{"id":18120,"date":"2020-04-17T08:59:58","date_gmt":"2020-04-17T12:59:58","guid":{"rendered":"https:\/\/www.benefitscanada.com\/news\/head-to-head-is-carbon-divestment-becoming-obligatory-for-pension-plans-144565"},"modified":"2020-04-17T08:59:58","modified_gmt":"2020-04-17T12:59:58","slug":"head-to-head-is-carbon-divestment-becoming-obligatory-for-pension-plans","status":"publish","type":"post","link":"https:\/\/blog.lifeinsurance-orleans.ca\/index.php\/2020\/04\/17\/head-to-head-is-carbon-divestment-becoming-obligatory-for-pension-plans\/","title":{"rendered":"Head to head: Is carbon divestment becoming obligatory for pension plans?"},"content":{"rendered":"
\n
<\/div>\n<\/p><\/div>\n

Benefits Canada<\/span> | April 17, 2020 <\/p>\n

Globally, many pension funds are divesting from carbon and fossil fuels, while others are staying the course and focusing on financial value and their fiduciary duties<\/p>\n

Simon Archer, partner at Goldblatt Partners LLP and co-director of Osgoode Hall Law School\u2019s Centre for Comparative Research in Law and Political Economy:<\/strong><\/p>\n

Political posturing aside, no one seriously disputes the science behind climate change and the threat it poses to societies, economies and, of course, the value of carbon assets held by institutional investors. The key question today is how to get \u201cthere\u201d from \u201chere.\u201d<\/p>\n

When the topic was discussed four years ago, the University of Toronto and the University of British Columbia each decided not to divest from carbon assets, choosing instead to take an engagement approach. At the same time, Swedish giant AP4 and others pursued divestment.<\/p>\n

Read: Considerations for institutional investors around divestment<\/a><\/strong><\/p>\n

Today, UBC has committed to divestment and a new campaign is underway at U of T. Around the globe, more than 1,100 institutions have committed to some degree of carbon asset divestment, including university endowments, philanthropic foundations and, notably, pension funds from Australia, France, Denmark, Germany, Norway, the Netherlands, Sweden, the U.K. and the U.S.<\/p>\n

Now, as then, there are competing definitions of the destination (what constitutes divestment) and more than one route to get there. The good news is the advisory community has become considerably more engaged in climate change, and there\u2019s a rapid proliferation of measurement tools and methodologies of implementation. The advice is available.<\/p>\n

The question is sometimes asked, \u201cBut does a fund fiduciary have a legal obligation to divest?\u201d The legal test hasn\u2019t changed. Plan sponsors must take factors that affect risk and return into account in making the decision, but this legal test is an \u201copen-textured norm.\u201d It provides a framework into which a close analysis must be framed. And as such, it won\u2019t be developments in fiduciary law that drives a decision to engage or divest.<\/p>\n

Read: Divesting from fossil fuels doesn\u2019t mean sacrificing returns: report<\/a><\/strong><\/p>\n

It is, instead, the increasing evidence of the material threats that climate change holds for portfolios and wider economic and social welfare, and the rapid improvement in the tools for conducting that analysis.<\/p>\n

Accordingly, the better question for legal and investment counsel is, \u201cCan we fully or partially divest from carbon assets and, if so, how and how fast?\u201d<\/p>\n

\n

Randy Bauslaugh, leader of the national pensions, benefits and executive compensation practice at McCarthy T\u00e9trault LLP:<\/strong><\/p>\n<\/div>\n

\n

C<\/span>limate change is an urgent and pressing economic issue. It requires pension fund fiduciaries to consider their investments in fossil fuels. But that doesn\u2019t mean they have an obligation to divest; it means they should consider how best to mitigate financial risk or enhance financial value. A one-track preoccupation with divestment could be a violation of fiduciary duty.<\/p>\n

Like any investment decision based on the usual financial metrics, many responses are available. In addition to divestment, fiduciaries or plan staff could dialogue with investee companies or managers, exercise proxy-voting rights or, in extreme cases, litigate to recover damages resulting from lost value. Sure, divestment has a place in the spectrum of responses, but it\u2019s a one-time gesture that puts fiduciaries on the sidelines with their fingers crossed and no remaining influence.<\/p>\n

Read: Most pension funds barely scratching surface on sustainable investment<\/a><\/strong><\/p>\n

In early March, three of the world\u2019s largest pension funds \u2014 Japan\u2019s Government Pension Investment Fund, the California State Teachers\u2019 Retirement System and the U.K.\u2019s Universities Superannuation Scheme \u2014 indicated they\u2019re forming a partnership for sustainable investing to pressure companies and asset managers. They\u2019re not divesting. They\u2019re taking measured action on climate change consistent with their fiduciary duty to preserve or enhance value.<\/p>\n

No doubt climate change is also an urgent ethical issue that compromises basic human rights to life, liberty and personal security. It exacerbates differences in standards of living in developing and developed countries. It destroys other life forms on the planet. It imposes some of the most significant physical, social, technological and health-care challenges ever. But isn\u2019t engagement, rather than disengagement, more likely to lead to meaningful change?<\/p>\n

The Canada Pension Plan Investment Board believes in \u201cclimate-aware investing as part of [its] mandate of maximizing returns without undue risk of loss and acting in the best interests of our contributors and beneficiaries.\u201d That\u2019s much more consistent with fiduciary duty than a myopic preoccupation with divestment.<\/p>\n

Read: CPPIB sustainability report shows increased investments in renewable energy<\/a><\/strong><\/p>\n<\/div>\n

Read the full article at BenefitsCanada.com<\/a><\/p>\n","protected":false},"excerpt":{"rendered":"

Benefits Canada | April 17, 2020 Globally, many pension funds are divesting from carbon and fossil fuels, while others are staying the course and focusing on financial value and their fiduciary duties Simon Archer, partner at...<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":[],"categories":[],"tags":[],"jetpack_featured_media_url":"","_links":{"self":[{"href":"https:\/\/blog.lifeinsurance-orleans.ca\/index.php\/wp-json\/wp\/v2\/posts\/18120"}],"collection":[{"href":"https:\/\/blog.lifeinsurance-orleans.ca\/index.php\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/blog.lifeinsurance-orleans.ca\/index.php\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/blog.lifeinsurance-orleans.ca\/index.php\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/blog.lifeinsurance-orleans.ca\/index.php\/wp-json\/wp\/v2\/comments?post=18120"}],"version-history":[{"count":0,"href":"https:\/\/blog.lifeinsurance-orleans.ca\/index.php\/wp-json\/wp\/v2\/posts\/18120\/revisions"}],"wp:attachment":[{"href":"https:\/\/blog.lifeinsurance-orleans.ca\/index.php\/wp-json\/wp\/v2\/media?parent=18120"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/blog.lifeinsurance-orleans.ca\/index.php\/wp-json\/wp\/v2\/categories?post=18120"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/blog.lifeinsurance-orleans.ca\/index.php\/wp-json\/wp\/v2\/tags?post=18120"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}