Ontario pension holders want climate clarity from fund manager

Members of Ontario's Public Service Pension Plan want clarity on how one of the province’s largest pension fund managers is actually implementing its climate commitments.

The Investment Management Corporation of Ontario (IMCO), which manages over $73 billion in assets, released a climate action plan last year detailing its plan to cut or cancel out its greenhouse gas emissions by 2050. At the time, Shift Action for Pension Wealth & Planet Health said it was rife with “weasel words” and lacked clarity. Shift Action is a charitable initiative that tracks how well pension funds are aligning their investments with climate goals and educates Canadians on how to push their pension fund to stop investing in fossil fuels.

Now, some beneficiaries of Ontario's Public Service Pension Plan, including Toronto Coun. Dianne Saxe, have signed an open letter organized by Shift Action asking IMCO to detail what the fund will actually do to protect the planet and their pension from climate change.

“What the pension funds do with these large amounts of capital is enormously important on whether we get anywhere near that goal of a livable future or we don't,” Saxe said in a phone interview with Canada’s National Observer. Saxe is the former environmental commissioner of Ontario and receives a pension that's managed by IMCO. She noted that a lack of clarity is a hallmark of most pension funds’ climate plans.

IMCO declined a request to comment on the open letter.

“We have seen a number [of pension funds] make sort of grand announcements that, ‘Oh, yes, we're going to be great later,’ but without specificity about how they're going to measure this,” said Saxe. Pledges to achieve net-zero emissions are becoming increasingly popular among companies, governments, pension funds and more. While the United Nations defines net zero as cutting emissions as close to zero as possible and offsetting the remaining pollution, these targets have increasingly come under fire as businesses and governments lean more heavily on carbon offsets — like investments in tree planting and nature-based climate solutions that sequester carbon over time — that are not always as effective at cancelling out climate pollution as advertised.

For a pension fund to reach net zero, like IMCO and many others have committed to, its investments must not contribute to global greenhouse gas emissions when emissions are tallied up across its portfolio.

“They keep saying, ‘Oh, don't worry, don't worry, everything is fine.’ I'm not satisfied,” said Saxe. “We certainly don't have enough evidence to believe that we should just trust them.”

IMCO’s climate action plan, released in November 2022, says it has “climate guardrails” in place that will limit “exposure to investments that are incompatible with a net-zero future.”

These guardrails include a pledge to phase out new investments in developing new infrastructure for unabated fossil fuels — coal, oil and gas extracted without capturing the planet-warming emissions that happen during their production. The pension fund manager also vows to “limit exposure to investments in thermal coal mining and Arctic drilling.”

As the world transitions away from fossil fuels — like the International Energy Agency and the Intergovernmental Panel on Climate Change say must happen — investments in these costly projects will become worthless.

The open letter is packed with questions, like: What categories of investments does IMCO consider incompatible with a net-zero future, how much does it plan to limit exposure to those investments and what timeline is in place to do so.

It asks for a response from IMCO by the end of the month.

“I will give [IMCO] credit for being one of the more transparent and forthcoming pension funds,” said Patrick DeRochie, senior manager at Shift Action. He noted that in the past, IMCO has given “very detailed” responses to questions posed by beneficiaries about how the fund manages climate risks.

Following the toxic tailings scandal at Imperial Oil’s Kearl site in Alberta, IMCO voted against Miranda Hubbs when she was up for re-election as a director of Imperial Oil, as did the British Columbia Investment Management Corporation, another pension fund invested in the oil company.

Other than the vague climate guardrails, DeRochie says Shift Action is “actually pretty impressed” with IMCO’s climate plan. In it, IMCO says it will reduce carbon emissions relative to the products and operations of the organizations in its portfolio 50 per cent by 2030. The pension manager will also invest 20 per cent of its assets in “climate solutions” by 2030.

“If they have chosen to actually limit and phase out investments in fossil fuels, then they deserve credit for that,” said DeRochie.

The letter also asks about what role Brian Gibson — IMCO’s board chair, who is also on the board of directors at Precision Drilling, the largest oil and gas drilling rig contractor in Canada — had in the creation and approval of the climate plan. Many pension funds have at least one board member who also sits on the board of a fossil fuel company, according to research done by ShiftAction in May 2022.

IMCO is “doing a lot of good things on climate, and we do see them kind of emerging as a leader,” said DeRochie. “And that's why it's just so disappointing to see this weird, meaningless, confusing fossil fuel exclusion policy they have.”

Natasha Bulowski / Local Journalism Initiative / Canada’s National Observer