The following is a statement published by Shift Action for Pension Wealth & Planet Health on November 24, 2022.
Toronto, ON | Traditional territories of the Huron-Wendat, Anishnaabeg, Haudenosaunee, Chippewas and Mississaugas of the Credit First Nation – Beneficiaries of BC’s public pension plans who have been waiting over four years for the British Columbia Investment Management Corporation (BCI) to update its 2018 Climate Action Plan will be disappointed with yesterday’s weak attempt at a credible climate strategy.
BCI’s 2022 Climate Action Plan instills little confidence that the province’s public pension manager is on track to align its portfolio with a safe climate future or protect the interests of beneficiaries as the climate crisis worsens. BC teachers, healthcare workers, provincial and municipal civil servants and other government employees should be concerned that their pension manager is failing to keep up with the climate ambition of other Canadian and global pension funds.
As a $211-billion asset manager that already owns billions of dollars in oil and gas assets and continues to invest in fossil fuel expansion, BCI is choosing to wait for others to take the lead on climate action and decarbonization. In contrast to the progress shown by some other Canadian pension managers, there is little to celebrate in BCI’s 2022 Climate Action Plan. The plan’s shortcomings include:
- Still no commitment to net-zero emissions by 2050 or sooner, in contrast to seven other Canadian pension funds that have net-zero targets.
- No interim targets for reducing total portfolio footprint, beyond a target to reduce the carbon intensity of BCI’s public equity portfolio 30% by 2025, a target BCI announced nearly two years ago. Regarding its portfolio’s carbon footprint, BCI says that it has an “expectation that it will decrease over time,” making it impossible for beneficiaries to hold BCI accountable.
- Still no targets for investments in climate solutions, apart from an unclear commitment to invest $5 billion in “sustainable bonds, including green bonds, by 2025.” This comes in stark contrast to the Climate Action Plan released earlier this week by IMCO, Ontario’s public service pension manager, which committed to invest 20% of its portfolio in climate solutions by 2030.
- BCI’s methodology for measuring and categorizing investments in “climate solutions” is incomplete and problematic, with BCI indicating that “This metric will count 50 per cent of BCI’s exposure to companies that generate over 10 per cent of their revenue from aligned products and services, and 100 per cent of exposure for companies with over 50 per cent of their revenue meeting the criteria” (p.10). This essentially means that a coal-fired electric utility or oil and gas producer that happens to generate 10% of its revenue from renewable energy would be considered a climate solution by BCI. Beneficiaries will have no idea if BCI is counting its investments in the biggest carbon polluters in the world as “climate solutions.”
- A failure to recognize double materiality: BCI’s portfolio is exposed to climate-related financial risks while its investment decisions simultaneously influence the pace and scale of decarbonization and the transition away from fossil fuels, thereby contributing to how severe those climate risks will become.
- A weak commitment to ensure that its “carbon-intensive investments” (defined as the “approximately” 90 companies that make up 80% of BCI’s portfolio carbon footprint) have “set mature net-zero aligned commitments, or are the subject of direct or collaborative climate engagement by BCI” by 2030. This suggests, alarmingly, that BCI plans to continue investing in high-risk fossil fuel companies in 2030 and beyond, even if another eight years of engagement efforts fail to achieve climate alignment. BCI says that currently 25% of its carbon-intensive investments have a “mature commitment”, 53% have an “emerging commitment” and 22% have “no commitment”.
- BCI continues to emphasize its efforts to engage with the most carbon-intensive investments in the portfolio to drive action towards net zero. But these engagement efforts appear to be nothing more than a baseline that any responsible investor would have been doing for years. There is no indication that BCI’s engagement and advocacy efforts have resulted in even a single oil and gas company aligning its business model with a safe climate future. It is difficult to understand why BCI would continue to pursue this engagement strategy into 2030 and beyond, while explicitly writing off the critical tool of divestment for unfounded reasons (p.13).
- BCI acknowledges the importance of limiting global temperature increase to 1.5℃, saying that “the net-zero pathway presents the most favourable long-term financial outcomes for our clients” (p.1). BCI reports that it has expanded “its ESG Risk and Opportunity Framework with updated climate change scenarios” (p.7) and undertaken scenario analysis to determine how to “maximize the likelihood of achieving client objectives in all future climate scenarios” (p.4). The notion that BCI can deliver retirement security to its clients in “all future climate scenarios” is absurd. Planning for anything more than 2℃ of global heating consigns millions of BC pension plan members to a future of catastrophic impacts. BCI itself reports that a long-term 2℃ scenario will result in a 5.2% portfolio loss based on 2021 AUM (p.8)– the equivalent of nearly $11 billion.
BCI holds over $1.1 billion in the shares of publicly-traded fossil fuel companies. It added two new private oil and gas companies to its Infrastructure & Renewable Resources portfolio between 2021 and 2022– and reported next to nothing about it. BCI is also the private co-owner of fossil gas pipelines in four different countries, and co-owns coal plants in the southern U.S. Yet BCI’s 2022 Climate Action Plan barely mentions fossil fuels and offers no credible pathway for aligning these high-carbon assets with a safe climate.
BC has suffered calamitous climate disasters in the last year that pale in comparison to the catastrophic impacts to come if we fail to rapidly phase out fossil fuels and limit global greenhouse gas emissions. We are disappointed to see BC’s public pension manager offer such a weak plan to invest in climate safety and protect the pension savings of working and retired British Columbians from worsening climate-related financial risks.
Background information on BCI
The British Columbia Investment Management Corporation (BCI) manages over $211 billion on behalf of over 715,000 members and the insurance and benefit funds for over three million workers and retirees in British Columbia, with a fiduciary obligation to invest in their best financial interest. These funds include the province’s Municipal Pension Plan, Public Service Pension Plan, Teachers’ Pension Plan, College Pension Plan, BC Railway Company Pension Plan, WorkSafeBC Pension Plan, BC Hydro Pension Plan and staff and faculty pension plans at the University of Victoria and University of British Columbia.
BCI continues to invest billions of dollars in the oil, gas, coal and pipeline companies and infrastructure that are fueling the climate crisis. An analysis of BCI’s public equities portfolio found that, as of June 30, 2022, the pension manager held over $1.1 billion in the shares of publicly-traded fossil fuel companies, including:
- Pipeline companies: $142 million in Enbridge, $157 million in TC Energy, and $19 million in Fortis;
- Tar sands producers: $140 million in Suncor, $75 million in Canadian Natural Resources Ltd., and $26 million in Cenovus;
- Oil and gas majors: $54 million in ExxonMobil, $42 million in Chevron, and $17 million in ConocoPhillips;
BCI is also a large private owner of fossil fuel companies and infrastructure around the world through its Infrastructure & Renewable Resources portfolio. BCI committed in August 2022 to develop a plan to decarbonize this portfolio and “guide our portfolio companies through the green energy transition.” The Infrastructure & Renewable Resources portfolio includes:
- 32% ownership of Open Grid Europe, a company that owns and operates a 12,000-km fossil gas transmission pipeline network comprising about 70% of Germany’s gas shipping volume. BCI’s Executive Vice-President sits on Open Grid Europe’s board.
- A significant stake in Czech Gas Networks, the largest fossil gas distribution network in the Czech Republic. BCI’s Executive Vice President and two other senior staff sit on the pipeline company’s board.
- Partial ownership of Nova Transportadora do Sudeste SA (NTS), a Brazilian company that operates more than 2,000 km of pipelines. A BCI Senior Principal sits on NTS’s board.
- 37% of Cleco Corporation, an electric utility that owns 23 coal and fossil gas generating units in Louisiana and Texas. Three senior BCI staff sit on Cleco’s board.
- BCI owns a 20.9% stake in Puget Sound Energy, a utility in Washington state that has a ”beyond net-zero by 2045” commitment and is investing in renewables and energy efficiency. But PSE derived 50% of its energy from fossil fuels in 2020, plans to build almost 1,000 MW of new gas-fired generation between 2026 and 2045, is proposing to build an LNG export terminal in Tacoma, and previously funded sophisticated public relations and lobbying campaigns to prevent Washington state and municipal governments from banning gas hook-ups in new buildings. Two senior BCI staff sit on PSE’s board.
- In 2016, BCI bought a 12% stake in Pacific National, the largest transporter of coal in Australia that could play a key role in bringing coal from the proposed Adani mine to an export terminal near the Great Barrier Reef. Two senior BCI staff sit on Pacific National’s board.
- BCI announced in March 2022 that it will partner with Macquarie to acquire a 60% stake in National Grid, the owner and operator of a 7,000-km fossil gas pipeline transmission network in the United Kingdom, in a deal valued at £9.6 billion.
- A comparison of BCI’s 2021 Investment Inventory with its 2022 Investment Inventory shows two new private oil and gas companies added to BCI’s “Infrastructure & Renewable Resources” portfolio between March 31, 2021 and March 31, 2022– Corex Resources and Connaught Oil and Gas. Corex was 49% owned by the Caisse de dépôt et placement du Québec (CDPQ) until Quebec’s public pension manager divested the company in June 2022, noting that two CDPQ staff would no longer sit on Corex’s board. The release says Azimuth Capital Management acquired all of CDPQ’s shares. There is no mention of Azimuth in BCI’s 2021 or 2022 Investment Inventory, but Azimuth is listed in the Private Equity section of “External Managers and Partners” of BCI’s 2021-22 annual report. Shift cannot identify any disclosure to beneficiaries or the public about Corex or Connaught beyond the single line of its Investment Inventory mentioned above.
Contact information for interview requests:
Adam Scott, Executive Director, Shift Action for Pension Wealth & Planet Health
Patrick DeRochie, Senior Manager, Shift Action for Pension Wealth & Planet Health
To read the original statement, click HERE.