This year, Ontario’s University Pension Plan (UPP) has a big opportunity to cement its leadership as a climate leader among Canada’s public pension funds. It can leverage its membership in the Net Zero Asset Owner Alliance (NZAOA) and stop investing in the oil and gas companies that are putting our pensions and our climate at risk.
The UPP is the $11.8-billion pension manager for 37,000 faculty and staff at the University of Toronto, Queen’s, Guelph and Trent. It’s one of just two Canadian pension funds that belong to the NZAOA, a global alliance of institutional investors committed to aligning their portfolios with a maximum temperature rise of 1.5 C by 2050.
The NZAOA’s other Canadian signatory, Caisse de dépôt et placement du Québec, has already divested from all oil producers, stating: “We believe that the risk/return outlook for oil producers and their climate impact are not aligned with our long-term objectives. That’s why we will stop contributing to the growth of global oil supply.”
In March, the NZAOA set out new guidelines for investor signatories in its Position on the Oil and Gas Sector. The NZAOA recognizes the need for immediate action for a fossil fuel phaseout and calls on member organizations to align investment with credible 1.5 C scenarios.
But despite its previous endorsement of the International Energy Agency’s net-zero scenario, the new NZAOA statement fails to acknowledge that there is no room in feasible 1.5 C scenarios for investments in new oil and gas projects.
According to one insider watchdog, references to ending investments in new upstream, midstream and downstream oil and gas infrastructure were removed from a 2022 draft of the NZAOA’s policy.
Instead, the final document has been watered down, calling for members to “practise discipline in all infrastructure financing decisions in alignment with emissions targets and 1.5 C scenarios.”
Oil and water simply don’t mix.
If the NZAOA is truly committed to halving emissions by 2030, it’s going to need its members to do more than “practise discipline.”
Investors committed to climate safety need to follow the guidelines established by the UN Race to Zero campaign, which calls for phasing out the “development, financing and facilitation of new unabated fossil fuel assets.”
In other words, it’s time to stop shying away from investment exclusions on oil and gas producers.
This is where the UPP can step in and consolidate its role as one of the leading proponents of responsible investing practices in North America.
UPP president Barbara Zvan is one of the most climate-positive investment managers in Canada and has consistently shown support for the NZAOA’s forward-thinking positions. Now would be an ideal time for Zvan to go further and endorse a truly responsible approach to climate-aligned investing.
The UPP should join other leading investors by committing to a full exclusion of companies that explore for, extract, produce, refine and transport fossil fuels in the UPP’s investment portfolio.
So far, however, the UPP response has been tepid. While explaining it intends to “carefully consider” its position, the UPP refers back to its own Climate Action Plan and reiterates a belief that “investors have several mechanisms to catalyze the transition to a resilient, net-zero world.”
With the Intergovernmental Panel on Climate Change unambiguous that we have run out of time for half-measures, there is no room for the UPP to be indecisive.
The Canadian Association of Petroleum Producers triumphantly projects that upstream investment in oil and gas production in Canada alone is set to reach $40 billion in 2023 without any consideration of the climate implications.
Practices of shareholder engagement are clearly insufficient to curb the expansionist business models of the oil and gas sector.
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If the UPP is serious about its desire to address what it calls the “systematic and material risk to the ecological, societal and financial stability of the economy as a whole,” and if it wants to distance itself from the oil and gas sector’s history of violating Indigenous rights, it should use its Climate Action Plan update and annual Responsible Investing report this summer to make a bold commitment to end investment in the oil and gas industries.
UPP members and all climate-concerned Canadians are looking to Barbara Zvan and the UPP to join its NZAOA partners in Quebec as climate leaders in Canada’s pension sector.
The only truly responsible investing decision is to stop risking our retirement savings and our climate on oil and gas companies that face terminal, inevitable decline. UPP: it’s your time to lead.
Paul Downes is a professor in the Department of English at the University of Toronto and an elected member of the university’s Academic Board. He has served as chief negotiator for the University of Toronto Faculty Association and is currently working with Divestment and Beyond, a group of students, faculty and staff pushing for a more progressive response to the climate crisis at the University of Toronto.
Andrea Paras is associate professor in Political Science at the University of Guelph. Paras teaches and supervises in the area of international development, international relations, human rights, religion and politics, community-engaged research, and intercultural competence.
Marcus Taylor is a professor in the Department of Global Development Studies at Queen’s University. He has researched widely in the field of climate change adaptation and is a contributing author to the IPCC Working Group 6 report and an adviser to the OECD working group on adaptation policy.