Stop gambling our pensions on green energy bets

Pension managers have one job: maximize your savings, not fund a government agenda

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Pension plan trustees are expected to manage funds conservatively by avoiding unnecessary risk to beneficiaries. Yet some of Canada’s largest pension funds are directing billions into climate-focused investments that have often delivered weak or uncertain returns, putting Canadians’ retirement security at risk.

For example, the Ontario Teachers’ Pension Plan Investment Board (OTPP), which managed total assets of $279.4 billion at the end of 2025, and University Pension Plan Ontario (UPP), with $12.8 billion at the end of 2024, are among funds increasing their exposure to climate-focused investments despite those risks.

The pattern extends beyond Ontario. A Pension Benefits Monitor story reported that the Caisse de dépôt et placement du Québec plans to “… scale up its investments in climate solutions and transition-aligned companies with a target of $400 billion by 2030.” Hence, a large proportion of assets, which were $517 billion at the end of 2025, would be in ‘climate-friendly’ investments within five years.

This concentrates investment in a sector where there is limited evidence of superior returns. Aimco, Alberta’s public sector asset manager, acknowledged environmental concerns in its investment philosophy, without specific commitments. The BC Investment Management Corporation acknowledges climate considerations, but hedged its bets.

The Canada Pension Plan Investment Board, which manages $714.4 billion as of March 31, 2025, faces the same issue. Climate barely appears until page 23 of its 2025 Annual Report and is addressed through five principles.

The most telling is “Principle 4: Support a responsible transition consistent with our investment beliefs and expertise, including our belief that accelerating the global energy transition requires a sophisticated, long-term approach rather than blanket divestment.” In plain terms, it leaves the door open to continued investment without clear evidence that those investments will outperform.

The report then softens the language even further: “These principles frame how we engage with stakeholders and deploy capital …” and so on. The wording avoids committing to a clear strategy, but it still allows capital to be directed toward policy goals rather than performance.

Estimates suggest more than $21 trillion has already been spent on these kinds of efforts, including figures cited by Bjorn Lomberg. That scale of spending underscores how much capital is being directed into investments not clearly tied to returns.

Governments give pension managers wide latitude to invest pension assets. But that freedom comes with a simple obligation. Deliver returns, not policy outcomes. The CFA Institute, the industry’s leading professional body, sets the standards for all CFA charter holders.

Its Code of Ethics requires managers to “use reasonable care and exercise independent professional judgment” in their decisions.

That is where the problem lies. First, steering money into green energy and other climate-focused investments may conflict with that duty when the returns do not justify the risk.

The track record in recent years is not encouraging. In 2024, Real Clear Energy noted that a global renewable energy index had been flat since 2021, while the S&P 500 surged. It pointed to underperforming investments in electric vehicles, batteries, wind turbines and charging infrastructure.

There is also a second reason to avoid such investments. Many of these investments depend on government subsidies, mandates or tax credits. Those supports can change quickly. When they do, the investments can unravel just as quickly.

Prudent portfolio managers limit exposure to that kind of uncertainty, just as they would treat investments in unstable, politically volatile or corrupt jurisdictions.

This is not a fringe concern. At least eight asset management firms overseeing more than $20 trillion have declined to join the Glasgow Financial Alliance for Net Zero.

Pension trustees are not policymakers. Their job is to deliver returns. When investment decisions are driven by government policy rather than performance, the cost will be felt by the Canadians who depend on those pensions.

Ian Madsen is a senior policy analyst at the Frontier Centre for Public Policy.