Statement on the 2023 Federal Budget and the decision for PSP Investments to manage the Canada Growth Fund

SHIFT ACTION FOR PENSION WEALTH & PLANET HEALTH

For Immediate Release: March 30, 2023

Toronto, ON | Traditional territories of the Huron-Wendat, Anishnaabeg, Haudenosaunee, Chippewa and Mississaugas of the Credit First Nation - Shift welcomes measures in the 2023 federal budget to leverage private investment to accelerate the decarbonization of Canada’s economy. But we are concerned that the government’s plans place too much priority on risky, unproven technologies that at best drive incremental emissions reductions while ignoring the need to rapidly transition away from oil and gas to meet Canada’s climate commitments under the Paris Agreement. The government’s decision to mandate the Public Sector Pension Investment Board (PSP Investments) to manage the Canada Growth Fund (CGF) underscores our concerns.

Government investments in climate solutions, coupled with new mechanisms to leverage private finance of those solutions, are a smart and critical move to deliver urgent emissions reductions and build a zero-carbon economy. But we are concerned that the federal budget is disproportionately focused on risky private investments in false solutions that can undermine the energy transition by prolonging the use of oil and gas, like fossil hydrogen and carbon capture, utilization and storage (CCUS). Of the $60 billion in new climate-related spending in Budget 2023, $35 billion targets hydrogen and CCUS. Public investments in proven, ready-to-deploy solutions that actually enable the rapid transition away from fossil fuels, such as the electrification of transportation and housing, green infrastructure, renewable energy and storage deployment, and energy efficiency are required immediately to meet our climate goals.          

The decision to mandate PSP Investments to manage the Canada Growth Fund (CGF) is a good example of this disproportionality. We were surprised to see the federal government assign the management of $15 billion to one of the only Maple Eight pension managers that has yet to commit to net-zero emissions by 2050– the minimum standard for achieving Canada’s legally-binding international climate commitment. PSP’s assumption of the CGF underscores the need for the federal government to require PSP to develop a credible, science-based climate plan as part of requirements laid out in the 2021 Canadian Net-Zero Emissions Accountability Act.

PSP continues to invest the retirement savings of federal employees in fossil fuel companies with no credible or profitable decarbonization pathway other than phase-out. PSP’s own privately-held companies, such as TriSummit Utilities, are actively planning to expand fossil fuel infrastructure, with PSP itself falsely referring to fossil gas as “low carbon energy.” And a corporate director of Imperial Oil simultaneously sits on PSP’s Board of Directors, raising concerns about fiduciary duty and conflict of interest.

We agree with the premise of the CGF (an innovative public finance tool to attract the private capital required to decarbonize the Canadian economy), but it appears to be torqued in favour of support for investments linked to extending the runway for oil and gas producers that have no credible, science-based, profitable pathway to decarbonization other than phase-out. The strategic objectives and scope of investment activities of the CGF are misplaced. There is a high risk that the CGF will be used to finance oil and gas CCUS and fossil hydrogen projects, slowing the energy transition and creating stranded assets as fossil fuel demand collapses. PSP’s assumption of management of the CGF underscores the need for PSP to end its entanglement with the fossil fuel industry and fully commit to alignment with Canada’s international and domestic climate obligations, which the IPCC makes clear requires an immediate end to expansion and a rapid phase-out of fossil fuels. 

The decision to have PSP oversee this financing tool underscores the need for the federal government to do more to ensure it is treating the climate emergency with the urgency that it demands. Protecting the retirement security of 900,000 federal employees and responsibly managing the CGF means PSP must rapidly demonstrate its portfolio’s alignment with an emissions pathway that limits global heating to 1.5℃.

Contact information:
Adam Scott, Director, Shift Action for Pension Wealth & Planet Health 
adamscott@shiftaction.ca
416-347-3858

Shift Action for Pension Wealth and Planet Health is a charitable initiative that works to protect pensions and the climate by bringing together beneficiaries and their pension funds to engage on the climate crisis.

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