Since the British Columbia Investment Management Corp. is the fourth largest pension fund manager in Canada, it’s important to consider whether it’s investing its resources in a way that aligns with the country’s commitment to the Paris Agreement, according to a new report by the Canadian Centre for Policy Alternatives.
BCI isn’t investing with the goals of the agreement in mind to the extent that it should, noted the think-tank’s report. “Our research indicates that BCI’s claims of responsible investment are more talk than walk, as its actions are not sufficient considering the risks posed by climate change to its portfolios, its beneficiaries or the broader society,” stated the report.
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As of 2016, BCI held more than $3 billion in the top 200 publicly traded fossil fuel reserve holders and invests heavily in Alberta’s oilsands, according to the think-tank’s report. These heavy-carbon investments constitute “both a moral failing and a financial risk,” it noted.
The report also pointed out that BCI has previously stated that it doesn’t favour the practice of divesting from carbon-heavy companies, save for in very rare circumstances, because it removes its potential ability to engage with them for the better. The think-tank is skeptical of that reasoning as it found little publicly available evidence that engagement on the part of BCI has resulted in positive change. Further, the report noted that since $49.5 billion of the more than $135.5 billion it has under management is with external managers, BCI has limited control over that portion of assets and doesn’t require its providers to engage on environmental, social and governance issues with companies.
In an email to Benefits Canada, BCI pointed that out oil and gas makes up about 20 per cent of the S&P/TSX composite index.
“However, climate change is increasingly becoming a focus of both long-term investment risk and opportunity among global investors,” wrote Gwen-Ann Chittenden, director of communication and government relations at BCI, in the email. “And over a number of years, BCI has been researching and formalizing our approach to climate action in response to the [2C] limit.
“Our motivation is driven by our clients’ interest in having a comprehensive understanding of their exposure to climate change risks and opportunities, as well as aligning with best practices among global investors while also demonstrating our support of the Financial Stability Board’s task force on climate-related financial disclosure. BCI’s approach includes new tools and metrics and maps out our strategy for identifying opportunities and managing the risks of climate change on our clients’ investments. Our climate action plan has been delivered to clients and a public release is planned for the near future.”
Regarding future strategy, the think tank’s report highly encourages divestment from high-carbon companies, calling it the surest way to address the financial and moral risks associated with investing in the fossil fuel industry. Further, it suggested BCI should perform a portfolio-wide climate risk analysis to determine how its public equity portfolio performs in the context of the 2C temperature rise targeted under the Paris Agreement.
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