BCI has begun to address the risks associated with continued fossil fuel investments, but much more needs to be done—divestment will make the British Columbia Teachers’ Pension Plan fund stronger and more resilient.
Implementing IEEFA’s divestment recommendations would allow fund managers and pension fund beneficiaries to move capital in the direction of both climate solutions and economic growth.
BCI currently holds billions of dollars in fossil fuel reserve and infrastructure investments, yet its fragmented disclosures provide only partial insight into the full extent of its fossil fuel investments.
BCI has determined if global temperatures rise to 2oC, its portfolio will lose 5.1 percent of its value, putting $11 billion of its investments—$2 billion attributable to BCTPP beneficiaries—at risk of capital loss.
The British Columbia Teachers’ Federation (BCTF) adopted a resolution in 2022 requesting its pension fund representatives to begin divesting assets from fossil fuel companies. The resolution, made at the request of union members, has initiated a dialogue within the stakeholder community as to how divestment from fossil fuels could occur. This report details the policy and fiduciary imperatives to achieve divestment; key analyses and actions required to meet the challenge; and the potential to convert the challenge into new opportunities to achieve a stronger, more resilient pension fund.
IEEFA proposes expanding the investment options offered to the British Columbia Teachers’ Pension Plan (BCTPP) and other funds under the current management paradigm to create a seamless set of decarbonized alternatives that run parallel to the existing investment strategies that include fossil fuels. Implementing IEEFA’s proposal would allow fund managers and pension fund beneficiaries to move capital in the direction of climate solutions and economic growth.
Climate change poses financial risks, and financial action should be taken to address the risks.
Climate change poses financial risks, and financial action should be taken to address the risks. The market position of fossil fuel companies is weak, and its outlook is negative. Alternative investment products now exist for a prudent, well-managed, orderly process to reduce and ultimately eliminate fossil fuels from the BCTPP.
The BCTPP, established to provide retirement income security for teachers and administrators, has an opportunity—and a duty—to strengthen and improve its fund’s stability by protecting it against the risks posed by fossil fuel investments. The British Columbia Investment Management Company (BCI), as the plan’s investment management services provider, has taken important preliminary steps toward addressing this risk. Much more, however, needs to be done.
IEEFA analyzed annual reports, audits, policy documents and other materials related to the BCTPP and BCI’s role in providing investment management services to identify the steps that have been taken and still need to be taken to address risks to the BCTPP from its investments in fossil fuels. Considering the information in the context of the fossil fuel industry’s condition and outlook, as well as the disruptive impacts of climate change, IEEFA found:
The current measures taken by BCI, while commendable, are insufficient given the degree and severity of the risks. A prudent fiduciary should work expeditiously to achieve:
Although many potential routes to portfolio decarbonization exist, BCI should consider expanding its fund offerings by introducing a new line of sustainable pooled funds that run parallel to and complement the existing menu of options for equities, bonds, real estate, private equity and alternative investments. This would provide trustees with a set of seamless investment options to tackle climate risk in line with their fiduciary obligations, investment philosophies, current asset allocation strategies and return targets. A prudent strategy to divest from portfolios containing fossil fuels is in the best interests of the BCTPP’s current and future beneficiaries, and will fulfill the fiduciary duty of the BCTPP and BCI to protect income security for teachers and administrators in retirement.