CPPIB critiqued for investments in carbon intensive companies

copyright: 123rf_Kitiyud Phornphibul

The Canada Pension Plan isn’t taking sufficient action to address climate change, according to a new report by the Corporate Mapping Project and the Canadian Centre for Policy Alternatives.

Specifically, the report said the CPPIB isn’t investing with the goal of limiting the global rise in temperature to 1.5 degrees Celsius.

“Within its public equities portfolio, the CPPIB has over $4 billion invested in the top 200 publicly traded fossil fuel reserve holders,” said James Rowe, associate professor in the University of Victoria’s School of Environmental Studies and a co-investigator with the Corporate Mapping Project, in a press release. “To stay within 1.5 degrees, these companies can extract only 71 billion tonnes of carbon dioxide, yet the companies the CPPIB is invested in have 281 billion tonnes in reserve, meaning they have almost four times the carbon reserves that can be sold and ultimately burned to stay within 1.5 degrees.”

Read: CPPIB sustainability report shows increased investments in renewable energy

The report argued the continued profitability of some of the companies in which the CPPIB invests depends on their overshooting appropriate carbon budgets.

It also suggested the CPPIB’s disclosure efforts are insufficient, in terms of exactly how it integrates environmental, social and governance issues into its investment processes. In particular, it noted the CPPIB doesn’t disclose the ESG practices of external management companies it works with, which comprise a hefty chunk of its overall portfolio.

The report recommended that the CPPIB take three actions. First, it should “carry out a portfolio-wide risk analysis in the context of the climate emergency and disclose all findings to pension members.” Second, it should freeze new investment in fossil fuels, develop a plan to remove high-risk companies, such as coal producers, from its portfolio and divest sector-wide, reinvesting the capital in renewable energy. And finally, the report said the CPPIB should advocate for strong climate policy.

“While pension plans are incapable of preventing such changes on their own, managers of these plans can become strong advocates for climate policy that is in alignment with their intergenerational fiduciary duty,” it said.

The CPPIB was unable to comment by the time of publication.

Read: Canadian actuaries calling for mandatory financial reporting around climate change

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