B.C. public sector pension and insurance funds are at risk of proliferating climate change due to their failure to align with global carbon emission goals, according to a new report from a Canadian environmental watchdog.
Toronto-based Shift Action for Pension Wealth and Planet Health claims the province’s pension fund manager BC Investment Management Corp. (BCI) fares worse than most Canadian and international pension fund managers.
The corporation manages funds for over 715,000 members from the public sector, including municipal and provincial government bureaucrats, education workers and Crown corporation employees.
The corporation manages pensions for teachers, nurses, municipal employees, BC Government employees and most college and university staff, amounting to $164 billion. It also manages $43 billion of insurance funds for credit union deposits, ICBC and WorkSafeBC. Over $4 billion of public trusts and endowments round out the portfolio.
Over 2.5 million workers and retirees have money in BCI by way of pensions as well as insurance and benefit funds totalling $211 billion in March 2022.
BCI received an ‘F’ rating for having no plan to meet the Paris Agreement target of keeping global temperatures under 2.0 degrees Celsius, compared to pre-industrial levels.
BCI also received a failing grade for its failure to exclude new investments in coal, oil, gas or pipelines.
Meanwhile, BCI’s interim carbon emission targets were rated ‘D+’ for lacking consistency and containing loopholes. A key practice the corporation has adopted is to invest in companies that set their own net-zero targets by 2030. But, said the report, the “expectations lack teeth, as companies have until 2030 to comply, and even then face no consequences other than continued engagement if they have failed to progress.”
The corporation’s transparency on investments, messaging and engagement on climate change solutions received passing grades of ‘C’ or ‘C+’.
Among key fossil fuel investments, BCI has $453 million in TC Energy Corp., $240 million in Enbridge, $186 million in Pembina Pipeline Corp., $188 in Petroleo Brasiliero and $143 million in Suncor.
However, overall, the group sees “greenwashing” as commonplace across the country’s pension fund ecosystem. According to Canada's Competition Bureau, greenwashing can take many forms, "including claims, adjectives, colours and symbols used to create an impression that a product or service is ‘greener’ than it really is."
“Canadian pensions consistently tout their commitment to climate action and Paris-alignment without having made the investment, asset management and stewardship decisions necessary to follow through,” the report stated.
Overall, BCI is leaving much to the companies it is invested with. Instead of divesting, it claims it can influence companies to steer toward lower carbon emission practices.
“BCI’s ‘2022 Climate Action Plan’ missed an opportunity to set a net-zero emissions target for the portfolio, instead expressing the intention to ‘[use] our influence to drive actions aligned with the global goal of achieving net-zero greenhouse gas emissions by 2050,’” noted the January 2023 report.
BCI claims “fiduciary duty does not permit the selection or exclusion of investments predominately on values-based considerations.”
However, Shift Action noted values appeared to be front and centre when Russia attacked Ukraine and BCI divested from Russian securities last February.
“In announcing its attempts to sell its Russian securities, the investment manager referenced its organizational values, saying, ‘BCI recognizes that holding Russian securities in our portfolio is not aligned with our values as an organization nor that of our clients and our hearts go out to the people of Ukraine,’” the report stated.
Shift Action is overseeing pension funds because it says they play a central role in finance. And the group argues that investments with a climate change lens make better financial sense.
Such fund managers, it claims, have assets that are exposed to climate change risks “while their investment decisions simultaneously influence the pace and scale of decarbonization and the transition away from fossil fuels, thereby contributing to how severe climate risks will become,” the report states.
Shift Action assessed 11 Canadian pension fund managers and four international funds in its 2022 Canadian Pension Climate Report Card.
In Canada, only one pension manager has decided to phase out investments in fossil fuels to date — Quebec’s CDPQ, which committed to selling all of its $4 billion in holdings in oil producers by the end of 2022.
CDPQ received a ‘B+’ rating overall, whereas BCI got a ‘D+’ just a step above Alberta’s pension manager, which received a ‘D-’. International funds received grades of ‘B’ to ‘A-’.
“A significant gap has emerged between Canadian pension funds and leading global institutional investors in their approach to fossil fuels,” said Adam Scott, executive director of Shift Action, via a statement.
BCI vice-president of corporate stakeholder engagement Gwen-Ann Chittenden told Glacier Media via email it acknowledges climate change as a financial risk and “believes the net-zero pathway presents the most favourable long-term financial outcome for our clients.”
However, Chittenden noted BCI policies diverge from Shift Action’s assertions, particularly on divestment.
“BCI does not view broad-based divestment as an effective strategy for addressing long-term and persistent risks like climate change. Engagement is a more effective approach for initiating change and acting in our clients’ best financial interests, because ownership gives us the right to voice concerns, influence decisions, and advocate for improvements. Divestment eliminates those rights and does not encourage companies to amend their policies and practices,” noted Chittenden.