At City Council meeting, Vancouver asked to drop fossil fuels from Municipal Pension Plan
Vancouver mulls the decision to walk away from its oil-industry pension fund investments. Perhaps it's a more sensible financial move than you'd think.
Use your heart, use your head
The Lotto 6-4-9 street team is out in front of the City Hall SkyTrain station, telling us that the jackpot is $31 million. That’s nothing compared to the City of Vancouver’s Municipal Pension Fund. Over $400 million of that money is invested in fossil fuel companies.
On October 9, Vancouver City Council heard from staff and members of the community before voting on whether or not to move towards divesting from fossil fuels. This is a two-pronged issue: you have the moral aspect, and the financial-responsibility aspect. These two aspects could well converge.
Talk the talk, walk the walk
The City's Municipal Pension Plan (MPP) is directed by the British Columbia Investment Management Corporation (BCIMC). What City Council is voting on is whether or not to direct BCIMC to ditch the MPP's stakes in fossil-fuel companies.
If you're new to this issue, Carrie Saxifrage explains it rather well:
The City of Vancouver is signed on to the United Nations Principles for Responsible Investing (UNPRI), which suggests that investments take ethical and environmental issues into account. As former president of CCEC Credit Union, Andrea Reimer is familiar with people’s relationship with their investment funds: “Their money is often doing things at night that they’d prefer it not be doing.”
Divestment isn't the only option: An investor (in this case, the city of Vancouver via BCIMC) could hinge its funding on a company's ethical and sustainability practices. Of course, if you want to tell a behemoth Royal Dutch Shell that it better stop committing crimes if it wants to keep your money, you'd do well to manage your expectations.
Otherwise, an investor could choose to screen potential portfolio additions, either positively (Yes! I love companies that wash their trucks with reclaimed water!) or negatively (No! I will not invest in a company that serves panda in the lunchroom!). Other screening criteria are, obviously, risk and potential rate of return.
NPA Councilor George Affleck pointed out that this "is not a simple thing to do": public pressure and advocacy can have an impact on a city's pension-related decisionmaking, but the city cannot afford to ignore the future beneficiaries of those funds. Vision Councilor Andrea Reimer pointed out how this differs from direct city investment (which already avoids fossil fuels): with direct investment, the city benefits (we hope) right away; with pension-fund investments, someone else will ultimately take out that money, and ti won't necessarily be us.
Dollars and sense
The primary concern of a pension fund is to generate as high a return as possible for its eventual pensioners. Does this mean an inevitable deal with the Devil?
Several speakers weighed in with an emphatic "no." Mark Lee from the Canadian Centre for Policy Alternatives remarked, "Divestment is not just the right thing, it's the prudent financial move." Lee continued, "If you do the math, any plausible carbon budget for BC or Canada means that the vast majority of carbon reserves will have to stay in the ground. [...] We have a carbon bubble on our hands.”
The repercussions of a fossil-fuel industry bubble burst could be similar to those of the housing-bubble collapse and subprime crisis which sparked the recent Global Financial Crisis. Lee said that “fossil fuel assets will likely lose most of their value.” This would screw our City employees once they reach retirement age: “Pensions that ignore climate risk are not living up to their fiduciary responsibility.”
Patrick Condon, Chair of the UBC Urban Design Program, agreed: “There’s a moral requirement” to understand that “ethical investment in the fossil fuel industry is an oxymoron.”
Condon pointed out that the energy companies fed by MPP dollars are climate-change deniers that spend vast amounts of money to cast doubt on climate change reports. “Somebody has to do something, and this council is looked to for leadership across Canada and across North America.”
Nicholas Curry, a fourth-year UBC student questioned the logic of using MPP investments to lobby for corporate change; he asked the council, “Would you fund criminal activities in order to make them slightly less dangerous?”