One of Canada's leading pension funds has pledged to dramatically increase its "climate action" investments to $400 billion by 2030, while a watchdog group warns that many other funds are unduly influenced by fossil fuel-affiliated directors on their boards.

The $400-billion target showed up in a five-year climate strategy released last week by the Caisse de depot et placement du Quebec (CDPQ). The Caisse had already surpassed its previous goal, established in 2021, to invest $54 billion in low-carbon assets and another $10 billion in "industrial decarbonization" by 2025, ESG Today reports.

At the end of last year, CDPQ reported total assets of $473 billion.

"In 2025, we are entering a new phase in our climate strategy with the ambition to accelerate the decarbonization of companies and the economy," the eight-page strategy states [pdf]. "This is the best approach for long-term performance for our depositors."

"We are reaffirming our sustainable investing convictions because they are at the heart of our fiduciary responsibility," said CDPQ President and CEO Charles Emond. "We are demonstrating even greater ambition by going beyond calculating our portfolio's carbon emissions to work even harder on transitioning the real economy across all sectors by encouraging the companies we invest in to adopt clear and credible decarbonization plans. We do this with a view to long-term value creation and sound risk management for our depositors."

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The strategy includes:

Helping companies "seize business opportunities and set decarbonization goals";

Select companies that have set climate transition plans and can explain how they intend to meet them;

Invest in less "climate-mature" industries or companies "to help them reduce their carbon footprints";

Rely on international best practices to assess the quality of companies' transition plans.

The strategy "reveals a credible, comprehensive and clear-eyed plan to protect Quebec pensions by achieving net-zero by 2050 and investing in a safe climate future," Toronto-based Shift Action for Pension Wealth and Planet Health said in a release. "The strategy further positions CDPQ as a global climate leader among institutional investors and exposes yawning shortcomings in the climate strategies of many other Canadian pension managers, particularly the Canada Pension Plan Investment Board."

This week, Shift released an analysis of fossil fuel influence on Canadian pension boards, an update of a report the organization first produced in 2022. The original report concluded that seven of the country's 10 biggest pension funds had at least one fossil executive on their boards. This year's research determined that:

CPPIB, which abandoned is 2050 net-zero commitment last month, has three fossil directors, accounting for 30% of its board seats.

Alberta Investment Management Corporation (AIMCo), where the Alberta government recently purged the previous board, has two, including former prime minister Stephen Harper as chair.

The Ontario Teachers' Pension Plan has two directors who "sit on the boards of fossil fuel companies pushing to expand pipelines, build [liquefied natural gas] terminals, and dismantle key climate policies."

The Public Sector Pension Investment Board (PSP) and Ontario Municipal Employees Retirement System (OMERS) have one each.

The report lays out the systemic risks pension funds face as a result of climate change and the transition off carbon, warning that management decisions in response "may be compromised when those at the helm have ties to the fossil fuel industry." It lays out a scenario in which a pension fund board member who's also a director of an oil and gas company must weigh their duty to the fund against the legal imperative to maximize their company's profit.

"When the pension fund evaluates whether to continue investing in oil and gas, does that director advocate for the sector's short-term interests-or for the long-term financial security of a 30-year-old plan member who won't retire for decades?" the report asks. "This reflects a deep structural conflict: how can a director reconcile their legal obligation to maximize shareholder value for a fossil fuel company with their fiduciary duty to act in the best long-term interests of pension beneficiaries facing escalating climate risk?"

Shift adds that, "critically, pension funds do not disclose whether conflicted directors recuse themselves from such decisions. This lack of transparency makes it impossible to determine how-or whether-conflicts of interest are managed. It is also unclear whether pension trustees, directors, and sponsors have the climate expertise to understand how these overlapping roles can create potential conflicts which could negatively impact long-term returns for beneficiaries."

Source: The Energy Mix