The board managing Canada’s largest pension fund has committed an estimated $7.1 billion to new oil, gas, coal and pipeline assets in the last year despite facing litigation for allegedly mismanaging climate related financial risks in its investment portfolio.
The Canada Pension Plan Investment Board (CPPIB) released its quarterly financial report last week, showing $4.1 billion invested for a 13 per cent stake in Sempra Infrastructure, a company that develops, owns and operates fossil gas pipelines.
Another $1.4 billion was spent for a minority stake in AlphaGen, which owns and operates 23 power plants that burn fossil gas, oil, diesel and kerosene across six U.S. states. The board also spent $122 million to invest in Caturus, “a U.S.-based integrated gas-focused exploration & production and liquefied natural gas (LNG) company, through a Kimmeridge co-investment vehicle.”
On top of these $5.6 billion investments, climate-oriented pension watchdog Shift Action for Pension Wealth and Planet Health has also highlighted a $421 million commitment to private equity firm ArcLight. About 81 per cent of this firm’s energy portfolio is composed of fossil fuel companies.
Early this year, the CPPIB quietly dropped its commitment to having net-zero greenhouse gas emissions by 2050. Shift Action quickly criticized this move, saying the unaddressed climate crisis will put investment returns at risk while also endangering the very retirees the CPPIB is meant to serve.
READ MORE: Canada pension plan abandons net-zero commitment
In October, four young people, represented by lawyers from EcoJustice and Goldblatt Partners LLP, began legal action against the CPPIB for its alleged mismanagement of climate risks. The case argues that the board underestimated the financial risks of climate change which could expose future retirees to reduced retirement benefits, the need for substantially higher contribution rates, or both.
“Canadians from coast to coast are dying in fossil-fueled heatwaves and wildfires. Thousands of people are fleeing their homes and losing their livelihoods. Entire towns are burning to the ground. Still, CPP Investments is investing billions of dollars in fossil fuel expansion,” one of the applicants for the case, Aliya Hirji, said in a statement.
“I’m concerned that CPP needs to be sustainable for the next 75 years and more, but it is using my pension contributions to fund the climate crisis, then telling me I should be confident in the future of the fund. A basic understanding of climate science and economics dispels CPP Investments’ claims that investing in fossil fuel expansion is compatible with sustainability, an adequate standard of living, and a functioning economy. Our pension managers are betting against our future. We deserve better,” Hirji’s statement goes on to read.
While Shift and those involved with the legal case against CPPIB are upset about the board’s new investments in fossil fuels, the pension fund has reported growth. Its quarterly report shows a net return of 5.4 per cent which brings the value of its assets up to $777.5 billion at the end of September. The pension fund’s assets were valued at $731.7 billion at the end of the previous quarter.
Despite these gains, Shift’s senior manager Patrick DeRochie said the risks of fossil fuel investments cannot be ignored.
“You don’t call climate change an ‘existential threat’ and the ‘single biggest investment risk that we face’, and then spend the next year pouring $7 billion from the Canada Pension Plan into investments which make this crisis worse,” DeRochie said. “That’s reckless and absurd, and it underscores exactly why CPPIB is now facing climate litigation from its contributors.”
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