Business as Usual?: The Limited Influence of Climate Change Disclosure and Fiduciary Duties on the Low-Carbon Investment Practices of Canada's Big 10 Public Pension Funds

Abstract

Canada must achieve an estimated CAD 2.6 trillion in low-carbon investments by 2030 to meet its commitment under the Paris Agreement. To reach this investment benchmark, Canada must secure the financial support of its ten largest public pension funds. But low-carbon investing is not currently “business as usual” for the majority of these “Big 10” funds. The recently commissioned Expert Panel on Sustainable Finance (EPSF) recommends two regulatory changes to address this problem: (1) implementing the disclosure recommendations of the Task Force on Climate-Related Financial Disclosures; and (2) clarifying the relevance of climate change to the fiduciary duties pension funds owe to their beneficiaries. I argue that these recommendations will not guarantee that the Big 10 will meaningfully contribute capital towards Canada’s transition to a low-carbon, climate-resilient economy over the next decade. A disclosure regime is unlikely to incentivize the Big 10 to increase their domestic low-carbon investments. The Big 10’s independent governance structures would likely prevent plan beneficiaries, civil society and the courts from holding them accountable for poor low-carbon investment disclosure or practices. Any clarification to the fiduciary duty of prudence would simply require the Big 10 to consider low-carbon investment opportunities as part of their investment decision-making; the duty could still be fulfilled by adopting a range of investment strategies that do not directly support Canada’s transition. These insights have important implications for how Canada responds to the EPSF’s recommendations and for any future regulatory action to secure a sustainable economic future.