CPPIB Criticized for ‘Moral and Ecological Failure’ on Climate-Conscious Investing

Group finds portfolio Is far off from the Paris Agreement’s 1.5 degree limit, blames relationships in oil and gas industry.

A report from the Canadian Centre for Policy Alternatives (CCPA) criticized the Canadian Pension Plan Investment Board (CPPIB) for its failure to invest in line with the Paris Agreement’s 1.5 Celsius degree limit on global temperature levels.

The CCPA alleges that the CPPIB has been slow to adopt the agreement’s limitations partly because its board of directors “are entangled with the oil and gas industry,” through relationships and contacts in its businesses. One example the CCPA points to is one of CPPIB’s managing directors of energy and resources, Avik Dey, holding board representation on nine oil and gas companies.

“The formal relationships that CPPIB board members and staff have with fossil fuel companies potentially bring the interests and perspectives of those companies into the CPPIB’s decision-making regarding climate risk, delaying the necessary shift in investments,” the report stated.

The report illustrated CPPIB’s connections to the oil and gas industry in the following map:

The report noted that CPPIB has publicly acknowledged the climate crisis and started to factor in environmental, social, and governance (ESG) concerns into its investment practices, however, it  highlighted the board’s stance against divestment.

“CPPIB believes we can more effectively press for positive change by being an active, engaged investor than we can by sitting on the sidelines,” the report quoted the institution. CCPA highlighted a contradictory action where it divested from private prisons detaining migrants at the US-Mexico border after public protest.

Another example the report pointed to is the CPPIB’s vote for Shell to not have to set and publish carbon emissions targets aligned with the Paris Agreement. Shell strongly advised shareholders to vote against the resolution, and the CPPIB complied by voting against it. “There is a fundamental contradiction in the CPPIB’s use of proxy voting to address climate change,” the report said.

The institution doubled its renewable energy investments last year and increased its magnitude by more than 100 times since 2016, according to is recent annual report on sustainable investing. “Over the past year, we advanced our goal to be a leader among asset owners in understanding the risks posed, and opportunities presented, by climate change,” CPPIB CEO Mark Machin said in a statement.

The CCPA took notice of these developments, but said it’s not enough. “This is important, but growth in green energy must occur alongside cast reductions in fossil fuel use if we are to meet needed carbon-emission reductions. Moreover, reducing exposure to fossil fuel companies can limit the impact of stranded assets.”

‘Stranded assets’ refer to investments that are no longer profitable, and in this context, it is a potential threat to investments in fossil fuel companies as energy generation shifts away from these technologies.

According to the sustainability report, 42.1% of climate-change related shareholder proposals that CPPIB support were in favor of ongoing operation emissions management, public policy interventions (5.3%), low carbon energy research (5.3%), climate change risks in supply chains (10.5%), and asset portfolio resilience (36.8%).

As of June 30, 2019, the fund had $3 billion invested in renewable energy companies.

Related Stories:
Canada’s CPPIB Doubles Renewables Investment
Canada’s CPPIB Returns 2.3% in Q2 Fiscal 2020
CPPIB Returns 8.9% in Fiscal 2019

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