Pension charity criticizing CPPIB’s new environmental investing strategy

By: Gideon Scanlon
December 21, 2021



A Canadian charitable initiative is criticizing the Canada Pension Plan Investment Board’s new environmental investing strategy.

“It’s encouraging to see that the CPPIB wants to invest in critical decarbonization pathways for hard-to-abate sectors,” wrote Patrick DeRochie (pictured), senior manager at Shift Action for Pension Wealth and Planet Health, in an email to the Canadian Investment Review. “But the CPP doesn’t seem to grasp that there is no credible or profitable pathway to zero emissions for companies whose core business is exploring for, extracting, refining and transporting fossil fuels.”


Read: CPPIB targeting high carbon emitters for long-term investments

The CPPIB’s strategy, announced last week, aims to identify companies committed to creating value by lowering their emissions in a manner that’s consistent with the CPPIB’s own time frame. The strategy would encourage investments to be made in companies in the petroleum and construction sectors.

Shift Action supports some aspects of the strategy, including its aim to provide a robust, targeted engagement strategy that sets clear expectations for companies to improve environmental behaviour and reduce emissions in line with a safe climate. “For most high-carbon sectors, such as cement, steel, mining and transportation, there is a clear financial and technological pathway to decarbonization,” noted DeRochie.

However, the charity doesn’t believe the approach will work for reducing the carbon footprint of businesses in the oil and gas sector. According to DeRochie, businesses in the sector have “no credible or profitable decarbonization pathway.

Read: CPPIB sustainability report shows increased investments in renewable energy

“The products these companies extract, refine and sell must be left in the ground. The climate and net-zero plans of both the international oil and gas super majors and Canadian oil and gas companies have been shown to be grossly insufficient. Just like you can’t engage a tobacco company out of making its cancer-causing product less harmful, you can’t engage a fossil fuel company out of making its climate-disrupting products less harmful.”

Instead of the CPPIB’s approach, Shift Action advises pension plans sponsors to put oil and gas sector investees on notice that they expect to see credible climate strategies produced within the next two-to-three years or face divestment. This would also include demands for investees to stop exploring for more oil and gas and stop approving new extraction projects and begin reducing production.

“An engagement strategy without the possibility of divestment is like raising a toddler without consequences. There needs to be consequences for companies that are greenwashing or not getting serious about the accelerating clean energy transition.”

The CPPIB declined the Canadian Investment Review‘s request for comment on this story.

Read: More standards required for pension funds using ESG data, indices and scores