Sustainable schism: Canadian pension titans diverge over climate change issues
In a recent report card by Shift: Action for Pension Wealth and Planet Health, the performance of Canada's largest pension managers in terms of climate policy was evaluated. The assessment revealed a mixed picture, with some pension managers leading the way, while others lagged behind.
The Investment Management Corporation of Ontario (IMCO), University Pension Plan (UPP), and Caisse de dépôt et placement du Québec (CDPQ) emerged as frontrunners, demonstrating a strong commitment to climate action. These leaders have adopted stricter climate benchmarks, such as the Paris Aligned Benchmark (PAB), which demands immediate and significant greenhouse gas (GHG) emissions reductions, aligning with the goal of limiting warming to 1.5°C.
On the other hand, the Canada Pension Plan Investment Board (CPPIB) and the Alberta Investment Management Corporation (AIMCo) are lagging behind. Critics have accused AIMCo of blatant political interference in its governance, seemingly driven by fossil fuel interests. CPPIB, meanwhile, continues to undermine its climate credibility through its refusal to set interim emissions reduction targets, persistent greenwashing from its executives, ongoing financing of high-risk fossil fuel expansion, and a fundamentally flawed decarbonisation thesis for fossil fuel companies.
The report card also highlighted the differences in investment policy and risk tolerance between the leading and lagging pension managers. Organizations like IMCO, UPP, and CDPQ have embedded more ambitious climate targets and disclosures, partly driven by organizational mandates and stakeholder pressure. In contrast, CPPIB and AIMCo, which manage very large pools of assets, tend to balance decarbonization goals with maintaining portfolio diversification and returns, possibly slowing aggressive climate moves.
Regulatory and disclosure environments also play a role in the varying performance. While Canadian government policies are evolving to mandate climate-related disclosures and set clear taxonomy standards, implementation timing and the degree to which pension managers integrate these policies varies across funds. Leaders may be quicker to adopt and exceed these expectations, while some managers remain in earlier phases of climate policy integration.
Strategic focus differences and scale and complexity are other factors influencing the performance gap. Some pension managers have more domestic versus global investment focuses or different sectoral exposures, affecting how actively and quickly they engage with climate policies. Larger funds like CPPIB have complex portfolios and investment mandates, making rapid or aggressive climate policy shifts operationally challenging compared to smaller or more specialized funds that can pivot faster.
The Public Sector Pension Investment Board (PSP) and the British Columbia Investment Management Corporation (BCI) have also lagged behind in the report card due to their ongoing refusal to commit their portfolios to net-zero emissions. OMERS, HOOPP, and OPTrust are in the middle of the pack, having made important incremental progress.
AIMCo has fallen further behind in the report card and is the first pension manager to receive an overall F in any of Shift's report cards. The Canada Pension Plan Investment Board (CPPIB) has seen its score drop in two categories in 2024 and is the only fund to see lower scores on any indicator two years in a row.
The Canadian pension sector is building momentum on climate issues, with leaders like IMCO, UPP, and CDPQ setting a high bar for others to follow. The upcoming years are expected to see standardization and increased climate accountability across all pension managers as government policies evolve.
Science and environmental science have become crucial factors in the Canadian pension sector's approach to climate change, as demonstrated by the adoption ofstricter climate benchmarks like the Paris Aligned Benchmark (PAB) by the Investment Management Corporation of Ontario (IMCO), University Pension Plan (UPP), and Caisse de dépôt et placement du Québec (CDPQ). On the other hand, some pension managers, such as the Canada Pension Plan Investment Board (CPPIB) and the Alberta Investment Management Corporation (AIMCo), have faced criticism for their lack of commitment to climate action, with CPPIB's unwillingness to set interim emissions reduction targets and AIMCo's perceived political interference in governance matters.
Business and finance interactions also impact the pension sector's climate performance, with some organizations prioritizing decarbonization goals while maintaining portfolio diversification and returns, and others focusing on more aggressive climate moves. The future of the sector depends on the evolving regulatory and disclosure environments, strategic focuses, and the integration of climate policies across pension funds.
