Canada’s second-largest pension fund divests its oil assets
Canada’s second-largest pension fund, Caisse de dépôt et placement du Québec (CDPQ), sells its oil assets as part of a four-pronged strategy to protect its members’ pensions as the world rushes in an era of climatic degradation.
The public pension fund manages $ 389 billion on behalf of Quebecers and on Tuesday unveiled its climate strategy built around four pillars.
These include tripling the value of its “low carbon” portfolio to $ 54 billion by 2025; set a target of reducing carbon intensity by 60% by 2030; the start of a $ 10 billion transition fund for high-emission sectors; and phase out oil production and pipeline construction by the end of next year.
“All the climate signals clearly show that the danger to our economies and our communities is not only increasing but accelerating,” wrote CEO Charles Emond in the strategy’s introduction.
“Governments, businesses and investors must act now. ”
Stand.earth’s director of climate finance, Richard Brooks, called the announcement important for three reasons. The first is that the Caisse manages nearly $ 400 billion in assets around the world, making it a major financial player. The second is that she is often viewed as a leader in climate finance in Canada.
“When a fund this size moves, you pay attention,” Brooks said.
“They were one of the funds (that) started to take a very close look at the risk the fund is exposed to because of its assets in the fossil fuel sector and emitting industries,” he said. “They’ve come out in the past, and when you’re a trailblazer, people pay great attention to you.”
The third reason Brooks called it important is that although it is specifically a Quebec pension fund, internationally Canada is widely viewed as a resource sector economy with a significant influence of the fossil fuel industry.
“So for a pension fund in Canada to make this kind of decision, which particularly targets oil and gas producers, is important,” he said.
The Fund’s policy does not specifically target natural gas like it does oil, but as many fossil fuel companies invest in both, the pension plan’s decision is still expected to affect investor confidence in these industries.
Shift Action for Pension Wealth and Planet Health CEO Patrick DeRochie say pension plans have a fiduciary duty to all of their members, which means they can’t put the financial interests of older members ahead. those of the youngest. He must responsibly manage the pensions of each member.
Because the climate will continue to deteriorate until global greenhouse gas emissions are reduced to zero and climate degradation will impact the stability of an economy, no investment will be safe to pay off. here mid-century unless the climate crisis is brought under control, DeRochie said.
“So these pension funds that depend on GDP growth… or a functioning financial system, it is in their best interest to bring the climate crisis under control and to ensure that there is a liveable planet for their members. they want their investments to be successful. long term, ”he said.
Plus, it’s not just about aligning good intentions with narrow financial investments. Pension plans hold real power over the economy, he said.
“The 10 largest funds in Canada have almost $ 2 trillion in assets under their management, and that really equates to all of Canada’s GDP,” he said.
Canada’s GDP was recorded at about $ 2.08 trillion in 2020, down about $ 100 billion from 2019.
“In many ways, they have more assets and more money than entire governments at the national or sub-national level,” he said. “They operate infrastructure around the world and have a real role to play as owners and operators of infrastructure to ensure that there is resilience to climate change, and they are in fact planning a secure future for their people. members. . ”
Shift worked with Ecojustice lawyers and pension plan beneficiaries to send letters to each of the 10 largest funds on Wednesday seeking information on climate risks. A legal backgrounder accompanied the letters outlining the pension plan’s fiduciary duty to its members to protect their long-term investments, stating that there was an obligation to help address the climate crisis or to do so. in the face of potential lawsuits. The letters were signed by plan members, including teachers, retired health workers, elected officials, students, union representatives and others.
“Pension funds must assess and act decisively to limit their exposure to climate risks or face legal consequences,” Ecojustice lawyer Andhra Azevedo said in a statement.
Earlier this year, the Office of the Superintendent of Financial Institutions (OSFI), the nation’s pension regulator, said pension plans could be at risk “as perpetrators of climate change or claims filed by investors, pension plan members or other stakeholders for failing to consider possible risks to GHG-intensive assets.
Brooks said it will be critical for pension plans and other major financial institutions to play a role in the transition to a net zero economy.
“Pension funds manage and control $ 42 trillion in assets around the world,” he said. “This is the silver ladder that we need to move if we are to be able to halve the world’s emissions by 2030 and then reach net zero by 2050.
“If the money is not ready to move, and does not move, then all the plans of the governments of the world are really in handcuffs,” he said.
Mobilizing private finance to tackle the climate crisis is expected to be a major theme at COP26 later this year. Organized since 1995, the United Nations Climate Change Conference – also known as COP, short for Conference of the Parties – brings countries together to negotiate agreements to reduce global warming.
This year COP26 will take place at the Scottish Event Campus in Glasgow, Scotland, from October 31 to November 12.
Mark Carney, former Governor of the Bank of Canada and current United Nations Special Envoy for Climate Action and Finance, is a key figure ahead of the conference. He heads the “private finance hub” of COP26.
Private finance priorities at COP26 should set up an international framework for moving huge sums of money, essentially making investors feel more comfortable seeing attractive returns. The priorities of the strategy refer to expanding the role of public-private partnerships.
Brooks said a credible climate finance strategy must go beyond increasing funding for renewable energy. It must phase out fossil fuel financing, as expanding fossil fuel infrastructure blocks emissions for years to come.
“You can’t build a coal-fired power plant and run it for a year and hope to make money,” he said. “Same thing with a pipeline.
“So first of all, we have to stop building the infrastructure. ”
Earlier this month, the Ontario Teachers’ Pension Plan announced greenhouse gas emission reduction targets for 2025 and 2030 of 45% and 67%, respectively. Reuters reported on Monday that Ontario Teachers was considering the sale of Chisholm Energy, an oil and gas company valued at nearly $ 1 billion. Last week, it was announced that Ontario’s municipal employee retirement system was looking to sell its 35 percent stake in a Chilean gas plant worth more than $ 1 billion.