Pension Percolator blog
What’s brewing for BC and the Canadian retirement landscape.
July 19, 2017
Leaning in on climate change
The Municipal Pension Board of Trustees takes its responsibility to invest the $46.4 billion fund of BC’s Municipal Pension Plan very seriously. They recognize that more than 300,000 members are depending on the plan for retirement income and that 75 per cent of the cost of pensions paid by the plan comes from investment returns. The board believes the purpose of investing is to build on member and employer contributions to ensure there’s enough money to pay current and future pensions.
Like more and more investors, the board recognizes global warming may be the most significant threat facing our planet. As the temperatures of our earth and oceans steadily rise, climate change is predicted to have a large-scale impact on the economy, both directly (e.g., extreme weather events) and indirectly (e.g., the emergence of low carbon technologies).
Last year, a key plan stakeholder, the Union of BC Municipalities (UBCM), released a primer on fossil fuel divestment as an investment strategy. The study was prepared in response to a resolution seeking information on fossil fuel–related investments held by the plan and the implications of divesting these holdings. It’s excellent reading for anyone wanting to understand the board’s approach to responsible investing and why it prefers a strategy of engagement over divestment. You can read the full report on UBCM’s website.
Also known as the Paris climate accord, this agreement falls within the United Nations Framework Convention on Climate Change and deals with greenhouse gas emissions mitigation, adaptation and finance starting in the year 2020.
The board believes its investment manager, British Columbia Investment Management Corporation (BCI), can use its influence as a large institutional investor to encourage companies to be better corporate citizens, which will benefit society in the long term. It has instructed BCI to act in the best financial interests of the fund. In addition, the board expects BCI to engage with companies and encourage them to focus on creating value over the long term by effectively managing environmental, social and governance risks that may emerge over time and materially affect the valuation of the company or asset. For example, BCI uses its influence to encourage the companies it invests in to prepare for the coming shift to a lower carbon economy.
The board has delegated its proxy voting rights to BCI, which votes proxy proposals for its North American holdings and about 75 per cent of the market value for global holdings – after researching and considering each resolution in light of plan-endorsed proxy voting guidelines. For example, in exercising proxy voting on the plan’s behalf this year, BCI voted to request that ExxonMobil management publish a report on the impact of global measures designed to keep climate change to two degrees or less. Additional disclosures like this will help investors better assess how environmental risks can affect a company’s activities and longer-term financial results.
Interested in learning more about BCI’s proxy voting record? It publishes a complete, searchable record on its website.
The board supports the Paris Agreement
The board periodically signs on to investor letters when there is a role for the plan to play, as a major institutional investor, in advocating for effective and efficient public policy that supports long-term sustainable investment returns.
This year, the board collaborated with like-minded investors and stakeholders on calling for clear regulatory policies; these will provide investors with a more certain regulatory environment that may lead to investment opportunities in the future.
Municipal Pension Plan and BCI joined 378 global investors representing US$22 trillion in assets under management and signed a letter organized in response to the U.S. promise to withdraw from the Paris Agreement. The letter, addressed to the G7 and G20 governments, calls for:
- Implementation of the Paris Agreement
- Stronger climate policies to encourage more investment in areas such as renewable energy
The letter was shared with G20 leaders in advance of their July meeting.
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The views and opinions expressed in this blog are those of the author and do not necessarily reflect the official policy or position of the Municipal Pension Board of Trustees.
Learn more about investments and actions on climate change
Judy Payne is the Executive Director
of the Municipal Pension Plan