Canada’s national pension plan is facing significant criticism for failing to meet its climate change commitments, while some of the country’s leading pension funds are actively working to meet their ambitious sustainability goals.
According to the Shift Action for Pension Wealth and Planet Health report released on February 19, Canada’s pension fund managers are not doing enough to align their strategies with the transition to a net-zero economy by 2050.
Fund Managers’ Progress on Climate Risks
The Canadian Pension Climate Report Card highlights that while pension fund managers have made progress in understanding and managing climate-related financial risks, few have implemented strategies that support the net-zero transition.
Shift Action specifically criticizes major pension funds such as the Canadian Pension Plan Investment Board (CPPIB) and the Alberta Investment Management Corporation (AIMCo) for their inadequate actions toward tackling these risks.
The Importance of Climate Action for Pension Funds
The stakes are high—not only for the environment but also for the financial security of Canada’s retirees. The pension system is exposed to the financial risks associated with global warming and extreme weather events, such as floods, heat waves, and droughts.
According to the report, the long-term investment horizon of pension funds makes them particularly vulnerable to climate change, which could impact the ability of these funds to fulfill their mandates. Inaction in addressing climate-related risks could jeopardize the stability of both the climate and the retirement system.
CPPIB Faces Criticism for Greenwashing
The CPPIB manages $675 billion in assets but is ranked near the bottom of the report card with a C- grade. The report highlights concerns about the fund’s greenwashing and contradictory actions, despite its apparent sophistication in managing climate-related risks.
CPPIB has set no interim targets for its net-zero goal and continues to fund oil and gas projects without providing evidence that these projects have credible pathways for decarbonization.
Shift Action Director Adam Scott claims that CPPIB’s rationale for staying invested in the oil and gas sector is misleading, as many of the companies involved have not published credible transition plans.
Scott also suggests that CPPIB’s stance may be motivated by a desire to avoid political conflict, particularly with the Alberta government, which has been pushing for autonomy in managing its public pension system.
AIMCo Receives Failing Grade
AIMCo, which manages the pensions for Alberta’s public-sector workers, also receives failing marks due to its lack of commitment to net-zero targets and failure to reduce its carbon footprint. Additionally, AIMCo has not excluded investments in fossil fuels.
The situation worsened in November when Alberta Premier Danielle Smith dismissed AIMCo’s board and appointed former Prime Minister Stephen Harper as its chair. Critics have raised concerns about Harper’s ties to a private equity firm with significant oil and gas investments.
Progress in Quebec and Ontario
Despite political resistance, some pension funds in Quebec and Ontario are making notable strides toward climate action. The Caisse de dépôt et placement du Québec (CDPQ), managing several public sector plans in Quebec, received high marks in the report card for its commitment to net-zero goals.
Similarly, pension funds in Ontario, including the University Pension Plan, Ontario Teachers’ Pension Plan, and Investment Management Corporation of Ontario, are on track to meet the Paris Agreement goals of limiting global temperature rise to well below 2°C and striving for 1.5°C.
CDPQ stands out as the only fund to receive top marks for its decision to exclude most fossil fuel investments from its portfolio, signaling a clear commitment to sustainability.
Political Pushback on Climate Action
Financial institutions globally, including Canadian banks and pension funds, are facing political pressure regarding their climate-related actions.
In the U.S., former President Donald Trump and several Republican governors have criticized financial institutions that adopt environmental, social, and governance (ESG) strategies, which aim to align investments with climate sustainability.
In Canada, the Conservative Party, leading in the polls ahead of the upcoming election, supports the oil and gas industry and has been vocal in opposition to aggressive climate policies.
This has led to backlash from financial institutions, including Canadian banks, many of which have withdrawn from climate alliances formed during the Glasgow climate summit in 2021.
Asset Owners Advocate for Climate Action
A group of 35 Canadian asset owners, representing over $53 billion in funds, released a statement urging pension funds, banks, and other institutional investors to recommit to climate action. These asset owners include family offices, foundations, and universities.
The group emphasized the need for science-based targets, the transition to net-zero, and standardized annual reporting on progress. Their statement underscores the systemic financial risks posed by climate change and the role financial institutions play in safeguarding long-term investments.
Canadian Pension Fund Performance on Climate Action
| Pension Fund | Grade | Net-Zero Commitment | Fossil Fuel Exclusion | Interim Targets | Comments |
|---|---|---|---|---|---|
| Canadian Pension Plan Investment Board (CPPIB) | C- | No | No | None | Greenwashing concerns, continues to fund oil and gas projects |
| Alberta Investment Management Corporation (AIMCo) | F | No | No | None | Failing grade, no commitment to reducing carbon footprint |
| Caisse de dépôt et placement du Québec (CDPQ) | B+ | Yes | Yes | Yes | Excludes fossil fuels, aligned with Paris Agreement |
| University Pension Plan (Ontario) | B | Yes | Partial | Yes | Commits to Paris Agreement targets |
| Ontario Teachers’ Pension Plan | B- | Yes | Partial | Yes | Aligns with Paris Agreement goals |
Canada’s pension funds are at a critical juncture, with many failing to meet their climate change commitments. While some funds have made progress, others, like CPPIB and AIMCo, remain mired in inaction and greenwashing.
The Caisse de dépôt et placement du Québec and Ontario pension funds demonstrate a path forward, showing that climate action is both possible and necessary for long-term financial sustainability.
However, as political pressure mounts, pension funds must remain steadfast in their commitment to a net-zero economy to safeguard the future of both the environment and retirees.
FAQs
What is the Canadian Pension Climate Report Card?
The Canadian Pension Climate Report Card evaluates pension fund managers’ efforts to address climate-related financial risks and their alignment with the net-zero transition by 2050.
Why is CPPIB criticized in the report?
The CPPIB is criticized for greenwashing, failing to set interim net-zero targets, and continuing investments in oil and gas projects without credible decarbonization plans.
How are pension funds in Quebec and Ontario performing?
Pension funds like CDPQ, University Pension Plan, and Ontario Teachers’ Pension Plan are leading with strong climate commitments and actions aligned with the Paris Agreement.
Why is AIMCo failing in its climate goals?
AIMCo is failing due to its lack of a clear net-zero commitment, absence of interim carbon footprint reduction targets, and continued investments in fossil fuels.