The Caisse de dépôt et placement du Québec received the highest mark in a report card grading the climate strategies of the 11 largest public pension investment organizations in Canada.
The Caisse’s strategy, which received a B+ from Shift Action for Pension Wealth and Planet Health, was praised for including provisions to divest its portfolio of oil producing companies by the end of 2022; prohibiting investments in new crude oil pipelines; setting interim targets in multiple areas and reporting on that progress; and tying executive and staff compensation to the achievement of climate targets.
“CDPQ clearly communicates climate urgency, acknowledges the role it can play as an investor in addressing the climate crisis and centres its climate commitments in its investment strategy,” noted the report.
With a B, the Ontario Teachers’ Pension Plan and the University Pension Plan shared second place, while the Investment Management Corp. of Ontario took the fourth spot with a B-. The Public Sector Pension Investment Board received a C, placing fifth, just ahead of the Canada Pension Plan Investment Board, which earned a C-. Three plans — the British Columbia Investment Management Corp., the OPSEU Pension Trust and the Ontario Municipal Employees’ Retirement System — received D+ grades, sharing seventh place. With a D, the Healthcare of Ontario Pension Plan placed 10th, while the Alberta Investment Management Corp., with a D-, was last.
The report criticized the AIMCo’s strategy for failing to acknowledge that its investment decisions affect the climate and failing to establish Paris Agreement-aligned emissions targets backed by a credible climate strategy. However, the report more warmly received the organization’s stewardship process. “AIMCo outlines an [environmental, social and governance] engagement and escalation process, which includes the possibility of divestment. However, it’s not clear what would lead AIMCo to escalate its engagements as the pension manager has articulated no goals, expectations or timelines for its climate engagements.”
The report also suggested that the AIMCo is downplaying the urgency and severity of the climate crisis. For example, the word “climate” wasn’t mentioned during the board chair’s message in its 2021 annual report, though it did appear in the chief executive officer’s message. “AIMCo doesn’t yet seem to grasp the urgency and severity of the climate crisis, hasn’t identified a role for itself in addressing the systemic risks posed by climate change and hasn’t centred the climate crisis in its investment strategy.”
In a statement provided to the Canadian Investment Review, the AIMCo said the report created “misperceptions” about the ESG strategies pursued by Canada’s largest pension investment organizations. “As a long-term investor, AIMCo considers all aspects of environmental, social and governance factors throughout the investment process. We remain committed to full transparency in how we do business — ensuring that our commitments are reflected in our actions.
”The report only helps to create further misperceptions of the rigour behind how Canada’s largest public institutional investors arrive at investment decisions and lacks a sophisticated understanding of our respective fiduciary obligations to those we serve.”
Shift Action also found fault with all of the investment organizations — except for the Caisse, the IMCO and the UPP — for failing to join credible and accountable Paris Agreement-aligned investor bodies. It recommended they join one of two organizations: the Net Zero Asset Owner Alliance or Paris Aligned Investment Initiative. Membership in another organization, the United Nations-backed principles for responsible investment, didn’t provide a benefit to overall scores.
“The reason we highlighted NZAOA and PAII, in particular, is because they are the only investor bodies that actually require signatories to take clear action . . . , like pursuing 1.5C alignment, setting clear emissions reduction targets on prescribed timeframes, achieving real economy emissions reductions, covering scope 1, 2 and 3 emissions, aligning policy advocacy with net zero by 2050, publishing a clear climate action plan within one year of joining and clarifying that offsets should be used only when viable alternatives aren’t available,” wrote Patrick DeRochie, senior manager of Shift Action, in an email to the Canadian Investment Review.
The report also highlighted three public pension investment organizations for what Shift Action considers the most egregious examples of greenwashing. “. . . We’re assigning three stars to the Canadian pension funds whose recent actions best meet the definition of greenwashing. PSP Investments receives the bronze star, Ontario Teachers’ takes the silver star and [CPPIB] gets the gold star for misleading [its] members and Canadians on [its] approach to climate action.”
In the citation for the CPPIB’s gold star, the report criticized the investment organization for making significant investments in the fossil fuel sector through subsidiary companies. It also criticized the CPPIB for investing in carbon capture utilization and storage projects and carbon credit schemes — technologies that Shift Action described as “false climate solutions.”
“The gold star for greenwashing goes to CPPIB, due to its alarming and ongoing pattern of communications, investment decisions and stewardship approaches that misrepresent the potential for the oil and gas industry to align with stated climate obligations,” stated the report.
“Our portfolio is committed to being net zero of greenhouse gas emissions across all scopes by 2050 and our internal operations to being carbon neutral by March 31, 2023,” wrote the CPPIB in a statement to the Canadian Investment Review in response. “We continue to invest in and exert our influence in the whole economy transition as active investors, rather than through blanket divestment. We will continue investing in companies that are committed to a whole economy transition and that are advancing climate change solutions across every sector of the economy.
“We continue to send clear messages that boards need to hold management to account to develop credible transition plans. Importantly this also means providing capital to support these companies in executing these plans when they develop them. We will finance early-stage climate solutions, we will scale green technologies as they become commercial and we will provide transition financing to support the greening of grey sectors.”