Canada’s second-largest pension fund dumps its oil assets

Canada’s second-largest pension fund, Caisse de dépôt et location du Québec (CDPQ), is selling its oil assets as part of a four-pronged strategy to protect the pensions of its members as the world hurtles into an era of climate crisis.

The publicly owned pension fund manages $ 389 billion on behalf of Quebecers, and on Tuesday, unveiled its climate strategy based on four pillars.

They include tripling the value of its “low carbon” portfolio to $ 54 billion by 2025; set a carbon intensity reduction target of 60% by 2030; initiate a $ 10 billion transition fund for high-emission sectors; and divesting from oil production and pipeline construction by the end of next year.

“All the weather signs clearly show that the danger to our economies and our communities is not only growing, it is accelerating,” wrote CEO Charles Emond in introducing the strategy.

“Governments, companies and investors must act now.”

Stand.earth’s climate finance director Richard Brooks called the announcement significant for three reasons. The first is that the CDPQ manages assets worth nearly $ 400 billion worldwide, making it a major financial player. The second is that it is often seen as a leader in climate finance in Canada.

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“When you move a fund of this size, pay attention,” Brooks said.

“They were one of the funds (that) for the first time went on to look very closely at the risk that the fund is exposed to due to its assets in the fossil fuel sector and emitting industries,” he said. “They’ve come out in the past, and when you’re a trendsetter, people pay a lot of attention to you.”

The third reason Brooks called it important was because, although it is specifically a Quebec pension fund, internationally, Canada is widely viewed as a resource sector economy with significant influence from the fossil fuel industry.

“So that a pension fund in Canada makes this kind of move, which is particularly focused on oil and gas producers, is significant,” he said.

The CDPQ policy does not specifically target natural gas as it does oil, but because many fossil fuel companies invest in both, the pension plan decision is expected to affect investor confidence in these industries.

Shift Action for Pension Wealth and Planet Health Senior Manager Patrick DeRochie says pension plans have a fiduciary duty to all of their members, which means they cannot put the financial interests of older members before younger ones. . You have to responsibly manage the pensions of all members.

Because the climate will continue to break down until global greenhouse gas emissions are reduced to zero, and climate collapse will affect the stability of an economy, no investment is secure by mid-century unless the crisis is controlled. climatic, says DeRochie.

“So these pension funds that depend on GDP growth … or depend on a functioning financial system, it is in their best interest to control the climate crisis and make sure that there is a livable planet for their members if they want their investments to be successful. long term, ”he said.

Plus, it’s not just about aligning good intentions with limited financial investments. Pension plans have 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 comes close to what Canada’s total GDP is,” he said.

Canada’s GDP was recorded in about $ 2.08 trillion in 2020, about $ 100 billion less than in 2019.

“In many ways, they have more assets and money than entire governments at the national or sub-national level,” he said. “They operate infrastructure around the world and they have a real role to play as owners and operators of the infrastructure to make sure there is resilience to the changing climate, and indeed they are planning a secure future for their members. . “

Shift worked with attorneys for Ecojustice and pension plan beneficiaries to send letters to each of the 10 largest funds on Wednesday seeking information on weather risks. Attached to the letters was a legal background outlining the pension plan’s fiduciary duty to its members to protect their investments in the future, saying there is an obligation to help address the climate crisis or face potential lawsuits. The letters were signed by members of the plans, 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 otherwise face potential legal consequences,” Ecojustice attorney Andhra Azevedo said in a statement.

Earlier this year, the Office of the Superintendent of Financial Institutions (OSFI), the country’s pension regulator, said pension plans could be at risk “As perpetrators of climate change or claims made by investors, pension plan members, or other stakeholders for not taking into account the potential 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 assets worth $ 42 trillion worldwide,” he said. “That is the scale of money we need to move if we are going to be able to cut emissions in half globally by 2030 and then reach net zero by 2050.

“If the money is not ready to move and it does not move, then all the governments of the world’s plans are really handcuffed,” he said.

Climate finance on the table at COP26

Mobilizing private finance to address the climate crisis is expected to be a major topic at COP26 later this year. The United Nations conference on climate change, which has been held since 1995, 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 UN Special Envoy for Climate Action and Finance, is a key figure ahead of the conference. He directs the “private finance center” of COP26.

The private financing priorities at COP26 are expected to establish an international framework for moving huge amounts of money, essentially making investors feel more comfortable and they will see valuable returns. the strategyThe priorities refer to expanding the role of public-private partnerships.

Brooks said that a credible climate finance strategy has to be about more than just scaling up financing for renewables. You have to phase out funding for fossil fuels, because expanding fossil fuel infrastructure locks emissions in the next few years.

“You can’t build a coal-fired power plant and run it for a year and expect to make money,” he said. “The same goes for a pipe.

“So first things first, we have to stop infrastructure development.”

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, Ontario Teachers was considering the sale of Chisholm Energy, an oil and gas company valued at nearly $ 1 billion. Last week was reported Ontario’s Municipal Employees Retirement System was seeking to sell its 35 percent stake in a Chilean gas plant worth more than $ 1 billion.

John Woodside / Local Journalism Initiative / Canada National Observer