“Achieving net zero by 2050 remains a widely adopted goal and critical ambition for many countries, companies, and international organizations,” the Canada Pension Plan Investment Board (CPPIB) says [pdf] in its annual report released this week. But the report falls short of reaffirming the net-zero commitment the fund announced in 2022 while steadfastly refusing to abandon its fossil fuel investments.

Instead, CPPIB simply states that “the fulfillment of commitments made by governments, technological progress, fulfillment of corporate targets, changes in consumer and corporate behaviours, and development of global reporting standards and carbon markets will determine the pace of the transition to net zero.”

In the FAQ section of its Approach to Sustainability web page, CPPIB explains that “recent legal developments in Canada have introduced new considerations around how net-zero commitments are interpreted,” resulting in “increasing pressure to adopt standardized emissions metrics and interim targets, many of which don’t reflect the complexity of a global investment portfolio like ours.”

Those “rigid milestones could lead to investment decisions that are misaligned with our investment strategy,” CPPIB adds. “To avoid that risk – and to remain focused on delivering results, not managing legal uncertainty – we have made a considered decision to no longer maintain a net-zero by 2050 commitment.”

The FAQ material appears on a page where chief sustainability officer Richard Manley declares that “companies that effectively anticipate and manage material sustainability-related factors are better positioned to be more profitable and resilient over the long term.” A CPPIB spokesperson did not reply to an email requesting further detail on the announcement.

The news from CPPIB echoes the Royal Bank of Canada’s late-April decision to abandon its $500-billion sustainable finance pledge and stop public disclosures on its updated climate strategy, citing the new anti-greenwashing provisions in the Competition Act. At the time, legal and climate policy experts said the new rules shouldn’t be a problem for companies that were telling the truth about their climate performance – or that were working in good faith to meet their commitments, even if they ultimately fell short.

“Walking away from a climate commitment when asked to prove its credibility raises serious concerns about the integrity of that commitment in the first place,” Senator Rosa Galvez (ISG-Quebec), who worked to introduce and pass a Climate-Aligned Finance Act (CAFA) in the last Parliament, said at the time. “Moreover, by abandoning its claims, RBC has demonstrated that the provisions of the Competition Actthat intend to address greenwashing are in fact serving their purpose.”

Walking away from a climate commitment when asked to prove its credibility raises serious concerns about the integrity of that commitment in the first place.

– Senator Rosa Galvez

In a media release Wednesday, Toronto-based Shift Action for Pension Wealth and Planet Health said CPPIB’s investment and asset management decisions “have been misaligned with a credible net-zero strategy ever since it first made this commitment in 2022,” continuing to invest in fossil fuel expansion “in violation of credible science-based commitments and prudent due diligence” against climate risk.

“Net-zero commitments are not optional,” Shift Action wrote. “They have become essential tools to manage risk and maximize long-term financial returns for pension funds. Climate impacts are already reducing global GDP growth, threatening the stability of financial markets and disrupting lives and livelihoods in Canada and around the world,” pointing to a future where “pension funds like CPPIB are unlikely to generate the stable, future returns necessary to pay out their long-term obligations.”

Canadians under 40 who are now in the work force “won’t be eligible to receive their CPP benefits until after 2050,” the release adds. “What kind of a world are Canadians expected to retire into? How would CPPIB be able to sustain benefits in a world of climate breakdown?”

This article was first published by The Energy Mix. It has been edited to conform with Corporate Knights style. Read the original story here.

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For investors with public pension funds who are concerned about animal welfare, knowing a fund’s involvement in potential animal cruelty is crucial, though not always easy to discern.

According to recent research from animal welfare experts, at least six top global pension funds have holdings in potentially cruel companies that slaughter animals for meat, produce other animal products or fall behind in animal welfare standards.

Norway’s pension at back of pack

At the top of the list of funds with holdings in potentially cruel companies is Norges Bank Investment Management (NBIM), with four holdings of concern worth US$159.7 million. Of that, $61 million is invested in Sanderson Farms, a Fortune 1000 company that, according to its website, has the capacity to “process more than 13.65 million chickens per week.” While the company does have an animal welfare policy of sorts, it refers only to antibiotics and does not address stocking density, painful procedures, breeding or other important animal welfare issues pertaining to chickens.

A 2017 report by the Animal Welfare Institute found that one Sanderson farm had been cited 20 times in the two preceding years for not complying with humane handling standards. One USDA inspector determined that the plant’s slaughtering process was “out of control.”
The other contentious NBIM holdings are Japan’s NH Foods (US$64 million), Mexico’s Industrias Bachoco ($US34.3 million) and Dean Foods in the U.S. (US$0.1 million).

An NBIM spokesperson states the fund has no specific policy regarding animal welfare.

Canada and California pension plans also clued out on cruelty

The Canada Pension Plan Investment Board holds a total of US$24 million in potentially cruel companies, including US$13.7 million in NH Foods, US$10.2 million in Sanderson Farms and US$0.1 million in Dean Foods. The fund takes no position on animal welfare and makes no mention of it in its 2017 or 2018 Sustainable Investing Reports.

The California State Teachers’ Retirement System and California Public Employees’ Retirement System both have holdings in Sanderson Farms, US$5.6 million and US$7.9 million respectively. Neither has a specific policy regarding animal welfare.

Some funds are starting to consider cruelty

A spokesperson for Caisse de dépôt et placement du Québec (CDPQ) says that animal-welfare issues are studied as part of their fund’s pre-investment ESG analysis, and “if concerns arise, we proactively engage in dialogue with companies we’re invested in.”

However, CDPQ has three holdings in potentially cruel companies, including US$9.2 million in Industrias Bachoco, US$1.7 million in NH Foods and US$18.5 million in JBS S.A., the largest meat-processing company in the world, which slaughters 13 million animals every day.
JBS S.A. has also not signed on to the Better Chicken Commitment, an initiative supported by major animal protection groups around the world. And according to the 2018 Business Benchmark on Farm Animal Welfare, though the company appears to have an established approach to animal welfare, it “has more work to do to ensure it is effectively implemented.”

New York’s pension fund claims to use more of a shareholder engagement rather than divestment approach. The proxy voting guidelines of the New York State Common Retirement Fund state that “the Fund will support proposals asking a company to report on its animal welfare standards.” In 2018, fund managers wrote to McDonald’s, requesting information on what the company was doing to align its chicken welfare policy with widely accepted best practices like those of the Royal Society for the Prevention of Cruelty to Animals and the Global Animal Partnership. However, it still holds US$3.6 million in Sanderson Farms.

Which financial institutions are taking the lead?

While pension funds may lag behind when it comes to animal welfare, other financial institutions are stepping up, providing examples of how to approach animal-friendly finances.

Bank Australia, for example, states on its website that it does not lend to “organizations that use intensive animal farming systems like battery caged hens and sow stalls, or organizations that export live animals.”

The Netherlands Development Finance Company (FMO) has a three-page position statement regarding animal welfare that includes recognizing animals as sentient beings capable of experiencing pain. FMO considers unacceptable farming practices to include “non-enriched battery cages for chickens, the tethering of sows, individual sow stall housing throughout the entire pregnancy, individual pen housing for veal calves beyond the age of eight weeks, forced feeding of geese and ducks.” The agency will not make investments “that substantially involve any of these systems or practices.”

Other financial institutions notable for making animal welfare a priority include Allianz, CDC Group (the UK’s development finance institution), Rabobank, Standard Chartered and Triodos Bank.

Australian Ethical wealth management outright excludes any investment “in current systems of commercial animal agriculture including meat, dairy, eggs and seafood.”

Another option for investors concerned with the treatment of animals: the VEGN ETF, managed by Beyond Investing and listed on the New York Stock Exchange. The fund “excludes from consideration companies that harm animals, screening out companies that are involved in animal testing, animal-derived products, as well as animals in sports or entertainment.” Top holdings aren’t so much in, say, plant protein companies like Beyond Meat, but in corporations like Apple, Microsoft and Mastercard that don’t engage in screened practices.

Investor network pushing for change

One global network of investors with $20 trillion in assets under management has been encouraging investors to consider the financial and climate risks of investing in animal cruelty. Jeremy Coller, executive chair of London-based Coller Capital and a well-known name in private equity, developed the Farm Animal Investment Risk & Return (FAIRR) initiative five years ago “to put animal welfare on the ESG agenda.” The Coller FAIRR Protein Producer Index assesses the 60 largest global meat producers for investors. FAIRR also pressures corporations like Kroger, Walmart and McDonald’s to consider the risks to investors of relying exclusively on animal proteins within their supply chains – and to consider alternatives.

With the widespread rise in interest in meatless products, veganism and animal welfare, the treatment of animals is quickly becoming an important issue in that realm of socially responsible investing. If large pension funds and financial institutions want to keep up with this trend, they will need to become more aware of their involvement in potentially cruel companies and take steps to keep cruelty out of their investments.

Jessica Scott-Reid is a freelance writer and animal advocate. She writes for major media across Canada and the U.S.

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But with the Liberals preparing for their first minority-government budget, Morneau is under growing pressure to act on the panel’s call for better data and clearer rules on climate-related finance and other incentives to drive capital into emerging low-carbon technologies.

The government remains committed to acting on sustainable finance and will “consider the [panel’s] recommendations very closely,” Morneau’s spokesperson, Pierre-Olivier Herbert, said in an interview. He would not comment on what measures are being considered for the budget.

The Liberals have embraced the aim of “net zero” carbon emissions by 2050 and plan to enshrine that goal in legislation with a series of five-year interim targets. Environment Minister Jonathan Wilkinson said sustainable finance is an important component of the government’s commitment to reach net-zero greenhouse gas emissions by 2050, and that he and Morneau “will have more to say on [the panel’s] recommendations in the coming months.”

“The right finance and investment structures can help Canadians and governments fight climate change and transition to a low carbon economy,” Wilkinson said in an emailed response.

“Globally, we are seeing significant movement to consider climate impacts in investment decision-making and in the mobilization of capital.”

Sources in government and the private sector say they expect the budget will provide discussion of the government’s approach to climate-related finance, though it remains unclear the degree to which it will include concrete measures.

In June 2019, a federally appointed expert panel on sustainable finance issued a report with 15 recommendations that would put climate change considerations in the mainstream of the country’s financial system.

The panel was chaired by former Bank of Canada deputy governor Tiff Macklem and included senior executives from the Canada Pension Plan Investment Board and Quebec’s Caisse de dépôt et placement, as well as a member of the Royal Bank of Canada’s board of directors.

Wilkinson met on January 22 with some members of the expert panel and recommitted to action, though he did not provide specifics.

There remains considerable resistance in some quarters of the financial community to the notion that asset managers and financial institutions must take into account long-term environmental considerations when making their investment decisions. Former Conservative finance minister Joe Oliver, writing in the Financial Post, criticized the Macklem panel, saying its proposals would “undermine a fundamental underpinning of the market economy, with negative consequences for profitability, capital formation and wealth creation.”

In a pre-budget submission, the national Chartered Professional Accountants (CPA) association urged the government to implement the recommendations of the expert panel that fall within federal jurisdiction and to encourage the private sector and provinces to act.

CPA highlighted two key recommendations from the Macklem panel: that the government map a long-term plan to achieve a low-carbon economy, sector by sector, complete with the amount of investment that would be required to achieve it; and that Ottawa establish an information and analytics centre to provide data on a broad range of climate-related issues, including private-sector targets, actions, risks and opportunities.

The two measures would give businesses and investors greater certainty and confidence in making decisions about climate-related risks and opportunities, Rosemary McGuire, CPA’s director for external reporting and capital markets, said in an interview.

Sean Cleary, executive director of the newly launched Institute for Sustainable Finance, housed at Queen’s University, said the federal government should also take up the Macklem panel’s recommendation to clarify the concept of fiduciary duty for pension funds, corporate boards and finance industry players.

The Macklem panel noted that many people in the financial sector regard environmental issues such as climate change as “non-financial” and therefore outside the scope of their fiduciary responsibility to achieve the best risk-adjusted returns.

Cleary said the notion is inconsistent with clear warnings from the Bank of Canada and global bodies like the Bank for International Settlements (BIS) – the global association of central banks – that climate change represents a major risk to corporate balance sheets and national economies.

The BIS issued a report on January 20 warning that climate change could have seismic impacts on the world’s financial systems.

Since the Macklem panel reported last June, there has been increased attention paid to sustainable finance, including a statement from the world’s largest asset manager, BlackRock, that it would screen all investments for climate-related financial risk.

However, on a panel at the World Economic Forum in Davos in January, Morneau talked about a “balanced approach” to budget-making but did not address one of the conference’s more prevalent themes: the risks that climate change poses to business and national economies.

His silence on the subject of sustainable finance is a “little discouraging,” Cleary said. “It’s a really important part of the process” for meeting Canada’s climate goals.

Shawn McCarthy writes on sustainable finance and climate. He is also senior counsel for Sussex Strategy Group.

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