Despite it taking positive steps to assess the financial risks of climate change, report finds CPPIB still falls behind global peers
While it is taking positive steps to assess the financial risks of climate change and navigate its portfolio through the energy transition, the Canadian Pension Plan Investment Board (CPPIB) still remains one of the only pension managers analyzed in the 2023 Canadian Pension Climate Report Card that has yet to set interim portfolio emission reduction targets, says Shift Action for Pension Wealth and Planet Health, 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. Shift says CPPIB waffles on its communication of climate urgency, downplaying the systemic, existential nature of the climate crisis and the outsize role that it must play as a half-trillion dollar pension manager in keeping global temperature increases within safe limits.
CPPIB is the manager of the Canada Pension Plan (CPP). On behalf of over 21 million Canadians, CPPIB manages one of the largest investment funds in the world.
“The deep entanglement between Canada's pension funds and vested fossil fuel interests raises critical questions about the fiduciary duty of pension directors and how they're managing potential conflicts of interests when it comes to climate related policies and investment decisions,” says Patrick DeRochie, senior manager at Shift. Speaking at Shift’s webinar, Canadian Pensions and the Climate Crisis: How does your pension stack up?, he said, “CPPIB is not shy about spouting oil industry talking points. The national pension manager continues to make regular public statements that celebrate Canada’s oil and gas industry and obfuscate the scientific imperative to rapidly phase out fossil fuels. CPPIB has repeatedly stated that it is opposed to ‘blanket fossil fuel divestment’.”
CPPIB is taking positive steps to assess the financial risks of climate change and navigate its portfolio through the energy transition, however. In 2021, it set a net-zero by 2050 emissions target which includes scopes 1, 2 and 3 emissions. The investment manager developed a climate plan and issued several short reports on the energy transition and decarbonization. It built specialized cross-organizational climate expertise and is using increasingly sophisticated tools and processes to generate value from the net-zero transition. CPPIB has smartly used its ‘Abatement Capacity Assessment Framework’ to begin identifying profitable pathways for portfolio companies to decarbonize under CPPIB’s ‘decarbonization investment approach.’ Shift says CPPIB is making large and growing investments in green and transition assets, but remains a significant owner of fossil fuel assets, including those that are expanding oil and gas production.
Canadians retirement security at risk
“CPPIB is making an alarming bet on the world failing to limit global heating to safe levels, putting the Canada Pension Plan at risk from an accelerating energy transition, and Canadians’ retirement security at risk from catastrophic climate change,” DeRochie said. “The position of CPPIB and other Canadian pension funds on fossil fuels is inconsistent with what the scientific consensus says is needed to limit global heating and safe levels. The rapid phasing of oil gas and coal production and the early retirement to fossil fuel assets for investors that by definition have a long-term investment horizon and who have a legal duty to invest in the best interests of their members, including those who will retire for many decades to come. It's problematic that Canada's pension funds won't acknowledge the scientific consensus on climate change in fossil fuels.
“There is of course an important role for pension funds to invest capital in other high carbon sectors that we need and that have a viable pathway to decarbonization – like electric utilities, manufacturing, mining, transportation, agriculture, chemicals, cement, and steel – but for fossil fuels, there is no viable pathway to decarbonization other than the phase out of production and early retirement of assets like pipelines and refineries.
“The longer you wait to do this, the worst climate change gets, and the harder it becomes for pension funds to fulfill their mandate.”
To show the fossil fuels assets owned by Canadian pension funds, Shift’s 2023 Canadian Pension Climate Report Card includes charts that attempt to inventory the significant fossil fuel assets all over the world that Canadian pension funds own.
The 2023 Canadian Pension Climate Report Card assesses large Canadian pension funds on their management of climate-related risks. The report is based on publicly available information to December 31, 2023.
