Your investment in the CPP misses the mark on climate risk

The Canada Pension Plan Investment Board is hugely important to Canadians. How our pension money is invested has a major impact on the world. It’s too important to be managed without regard to climate change, human rights and justice.

If you are working in Canada and eighteen or older, you are an investor in the Canada Pension Plan. For every pay period, a deduction is made that is invested on your behalf by the Canada Pension Plan Investment Board (CPPIB).

Did you know that your Canada Pension Plan (CPP) contributions are, in part, invested in fossil fuels that are significantly contributing to global climate change? Some of these investments are in coal (a major contributor to global warming, when combusted), and the process of fracking for oil and gas (a process that consumes great quantities of water then pollutes it, and has been linked to an increase in the frequency of earthquakes where it’s practiced).

Investments in fossil fuel-related entities that contribute to the devastating effects brought about by global warming and pollution can now be considered to be high risk investments. Some jurisdictions are now litigating against energy utilities in their midst who, through their combustion of fossil fuels, are emitting significant amounts of pollution and greenhouse gases (GHG) that increase the rate of global warming. The CPP is risking Canadians’ contributions when it invests in utilities that are becoming increasingly-subject to such litigation.

In another example, the CPP has significant investments of your money in major insurance companies–the same insurers who are having to pay out billions in dollars in claims to homeowners and business people who have suffered devastating losses due to severe weather effects–flooding, tornadoes, hurricanes–themselves the consequences of a warming planet. Again, your contributions are unnecessarily being subjected to risk.

If you are contributing to the CPP, you should be very concerned by the risky nature of many of the CPP’s investments–they are investing for your future. Bad investment decisions made by the CPP today will put your future pension benefits in jeopardy.

Partisan Donations

Specifically, Crestone Peak Resources, according to the Colorado Attorney General, gave US$600,000:

The Canada Pension Plan Investment Board is claiming the money did not come from its funds because Crestone Peak made the donation. However, Crestone is 95% owned by the CPPIB and at the time Avik Dey (CPPIB’s Managing Director, Head of Energy and Resources) and at least two other CPPIB employees were members of the Crestone Board of Directors.

Illegal or Not – it violates the spirit of the law

It is not clear if CPPIB’s partisan donations are illegal, but they do certainly violate the spirit of the law banning crown corporations from making political donations. What is clear is that the action of Crestone Peak and its CPPIB board members runs counter to the claims made in CPPIB’s “Policy on Sustainable Investing”.

It clearly contravenes the Section 2.9 of CPPIB’s Code of Conduct which says in part:

Friends of the Earth wrote to Heather Blum-Munroe, Chair of the CPPIB asking for an investigation and enforcement of the Code of Conduct. She did not acknowledge the letter or take any action.

Before the media story, but after reporters started asking questions Crestone Peak Resources stopped publicly reporting contributions to Republicans shortly after reporters started asking questions. It hasn’t stopped being partisan however as the signature of Tony Buchanan, CEO of Crestone, can be seen on a full page ad in the New York Times attacking Democrats that appeared just before “Super Tuesday”. While Friends of the Earth does not know how much Crestone contributed, we do know that a full page ad in the New York Times costs in the $150,000 range. The ad was officially placed by the Western Energy Alliance. Giving money to a “trade organization” is a way to hide political contributions.

[i] https://cdn1.cppinvestments.com/wp-content/uploads/2020/07/cpp-investments-code-of-conduct-april-20-2020-en.pdf

Origins of Crestone Peak Resources

In 2016, Friends of the Earth revealed the origins of Crestone Peak Resources. It was created by the CPPIB after the pension fund bailed-out cash strapped Canadian oil company Encana by buying its fracking rights in Colorado. To limit public accountability Crestone Peak Resources was set up as a private corporation not required to publish its financial statements.

Under CPPIB leadership, the new company set out on an aggressive fracking program that soon brought it into conflict with the people of Colorado. In just three years, the Colorado Oil and Gas Commission has received over 1000 public complaints about Crestone – that is almost one every day.

Community Conflict Over Fracking set-backs

At issue is the company’s insistence on drilling fracking wells as little as 500 feet from homes, schools and hospitals. This is legal in Colorado. However, Alberta regulations require set-backs of 1500 metres from schools and hospitals so Crestone’s drilling activity would be unlawful in Canada.

Despite CPPIB’s stated commitment to recognize human rights, it ignores them when it comes to drilling fracking wells, riding roughshod over public calls for environmental protection and even decisions by local elected officials. Boulder County was forced to go to court to impose its ban on fracking within its boundaries where 326,000 people live. Crestone counter-sued in order to force the county to accept its plans to drill 216 wells.

Colorado requires public meetings when a company wants to drill in urban areas. Crestone Peak’s response was to have a public meeting for invited guests only barring elected officials, the media and activists. Watch what happened when an elected official and a reporter tried to attend

In 2018, citizens of Colorado collected over 100,000 signatures to get Proposition 112 on the 2018 ballot in order to increase the setbacks to 1500 feet (460metres).  Crestone Peak Resources responded by giving US$600,000 to Republican campaigns to defeat Proposition 112 with the full knowledge of the CPPIB.

Funding Political Campaigns

Mounting political campaigns against environmental regulation may be a standard practice of the oil industry. The Canadian Association of Petroleum Producers (CAPP) ran extensive campaigns in the recent Alberta and federal elections. Interestingly, CAPP spending in the 2019 federal election was around $300,000 – less than half the US$600,000 spent by the Canada Pension Plan Investment Board in the 2018 Colorado election.

Requiring Environmental, Social and Governance Assessment of Investments

In 2016 Friends of the Earth asked for a copy of the Environmental, Social and Governance Report that the CPPIB says it prepares for major investments – this was an effort to understand how CPPIB could consider Crestone Peak Resources an appropriate investment given the climate change, health, environmental and social issues associated with fracking.

It’s not enough for CPPIB to just say it considers environmental, social and governance issues. CPP needs to provide the facts and figures to prove it.

The response was: “CPPIB does not share confidential information, such as investment background memos”. So FOE looked further and learned the Canada Pension Plan Investment Board is specifically excluded from the Freedom of Information Act.

That’s right, the Canada Pension Plan Investment Board has control of a $400 billion that belongs to all Canadian and the bureaucrats that run it get to decide if, when and what information is revealed to the public.

Action For Accountability

Friends of the Earth has a five point Action Plan to make the Canada Pension Plan Investment Board accountable to Canadians:

1. That all significant investments require an Environmental, Social and Governance Report (ESG) and that all ESG Reports be made public.
2. That the CPPIB and all business entities it controls (public and private) be prohibited from contributing to political campaigns or industry associations involved in political campaigns in Canada and globally. Political campaigns should include, but not be limited to, elections, ballot propositions, referenda or other means of influencing government decisions.
3. That the CPPIB be prohibited from investing in or creating private corporations not subject to public reporting.
4. That the CPPIB be required to recognize that the Government of Canada has declared a climate emergency and conduct a 1.5 degree stress test on the fund and present a plan to manage climate risk to the Parliament of Canada.
5. And finally, that the CPPIB staff involved with Crestone Peak Resources repay the $600,000 political contribution. FOE filed a request to Colorado’s Attorney General to investigate – action is still pending as of January 2024.

The Colorado Investigation

In September 2020 the Globe and Mail reported the Canada Pension Plan Investment Board gave US $600,000 to partisan Republican political action committees in 2018. The money came from CPPIB-own and controlled Crestone Peak Resources. The partisan donations were part of a wider fossil fuel industry campaign to prevent stronger regulations on fracking in Colorado.

At Friends of the Earth Canada’s urging, the Globe had sent a reporter to Colorado to investigate Crestone Peak Resources and the public complaints about its operations in the state.