Canada’s national pension system is under fire for not meeting its climate change commitments, as leading watchdog group Shift Action for Pension Wealth and Planet Health calls out the country’s pension plans for their lack of progress in a new report. While some of Canada’s top pension funds have made significant strides toward addressing climate-related financial risks, others—such as the Canadian Pension Plan Investment Board (CPPIB) and Alberta Investment Management Corporation (AIMCo)—are falling short, raising concerns about their future sustainability and commitment to the global fight against climate change.
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Pension Funds Under Scrutiny for Climate Action
The Canadian Pension Climate Report Card, released on February 19, 2025, reveals that while fund managers have been increasing their capacity to handle climate-related financial risks, few have implemented effective strategies to align their portfolios with the transition to a net-zero economy by 2050. In particular, CPPIB and AIMCo have been singled out for their lack of concrete actions and strategies in this area.
At the heart of the issue is the growing recognition that the financial risks associated with climate change—such as extreme weather events and shifting global markets—pose serious threats not only to the environment but also to the long-term health of Canada’s retirement system. Pension funds, with their long-term investment horizons, are directly exposed to the impact of climate breakdown. As the report points out, these funds face unprecedented risks from both physical climate impacts and the necessary transition to a low-carbon economy.
Adam Scott, Director of Shift Action, emphasizes the importance of pension funds transitioning to green investments to ensure they can continue to serve their members for decades to come. He says, “With their long-term investment horizon and mandate to act in the best interests of members, pension funds’ exposure to the climate crisis is both direct and unavoidable.”
CPPIB and AIMCo Criticized for Inaction
One of the most critical assessments comes for the CPPIB, which manages a staggering $675 billion in assets. Despite the fund’s claimed sophistication in managing climate-related risks, the report assigns CPPIB a concerning C- grade, citing its failure to set interim targets for achieving net-zero emissions by 2050. The report also condemns the fund for continuing to invest in oil and gas projects without offering credible decarbonization strategies for these investments.
Scott is particularly outspoken about the CPPIB’s contradictions, stating that while the fund claims to support a transition, it continues to invest in oil and gas without clear transition plans from the companies in which it holds stakes. He accuses CPPIB officials of “greenwashing,” claiming that the fund’s rhetoric does not align with its investments in high-carbon industries.
Similarly, AIMCo, which manages pensions for public-sector workers in Alberta, also received a failing grade. Shift Action highlights AIMCo’s lack of a commitment to net-zero emissions, the absence of interim carbon-reduction targets, and its ongoing investments in fossil fuels as major concerns. The report notes that Alberta Premier Danielle Smith’s recent decision to oust AIMCo’s board, replacing it with a leadership aligned with the province’s pro-oil stance, is likely to further undermine efforts to align the fund with climate goals.
Progress in Quebec and Ontario: Stronger Commitment to Climate Goals
In contrast, pension funds in Quebec and Ontario have shown more progress. The Caisse de dépôt et placement du Québec (CDPQ), which manages the public sector pension plans of Quebec, was among the highest-rated, earning grades between B+ and B-. This includes pension managers in Ontario, such as the University Pension Plan, Ontario Teachers’ Pension Plan, and the Investment Management Corporation of Ontario, all of which have taken concrete steps to align their portfolios with climate action and set Paris Agreement-compliant targets. CDPQ, in particular, stands out for its exclusion of most fossil fuel investments from its portfolio.
Despite these advances, the report acknowledges that global political pushback against climate action, particularly in Canada and the U.S., continues to hinder broader efforts to address climate change within financial markets. In Canada, political discourse surrounding climate action is intensifying, with the Conservative Party of Canada opposing aggressive climate strategies in favor of expanding the oil and gas sector.
Political Pressure and the Anti-ESG Backlash
The political landscape in Canada adds complexity to the situation. In the U.S., climate action initiatives have faced increasing resistance from political leaders, particularly among Republican policymakers. This resistance has found its way into Canada as well, where a vocal anti-ESG (Environmental, Social, and Governance) movement is gaining traction, with several banks and financial institutions recently withdrawing from climate-aligned investment groups. The Bank of Montreal, TD Bank, Canadian Imperial Bank of Commerce, and the National Bank are among those who have pulled out of the Glasgow Financial Alliance for Net Zero (GFANZ), a global initiative aimed at achieving net-zero emissions by 2050.
Scott suggests that these withdrawals were to be expected, as many of these banks never fully embraced the principles of climate action. However, he points out that pension managers, who make long-term investments and are not constrained by election cycles or shifting political winds, have a unique responsibility to prioritize climate risks in their decision-making.
Calls for Science-Based Climate Targets
In a bid to bolster action on climate change, a coalition of 35 Canadian asset owners, representing approximately $53 billion in funds, issued a statement on February 26 calling for stronger commitments from banks, pension funds, and other institutional investors. They urge these institutions to adopt science-based targets, transition their operations to net-zero goals, and implement standardized annual reporting on progress.
The statement emphasizes that “climate risks are systemic financial risks” and that institutional investors have a vital role to play in managing these risks while capitalizing on the transition to a net-zero economy. These investors, the group argues, must commit to safeguarding their clients’ long-term savings by taking decisive action on climate change.
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Conclusion: The Need for Climate-Conscious Pension Funds
The growing criticism of Canada’s pension funds highlights the urgent need for a more robust, science-based approach to managing climate risks. While some Canadian pension funds have made positive strides in transitioning to a green economy, others remain woefully behind, exposing their assets—and the retirement savings of millions of Canadians—to significant long-term risks. As climate change continues to accelerate, it is imperative that all Canadian pension plans take stronger action to align their investments with a sustainable, net-zero future.
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