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Canada’s $2.2T pension sector increasingly excluding oil & gas: report

Nearly half of the 11 Canadian pension funds included in the report have partial exclusions on fossil fuels. (THE CANADIAN PRESS/Jeff McIntosh)
Nearly half of the 11 Canadian pension funds included in the report have partial exclusions on fossil fuels. (THE CANADIAN PRESS/Jeff McIntosh) (The Canadian Press)

More funds in Canada’s $2.2 trillion pension sector put exclusions on oil and gas investments in 2023, according to a new report. However, Shift Action for Pension Wealth and Planet Health (SHIFT) says the Canadian industry’s “incremental progress” on climate change last year falls short of changes by U.S. and European peers.

SHIFT monitors the fossil fuel and climate-related investments of Canadian pension funds. In its second annual “report card,” the sustainable finance charity reviewed 11 of Canada’s largest pension managers, including the so-called “Maple 8,” which collectively manage retirement savings on behalf of over 27 million Canadians.

“Despite a few encouraging examples of leadership, Canada’s largest pension funds continue to invest their own members’ retirement savings in companies that are accelerating the climate crisis,” SHIFT wrote in the report released on Tuesday.

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“Canada’s pension sector remains misaligned with the scientific imperative to limit global heating to as close to 1.5 degrees celsius as possible, in-line with the goals of the Paris Agreement.”

SHIFT says eight of the 11 funds in its report have committed their portfolios to reach net-zero emissions by 2050 or sooner. However, even Canada’s most climate-aligned pension funds, Caisse de dépôt et placement du Québec (CDPQ), and University Pension Plan (UPP), were found to lag international peers.

Those include New York City Public Pensions and France’s Ircantec, which received “A-” grades in the report. CDPQ and UPP received “B+” grades. Alberta Investment Management Corporation (AIMCo) ranked last in 2023 for the second time, receiving a “D” grade. Companies were evaluated on alignment with the Paris climate target, as well as other factors, like interim emissions targets, and fossil fuel investment exclusions.

SHIFT says Ontario Municipal Employees Retirement System (OMERS) and the Healthcare of Ontario Pension Plan (HOOPP) showed the most progress in 2023. Each fund announced limited fossil fuel exclusions from their investment portfolios last year, joining UPP, Investment Management Corporation of Ontario (IMCO), and CDPQ, which says it has “essentially completed” its divestment of oil producers, according to SHIFT’s report.

“Exclusions on new investments in some fossil fuels are becoming increasingly common amongst Canadian pension funds,” the authors wrote. “Alarmingly, some Canadian pension funds chose to increase their exposure to high-risk fossil fuels in 2023.”

SHIFT points to British Columbia Investment Management Corporation’s (BCI) deal to increase its stake in a U.K. natural gas transmission transmission business, as well as CPPIB’s deal to buy a stake in a major Califorinia oil producer.

Lisa Baiton, CPPIB’s former head of global affairs, now CEO of the Canadian Association of Petroleum Producers, recently spoke to Yahoo Finance Canada about her views on institutional investment in the oil and gas industry.

“It’s really terrific that there are institutions like my former employer who have publicly acknowledged that it is possible to have meaningful net-zero commitments, while concurrently acknowledging that global demand for all sources of energy is going to continue for decades to come, [and] that have continued to unapologetically support the entire energy spectrum,” she said in an interview.

SHIFT gave CPPIB a “C-” grade in its report.

“CPPIB stands out as the biggest investor in and defender of fossil fuel investment in the Canadian pension sector,” the authors wrote. “CPPIB appears to have an ideological commitment to fossil fuel investment.”

Jeff Lagerquist is a senior reporter at Yahoo Finance Canada. Follow him on Twitter @jefflagerquist.

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