New research reveals ‘deep entanglement’ between pension advice and fossil fuel companies

New research reveals a “deep entanglement” between the fossil fuel industry and those who govern Canada’s largest pension funds, raising concerns about potential conflicts of interest.

Seven of Canada’s 10 largest pension funds have at least one board member who also sits on the board of a fossil fuel company, according to research by ShiftAction, a charity that works to protect pensions and climate. Across all 10 pension funds, 80 different directors, trustees, managers and senior executives have held or currently hold positions at 76 different fossil fuel companies.

It was worrying news for Ellen Campbell, 65, a former Alberta government worker who doesn’t want her savings to be invested in an industry that is a major driver of climate change and regularly acts to block climate policy.

“I’m on a pension and would much rather it had nothing to do with destroying our planet. But at the same time, I don’t know if I have much control over where and how they invest the money,” said Campbell, who has been collecting his pension for a decade and now works as an ESL teacher. National Observer of Canada.

She said learning that Canada’s largest pension funds are sharing board members with climate-damaging fossil fuel companies makes her even more worried about the future of her children and grandchildren – will have. a livable planet and a good pension?

Canadians’ retirement savings are exposed to unnecessary risk when pension funds remain heavily invested in companies “on the wrong side of the energy transition,” said Adam Scott, co-author of the report and director of ShiftAction.

Canada’s six largest pension funds have pledged to achieve net zero greenhouse gas emissions by 2050, with the Canada Pension Plan (CPP) becoming the latest fund to commit to net zero . But Scott said those promises are lackluster: As of March 2021, more than $17 billion of the CPP portfolio was invested in fossil fuels, ShiftAction noted in a press release.

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The results of fossil fuel companies depend on the continued use of their products, which are a major cause of climate change, Scott said. ShiftAction sees no “credible and cost-effective path” for the industry to survive in the energy transition, he added.

Pension funds must act quickly to change the way they manage investments in the face of the climate crisis, he said. But they may be less likely to adopt policies aimed at cutting fossil fuel funding if that is seen as undermining “the interests of some of their trustees”, he added.

“The best interests of pension recipients are not at all the same as the best interests of shareholders in a fossil fuel company,” Scott said. “And if you have administrators who are legally beholden to both, you have a problem.”

Scott pointed out that the report cannot determine whether conflicts of interest are actually occurring, but thinks there is “great potential” given the report’s findings.

“We know… that most (pension fund) boards have protocols in place to deal with conflicts of interest… We just don’t know if they are applied in this case. “, he said, citing a lack of disclosure and transparency.

“We need more information from the funds on how they ensure there is no conflict there.”

In parliament, independent senator Rosa Galvez is pushing for greater transparency in financial institutions. Earlier this year, she tabled a new climate-aligned finance law that aims to address the problem and requires financial institutions to align with Canada’s international climate commitments. The bill, which had its second reading on May 5, includes a pathway to ensure that government-appointed trustees have climate expertise and are not affiliated with any organization that fails to meet the country’s climate commitments.

Even if board members do not have a conflict of interest, they might simply lack expertise on climate risk and not know how to act in the best interests of pension plan members, the report says. .

Galvez’s bill has great potential to put pension funds — and the financial industry in general — on the right track, according to the report.

The senator told Canada’s National Observer that the ShiftAction report confirms her pre-existing concerns about conflicts of interest among senior financial institution officials.

“I don’t see how we’re going to walk in the direction of the 2050 net zero goal that we’ve set for ourselves,” Galvez said. “It’s impossible because people are in conflict situations, they have this fiduciary duty to return the investment to the contributors (to the pensions), but then they have other fiduciary duties if they also sit on a board Fossil Fuels Administration.”

It’s akin to a doctor sitting on the boards of a tobacco company and a hospital, Galvez said, pointing to the World Health Organization’s refusal to accept the Medicago COVID-19 vaccine from the Quebec because of the company’s ties to Big Tobacco. that.”

Galvez said most workers, including herself, unknowingly contribute to climate change when they trust financial institutions, pension funds and unions. If pension schemes do not divest from fossil fuels and learn to manage climate risk, young people will suffer the consequences, she added.

As the world transitions to a low-carbon economy, major pipelines and other fossil fuel infrastructure will lose value, and pension funds with a stake in these projects will eventually suffer heavy economic losses, he said. -she explains. Young people who contribute to these pension funds today and in the decades to come will feel these losses acutely in the second half of the century.

For many, climate change has caused or will cause loss of homes, livelihoods and health as extreme weather events occur with increased severity and frequency, she said, and the money invested by pension funds on behalf of workers will be partly responsible.

Natasha Bulowski, Local Journalism Initiative Reporter, National Observer of Canada