Canadian pensions are facing severe risks from climate change, with new warnings that federal pension valuations are underestimating the financial impacts of a rapidly warming world.
Pension watchdog Shift: Action for Pension Wealth and Planet Health, alongside environmental law charity Ecojustice, has written to the Office of the Chief Actuary (OCA) raising concerns that systemic climate-related financial risks are not being properly assessed.
The OCA is responsible for statutory valuations of the Canada Pension Plan (CPP), the Public Service Pension Plan (PSPP) and other federal programs that collectively manage more than $1 trillion in retirement savings.
“Many of Canada’s largest pensions are sleepwalking into a climate crisis with existential consequences for their members,” said Adam Scott, Executive Director of Shift.
“The Chief Actuary needs to do its job by ensuring its statutory actuarial valuations of federal plans and programs actually reflect the reality of these risks, so that they can be managed before it’s too late.”
Research from Ortec Finance, cited in the letter, warns Canadian pension funds could see investment returns fall by up to 50% by 2040 if global warming reaches 3.7°C.
Under severe scenarios, declines could approach 60%, significantly reducing retirement benefits for younger Canadians and potentially increasing contribution rates.
Key concerns outlined by Shift and Ecojustice include the omission of worst-case climate scenarios, failure to account for tipping points such as ice sheet collapse, continued exposure to fossil fuel investments worth tens of billions and unrealistic assumptions, that future decades could unfold without climate impacts.
The risks are particularly acute for younger workers who will contribute to pension plans during decades of rising climate instability but only access benefits after 2050, when the impacts are expected to be most severe.
“Pension plans are meant to provide a measure of future financial security,” said Tanya Jemec, Finance Lawyer for Ecojustice.
“The Chief Actuary has a key role to play in helping the Canadian public, government and pension decision-makers understand how this security could be at risk, particularly for young people and future generations, if we do not act now to avoid high global warming scenarios.”
Climate change could weaken pensions, warns Canadian watchdog appeared first on Energy Live News.