Shareholder Proposal Challenges Loopholes in Brookfield’s Transition Funds

For immediate release

Brookfield invests heavily in LNG and has called it a “transition” fuel, contrary to evidence and global taxonomies

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Investors for Paris Compliance (I4PC) and Shift: Action for Pension Wealth and Planet Health (Shift) have filed a shareholder proposal at Brookfield Corporation (BN) calling on the company to disclose specific criteria for inclusion of assets within its transition-labeled funds, which value $27.4 billion. A vote will be held at Brookfield’s AGM on June 6. This request follows concerns that the guiding document for the funds is too vague and may permit investments that undermine net-zero commitments, such as LNG.

“Brookfield’s overall enthusiasm for LNG is a cause for concern given that it has only vague guidance for what qualifies for inclusion in its transition funds,” said Michael Sambasivam, Policy Analyst with I4PC. “Without clear guardrails, unaligned assets could create reputational and transition risk for Brookfield, its fund investors and its shareholders.”

Some of Canada’s largest pension funds are core participants in Brookfield’s transition funds. The Ontario Teachers’ Pension Plan was a founding investment partner and anchor investor in Brookfield Global Transition Fund I, saying it “reflects (its) commitment to providing retirement security for our members while also helping to make the world a better place.” PSP Investments and the Investment Management Corporation of Ontario also made large investments in the transition-labeled fund, saying it “reinforces (their) collective dedication to responsible investing and the transition to a net-zero carbon economy.” Meanwhile, the Caisse de dépôt et placement du Québec was a major investor in Brookfield’s Catalytic Transition Fund.

The shareholder proposal from I4PC and Shift states:

• Brookfield has written its transition guidance document in a vague manner that includes loopholes such as not specifying which transition pathways Brookfield adheres to, while failing to include required measures such as full lifecycle emissions accounting and preventing carbon lock-in.

• A Brookfield executive has falsely called LNG a “leading transition fuel”, and Brookfield is the eighth largest LNG investor in the world via its other business lines.

• Brookfield’s transition guidance is not aligned with any leading taxonomies, including the draft principles set forward for a Canadian taxonomy.

• Any inclusion of non-aligned investments in funds with a "transition" label, would lead to controversy and considerable exposure to financial risk for both Brookfield and its limited partners.

“LNG is not a transition fuel, and does not belong in any fund being advertised as climate- or transition-aligned,” said Adam Scott, Executive Director at Shift. “It cannot reduce emissions on a lifecycle basis in power generation even compared with coal, and directly competes with the deployment of real transition activities such as renewable energy. LNG is simply not aligned with credible net-zero commitments.”

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For more information, contact:

● Michael Sambasivam, Senior Analyst at I4PC at (647) 785-7725 or michael@investorsforparis.com

● Adam Scott, Executive Director, Shift at 416-347-3858 or adamscott@shiftaction.ca

The Shareholder Proposal:

Resolved:

Shareholders request that Brookfield disclose clear criteria for assets within its transition-labeled funds in order to ensure compliance with net zero.

Supporting statement:

Brookfield has developed a significant business line in transition investing, raising almost C$30B across three funds.

Brookfield’s transition-labeled funds are guided by its Operating Principles for Impact Management document (OPIM). This includes the defining, management, and assessment of strategic impact objectives, and measurement and mitigation of negative impacts.

But, the OPIM is overly vague, and not compliant with existing and emerging green and transition taxonomies. This fosters business risk with the potential to allocate “transition” investments into activities that lock in emissions and undermine net-zero commitments.

This is particularly relevant to LNG, which the Brookfield Infrastructure CEO called a “leading transition fuel in the move toward net zero.” Across other business lines, Brookfield is one of the largest investors in LNG in the world, ranking 8th largest with US$5.25B invested.

Branding LNG as a “transition fuel” and potentially including such projects in Brookfield’s transition funds is only possible due to several loopholes in the OPIM.

For example, it states that Catalytic Transition Fund investments will be chosen using “the relevant regional decarbonization pathways.” But Brookfield does not identify any such pathways specifically, obscuring the magnitude and timing of permissible carbon-intensive assets. For its other transition funds, Brookfield vaguely says it will use relevant sectoral methodologies.

Without references to specific decarbonization models, Brookfield cannot deal with the issue of carbon lock-in, which is not mentioned anywhere in the OPIM. For example, a study finds existing and proposed LNG projects take up more of the 1.5°C-aligned carbon budget, as modelled by the Intergovernmental Panel on Climate Change, than would be allotted to all natural gas globally. This means any additional LNG projects are by definition carbon lock-in.

Furthermore, while the OPIM says Brookfield will report fund emissions using standards such as the GHG Protocol and Partnership for Carbon Accounting Financials, Brookfield’s current emissions disclosures lack the scope 3 categories which capture LNG’s lifecycle emissions. New studies show that when leakage is factored in, LNG can be higher-emitting than coal, and is never much better.

With these gaps, the OPIM leaves the door open to projects that are not compliant with existing or emerging taxonomies that spell out transition eligibility such as those in the European Union, Australia, and Canada. None of these permit new gas production projects.

Given these gaps and Brookfield’s overall support for LNG, investors in its transition funds face the risk that their capital will be deployed in projects that are antithetical to net zero. The resulting loss of credibility for Brookfield would pose a business risk as investors seek more credible alternatives.

For these reasons, shareholders ask that Brookfield issue clearer criteria for its transition funds to ensure that all invested assets align with net zero.