for campaign donations. EAP is a member of AXPC. EAP's CEO sits on AXPC's Executive Committee. https://lnkd.in/g9XbW7sM EAP is 98% owned by CPPIB, which is part of its "Sustainable Energies" portfolio. A Managing Director of CPPIB's "Sustainable Energies" group sits on EAP's board. On Earth Day 2024, EAP announced a US$300 million commitment from CPPIB to expand fracking production in Ohio. https://lnkd.in/gYRGp3wD AXPC has drafted detailed plans to reverse a new fee on methane emissions, and reverse a half-dozen executive orders that lie at the centre of the Biden administration's efforts to combat climate change. These include efforts to make the US power grid emissions-free by 2035, eliminate subsidies for fossil fuels, limit drilling on federal land, and pause LNG export terminals. AXPC is also targeting proposed climate risk disclosure rules that are publicly supported by CPPIB. “They want to take climate out of the policy process entirely,” said Paasha Mahdavi, director of the Energy Governance and Political Economy Lab at the University of California at Santa Barbara, who reviewed AXPC's roadmap. “They want government to stop regulating climate issues and stop thinking about climate risks... They talk a lot about climate ambitions while doing something different inside their companies. If you are aligned with the Paris agreement, you cannot be part of a trade association trying to roll back these emissions regulations. Those two things are inconsistent.” The Washington Post findings raise troubling questions about the oil and gas companies bought by CPPIB using the Canada Pension Plan, and the role they play in public policy. This year, a CPPIB executive claimed that "we are not prepared to sell assets for public policy reasons. We don't make policy, we make returns." https://lnkd.in/gzvqMp2p But it's clear that CPPIB-owned oil and gas producers are indeed very interested in making public policy, and are actively financing Republican Presidential and Senate candidates that will take a wrecking ball to US climate policy.

Investors at this month's PRI in Person conference in Toronto agreed that engagement and divestment both have a role to play in decarbonization. "It was clear that the responsible investment community has arrived at the conclusion that engagement and divestment should both be on the table, and that no one-size-fits-all approach works best for portfolio decarbonization. 'The idea that [the options are] either engage or divest is a bit of an antiquated, false dichotomy and doesn’t really reflect the reality that I have as an investor,' explained Joseph Bastien, trustee at the Wikwemikong Trust. 'We buy and sell companies all the time for a variety of reasons, quite frankly.'"

Governments’ current climate policies and promises have the world on track for “catastrophic” average global warming of 2.6°C to 3.1°C, and the odds of limiting global heating to the 1.5°C target in the Paris climate agreement are rapidly shrinking toward zero, the United Nations Environment Programme (UNEP) warns in the latest edition of its annual Emissions Gap Report. “Every fraction of a degree avoided counts in terms of lives saved, economies protected, damages avoided, biodiversity conserved, and the ability to rapidly bring down any temperature overshoot,” UNEP writes in a key messaging document that accompanied the release Thursday morning. But while “it remains technically possible to cut emissions in line with a 1.5°C pathway,” delivering on that potential “would require immediate global mobilization on a scale and pace only ever seen following a global conflict.” https://lnkd.in/gsgrQPdc

This week Investors for Paris Compliance (I4PC) updated its annual net-zero progress report on Canadian life and health insurance companies, this year adding Great-West Lifeco to its ongoing analysis of Manulife and Sun Life. "The link between climate change and health is becoming clearer. And yet, these three insurers have over $90 billion combined in fossil fuel investments, nearly a quarter of their $3.7 trillion in total AUM. The contradiction this presents with their mandate to protect their clients’ wellbeing is increasingly apparent. Kyra Bell-Pasht, director of research and policy with I4PC, says the billions of dollars the life insurers are investing in fossil fuels are a contradiction to their business models focused on the health and well-being of clients. Climate impacts are already adversely affecting the health of life insurance clients, and this will accelerate without stronger action. Climate action at the three insurers remains sparse, despite their 3-year-old voluntary net zero commitments. Especially lagging is (I4PC's) newest addition, Great-West, which only reports 1% of its general account financed emissions. There are a few glimmers of hope. For example, (I4PC sees) two (relatively small) asset management subsidiaries, one each at Sun Life and Great-West, that have set relatively strong fossil fuel exclusions. More pressure for net zero progress is coming. Starting next year, these insurers, including their expansive third party asset management businesses, will be expected under OSFI’s B-15 to start disclosing their climate risks and opportunities." Read the I4PC report here: https://lnkd.in/gB2QY6TA Media coverage here: https://lnkd.in/gqYQAenZ

Many more companies and investors must join the few leaders that are calling on regulators and governments to put in place stronger laws, policies and regulations to avert catastrophic climate change. Considering their power, influence, size and mandate, it is increasingly obvious that pension funds should take the lead. A growing number of sustainable business leaders are realizing that the status quo is not working, that the multiple crises facing humanity are deepening, and that "radical changes to markets and the policies that frame them" are required to drive faster climate action. Lindsay Hooper and Paul Gilding from the venerable Cambridge Institute for Sustainability Leadership say companies should go beyond setting targets for cutting their own carbon footprints and start lobbying for sweeping, long-term rules that reshape entire markets. They point to corporate backtracking on climate targets and environmental commitments, arguing "We must become less dependent on the goodwill and good citizenship of individual business leaders, both of which can be fragile foundations for sustained commitment."

A coalition of 27 of the world's largest pension funds representing approximately US$2.5 trillion in assets under management is urging governments at the COP16 summit to introduce ambitious policies and regulations aimed at halting biodiversity loss. Caisse de dépôt et placement du Québec (CDPQ) was the sole Canadian pension manager to join the call to action. "Biodiversity has become increasingly relevant to the financial sector," said Bertrand Millot, head of Sustainability at CDPQ. "It is essential to unite stakeholders to support the transition to a more sustainable and resilient world. We need proactive policies from governments and greater collaboration between public authorities and the private sector to accelerate progress in biodiversity preservation.” Among other things, the investors are calling for corporate disclosures to be linked directly to biodiversity outcomes, not just limited to risk reporting. They argue that companies should make every effort to avoid unintended negative consequences for nature and biodiversity, and they are pressing for greater transparency in corporate lobbying on biodiversity issues. The coalition is also calling for binding regulation to prevent biodiversity loss, emphasizing that regulatory bodies must be properly resourced, and that penalties for non-compliance should be clear and enforced. Media coverage here: https://lnkd.in/eqwmA8nM Read the letter here: https://lnkd.in/gKyipNgK

Imagine if your Canada Pension Plan savings were being used to finance fracking expansion at a conservation area or park in your community. That's what CPP Investments | Investissements RPC is doing in Ohio. Encino Energy, an oil and gas company owned by the Canada Pension Plan Investment Board (CPPIB), is planning to establish new oil and gas wells in Ohio's Muskingum Watershed Conservancy District, including the public Leesville Lake area that's home to iconic muskie fishing, two marinas and a campground that hosts multiple youth camps. Ohio resident and earth scientist Julie Weatherington-Rice said it is no surprise that Encino Energy plans to venture onto public Leesville Lake lands. She said the oil and gas companies have run out of other places to expand, leaving just state parks and public lands. "Everything else that could be fracked has been fracked," Weatherington-Rice said, adding that Encino Energy is industrializing what should be untouched nature for public recreation. "Just imagine, you're in a tent in a state park, and right across the line, just a few 100 feet away, you have a drilling pad, and you have this enormous drill that is three stories high, pounding 24 hours a day with lights and noise. Just bang, bang, bang, bang, bang, bang, bang, bang." Roxanne Groff, a member of community group Save Ohio Parks, says the Leesville Lake area has already been "fracked to death." Encino Energy is 98% owned by CPPIB, which is part of our national pension fund's "Sustainable Energies" portfolio. A Managing Director of CPPIB's "Sustainable Energies" group sits on the board of Encino Acquisition Partners (EAP), Encino Energy's parent company. On Earth Day 2024, Encino Energy announced a US$300 million commitment from CPPIB in “EAP’s accelerated development of the Utica oil play.” Our national pension savings are being used to expand fracking under parks and conservation areas in Ohio, making a mockery of CPPIB's net-zero commitment and claims of sustainable investing.