B.C. public pensions fuel climate change crisis

If you have a public pension in B.C., your retirement savings are likely fuelling the climate change crisis.

The pensions of over half a million British Columbians are administered by the British Columbia Investment Management Corporation (BCI), formerly known as the bcIMC. It’s the fourth-largest pension fund manager in Canada and controls one of the province’s largest pools of wealth, totalling $135.5 billion.

In 2016, Canada signed the Paris Agreement, acknowledging that global warming must not exceed two degrees Celsius above pre-industrial levels and further committing to work toward a 1.5 degree C limit. As one of the province’s largest financial managers, BCI’s investment decisions are critical for the urgent and sustained emission reductions that both targets require.

BCI’s holdings include investments in some of the world’s largest oil and gas companies.

To determine how it is responding to the climate crisis, our just-released report, Canada’s Fossil-Fuelled Pensions: The Case of the British Columbia Investment Management Corporation, asks: is BCI investing funds in ways that support the shift to a two degree Celsius global warming limit?

For example, BCI investments in Kinder Morgan rose to $65.3 million in 2017, nearly doubling its $36.7 million 2016 investment. Since 2016, BCI has over $3 billion invested in the top 200 publicly traded fossil fuel reserve holders. It is invested in 74 per cent of the oil and gas companies with the largest fossil fuel reserves and 30 per cent of the biggest reserve-holding coal producers.

BCI doesn’t believe these investments are a problem. It claims that its ability to be an “active owner” through shareholder engagement will create more lasting change in their investee corporations than if they withdrew or “divested” their money on ethical grounds.

We investigated BCI’s engagement strategies, including its shareholder voting history and collaboration with third-party organizations promoting responsible investment. We found that when it comes to climate action, BCI’s “active ownership” falls short.

Shareholder voting, also known as “proxy voting”, is one of BCI’s key responsible investment strategies, but in the context of climate change, is it effective? We found that companies often ignore climate-related shareholder resolutions and their eventual responses can be minimal at best. Exxon — which BCI’s holds an ownership stake in — claims that its business model “face(s) little risk” from climate change despite its commitment to blow past the two degree limit.

This is obviously an inadequate response to the scale and urgency of the climate crisis. By acknowledging the serious threats that climate changes poses, but only using shareholder engagement to address it, BCI is an obstacle to the transition away from fossil fuels which the two degree limit demands.

Not taking climate change seriously in its investment decisions not only breaches BCI’s claim to “responsible” investment on ethical grounds, it also threatens the financial stability of B.C. pensions.

A recent study published in Nature and Climate Change shows that falling prices in renewables and low-carbon technology means the demand for fossil fuel investments will drop before 2035, leaving companies with trillions in assets that cannot be sold. Last year the World Bank announced it would end financial support for oil and gas companies by 2019 and financial institutions around the world are following suit. Banking giants HSBC, BNP Paribas and ING recently announced they would end financing for greenfield oilsands projects, coal power plants and Arctic drilling projects.

If BCI committed to divestment from fossil fuels, it would join a host of institutions like churches, pension funds and state-owned investment funds that have pledged to fully or partially divest. Globally, over $6 trillion of investments have been declared fossil fuel free.

We have started moving towards a post-carbon world. Our report shows, however, that BCI is stuck in the 20th century of fossil-fuelled investment. As one of the province’s most powerful financial institutions, and the manager of most public pensions in B.C., we can’t afford to suffer the impacts of its choices.

Zoë Yunker is a graduate student at the University of Victoria and a research assistant with the Corporate Mapping Project; Jessica Dempsey is an assistant professor in the Department of Geography at the University of B.C. and a collaborator with the Corporate Mapping Project; James Rowe is an associate professor in the School of Environmental Studies at the University of Victoria and a co-investigator with the Corporate Mapping Project.

[Top photo: Globally, over $6 trillion of investments have been declared fossil fuel free. AP PHOTO/ROGELIO V. SOLIS, FILE]