The ABCs of CPP – B

We as Canadians are the beneficiaries of the Canada Pension Plan(CPP), yet we have no say in how the Canada Pension Plan Investment Board (CPPIB) invests our contributions.

If you’re a Canadian who has worked and contributed to the CPP you are entitled to a pension when you reach retirement age, or in the event you become disabled.

The CPPIB is managed by board members appointed by the government. They are mandated to assess risk when they are considering an investment, but only in the traditional, financial sense. There is no requirement for them to consider “climate risk.”

The government needs to introduce legislation requiring all the funds the CPP collects be invested in line with the government’s climate change policy. France has recently introduced legislation requiring their institutional investors to disclose their exposure to climate risk, yet the CPP has no requirement to do so. The CPPIB’s investment decisions, and how they’re arrived-at, are not subject to public disclosure and the CPPIB is exempt from disclosure under Access to Information legislation. Assessment of climate risk should be considered in any investment decision, given the increasing threats posed by climate change. Significant climatic events such as wildfires, storms, and flooding are occurring with ever-greater frequency and intensity, and the losses from these catastrophes are a significant liability to insurance companies.

When Friends of the Earth Canada asked the financial research firm Corporate Knights to look into the investments of the five biggest public service pension funds, it turned out that they were foregoing on average $20 billion profit each and every year by not fully incorporating climate risks into investment decisions. It is estimated that the CPP likely missed out on $6.5 billion to over $7 billion in profits, by sticking with climate-warming industries.