Pen­sion plan man­agers try to weigh risks of cli­mate change

The Hamilton Spectator - - BUSINESS - IAN BICKIS

A de­ci­sion by an On­tario pub­lic pen­sion man­ager to study the po­ten­tial con­se­quences of cli­mate change is the lat­est sign that pen­sion plans are in­creas­ingly be­com­ing con­cerned about how it can hurt the bot­tom line.

OPTrust re­leased a re­port last week that re­viewed how four cli­mate sce­nar­ios, fac­tor­ing in pol­icy changes and dis­as­ters in­clud­ing hurricanes and wild­fires, would af­fect its $18 bil­lion port­fo­lio.

“The re­al­ity is there’s a lot of talk about cli­mate change, there’s lots of think­ing about it, but from an in­vestor’s per­spec­tive we’re just at the be­gin­ning of the con­ver­sa­tion,” said OPTrust CEO Hugh O’Reilly.

O’Reilly, who man­ages the plan on be­half of the On­tario Pub­lic Ser­vice Em­ploy­ees Union, said it’s a strug­gle to fig­ure out the risks given how lit­tle com­pa­nies re­veal.

“In the con­text of is­sues around cli­mate change and car­bon, and the ef­fect of cli­mate change on com­pa­nies we in­vest in, the stan­dards of dis­clo­sure, they’re just, we can’t make mean­ing­ful or in­formed de­ci­sions,” he said.

The re­port by con­sul­tancy firm Mercer showed that un­der a best-case, two-de­gree Cel­sius rise in global tem­per­a­tures — achieved with cli­mate change poli­cies and mit­i­ga­tion ac­tion it de­scribed as am­bi­tious and strin­gent — in­vest­ments in some in­dus­tries such as en­ergy and min­ing could take a hit, while other ar­eas like in­fra­struc­ture, real es­tate and agri­cul­ture could ben­e­fit.

Un­der a worst-case sce­nario, with a four­de­gree C rise by the end of the cen­tury and higher phys­i­cal dam­age fac­tored in, the re­port found no up­side and ad­vo­cated preven­tion.

The study comes as in­sur­ers, pen­sion plans and other or­ga­ni­za­tions par­tic­u­larly ex­posed in the com­ing decades to cli­mate change try to fig­ure out how to mea­sure the risks and what to do about them.

Last Septem­ber, a re­port from Toron­to­based law firm Koskie and Minsk con­cluded that cli­mate change is one of the big­gest risks faced by Cana­dian pen­sion plans, and man­agers may be forced into tak­ing pub­lic stands to ful­fil their le­gal du­ties.

In De­cem­ber, in launch­ing its cli­mate as­sess­ment pro­gram in the U.S., Mercer said that even un­der the two-de­gree C sce­nario the av­er­age U.S. pub­lic pen­sion could lose bil­lions in dropped as­set val­ues. It also said that not ac­knowl­edg­ing and re­spond­ing to such risks could be a breach of fidu­ciary du­ties.

Other pen­sion plans in Canada have also been tak­ing note, start­ing with ac­knowl­edg­ing the risk and as­sess­ing their port­fo­lios, as well as push­ing in­di­vid­ual com­pa­nies to im­prove en­vi­ron­men­tal prac­tices.

Last year, the Cana­dian Pen­sion Plan In­vest­ment Board, Canada’s largest pen­sion man­ager, cre­ated a cli­mate change work­ing group to re­view risks and op­por­tu­ni­ties.

“Cli­mate change is among the most com­plex and chal­leng­ing is­sues that we con­sider as a long-term in­vestor,” said CPPIB spokesper­son Dan Madge by email.

He said the CPPIB, which man­ages about $300 bil­lion on be­half of 19 mil­lion Cana­di­ans, shares con­cerns on the lack of reli­able and stan­dard­ized data when as­sess­ing greenhouse gas emis­sions in in­vest­ment port­fo­lios.

La Caisse de de­pot et place­ment du Que­bec said in its lat­est an­nual re­port it sup­ported 19 share­holder res­o­lu­tions on cli­mate change, and specif­i­cally pushed for more dis­clo­sure from Royal Dutch Shell and BP, two com­pa­nies the pen­sion man­ager in­vests in.

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