Canadian pension funds must bolster climate plans, report warns

A new report says pension funds' plans do not do enough to ensure retirement security and the climate

Canadian pension funds must bolster climate plans, report warns
Steve Randall

The balance between ensuring the retirement security of Canadians and protecting against climate change is not being adequately planned by pension funds.

That’s the claim in a new report from non-profit Shift Action for Pension Wealth and Planet Health which says 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. 

Specifically, the report says that there are inconsistencies in plans in terms of transparency, detail, ambition, and even urgency. It warns that far more must be done to ensure that pension managers are fulfilling their fiduciary duty to invest in plan members’ best long-term interests and protect their retirement security in a world that limits global heating to 1.5°C.

Adam Scott, executive director of Shift, says that there is now a significant gap between how the Canadian pension sector views fossil fuels and the action taken by some global institutional investors.  

“While investors around the world have explicitly recognized the urgent imperative of a rapid phase-out of fossil fuel investments to protect their beneficiaries’ financial interests, the Canadian pension sector still clings to an unfounded belief that ongoing investment in oil and gas is somehow part of the energy transition,” he said.

Canada’s laggards

The report says that the Alberta Investment Management Corporation (AIMCo) is the worst-ranked pension manager as it has not set a “basic science-aligned climate objective.”

It adds that only one Canadian pension has followed expert advice to phase out investments in high-risk fossil fuels to date - the CDPQ, which committed to selling all of its $4 billion in holdings in oil producers by the end of 2022.

Also named are the Healthcare of Ontario Pension Plan (HOOPP) and the Ontario Municipal Employees Retirement System (OMERS) with Shift stating that these organizations still lack meaningful plans to achieve their climate change objectives.  

Shift’s Canadian Pension Climate Report Card warns that retirees should be concerned about the security of their pension funds held by firms without strong climate plans and the impact that their funds are having on climate change.

“The full participation of financial institutions in climate action is inevitable, both to protect the funded status of pensions and to prevent a worsening global climate catastrophe,” says Laura McGrath, Shift’s Pension Engagement Manager. “Given the escalating financial risks and potential for catastrophic climate disruption, there is no justification for further delays in developing and implementing credible climate plans.”