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The Alberta Federation of Labour is warning that the province’s pensions managed by the Alberta Investment Management Corporation (AIMCo) are over-exposed to carbon-emitting industries, despite increased awareness of the risks linked to them. AIMCo’s portfolio produces 243 tonnes of carbon dioxide for every million dollars it invests, up from 179 tonnes in 2015. AIMCo said its exposure to fossil fuels is in line with global trends; Joel Gehman, associate director of the Canadian Centre for Corporate Social Responsibility at the University of Alberta, echoed the claim. (The Canadian Press)

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Talking point: AIMCo’s increased exposure to fossil fuel-reliant companies isn’t just an environmental concern—it could be a problem for people relying on those investments to fund their retirements. Trident Exploration serves as an example: the junior energy company went bankrupt last spring, even after a $12.3-million AIMCo investment. As the financial risks linked to climate change are increasingly understood, some regulators are considering legislation to limit exposure. On Thursday, the accounting watchdog for the U.K. and Ireland said he plans to review how firms and auditors assess and disclose the potential impacts of climate change on their businesses. The EU is also considering standards for how companies report environmental and social risks.

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According to a Reuters survey, 33 of Britain’s 47 largest pension funds said they would not divest from oil and gas firms; some said doing so would result in losses in financial returns. Some funds said they preferred to focus on companies’ carbon footprints. (Reuters)

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Talking point: The survey comes just a week after BlackRock, the world’s largest investor, announced it would divest from companies that generate more than 25 per cent of their revenues from thermal coal by the middle of 2020. The fund manager lost an estimated US$90 billion over the last decade by ignoring the financial risk of investing in fossil-fuel companies, according to one report. Mark Carney, the outgoing Bank of England governor who is attending the World Economic Forum in Davos, Switzerland this week, has also warned that fossil-fuel investments will be “worthless.”

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Unions representing teachers and nurses in Alberta said they weren’t consulted about a provincial move to take control of the $18-billion Alberta Teachers’ Retirement Fund (ATRF), as well as funds from the Workers’ Compensation Board and Alberta Health Services. (Calgary Herald)

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Talking point: The Alberta government is billing this as a way to save money on administrative costs. There’s a much larger potential financial benefit in terms of returns, but the Crown corporation taking over—the Alberta Investment Management Corporation (AIMCo)—lags behind at least one of the funds it would be taking up. Last year, AIMCo had a 2.3 per cent return. The ATRF netted 9.6 per cent in fiscal 2017–18. Another purported benefit of switching to AIMCo is scale. The institutional investor already has $108 billion in assets under management. Adding another few tens of billions will put it closer to the $153-billion British Columbia Investment Management Corporation.

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The Canadian venture firm’s first new fund, the Round13 Fund II, is being led by the Labourers’ Pension Fund of Central and Eastern Canada and two Canadian charter banks. The second new fund, Round13 Growth, aims to support five to 10 deals in the $20-million range. (BetaKit)

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Talking point: The Fund II has closed $128 million to date, and has a final target of $150 million to $175 million. Some 40 percent of Round 13’s first fund, created in 2017, is still to be invested, the firm has backed companies like TouchBistro, Bold Commerce and Hubdoc. The creation of this fund follows a decision by iNovia to create two of its own last year. The trend is indicative of Canada’s burgeoning tech ecosystem, according to Round13 managing partner Bruce Croxon, who said these new funds will help cut larger cheques to keep Canadian firms in Canada.

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Domestic shares make up 21 per cent of the country’s retirement-savings sector’s equity portfolios, seven times Canada’s weight in the FTSE All-World Index, according to research from FTSE Russell. The index firm also looked at public and private pension funds in the U.S., Japan, Australia and the U.K.; Canada had the second-highest allocation to domestic stocks.(Financial Post)

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Talking point: Funds’ returns have suffered because of the overweighting to Canadian names, according to the study. Two of the three largest sectors on domestic indices—oil and gas and materials—have lost value over the 11 and a half years it evaluated, while their global peers have posted positive returns. And tech stocks, which have returned about 13 per cent over that period, make up a relatively small share of Canadian markets. But there’s wide variation within the pension sector. Large funds like the Canada Pension Plan Investment Board, the Ontario Teachers’ Pension Plan, the Caisse de dépôt et placement du Québec and Alberta Investment Management Corporation are widely diversified, with public equities making up only about a third of their assets, and less than half their holdings in Canada.

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The pension giant plans to triple its Asia staff from 25 people to 75, and open offices in Mumbai and Singapore. Its London office, where the fund oversees its European investments, could grow from 30 people to 50 over the next two years. It could also shift as much as $11 billion into infrastructure and other physical assets on the two continents. Also Monday, the Canada Pension Plan Investment Board (CPPIB) reported a 1.1 per cent return on investments, as overseas investments were worth less when converted to Canadian currency, due to the strengthening dollar. (Reuters)

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Talking point: OTPP’s planned asset shift follows the moves of other larger pension funds. CPPIB, Canada’s largest pension fund, currently derives the majority of its earnings from overseas. The move also comes ahead of OTPP getting a new CEO in Jo Taylor. Set to take over in January 2020, Taylor has significant experience on both continents. He was based in London and Hong Kong between 2016 and 2018, running OTPP’s operations in Europe, the Middle East, Africa and Asia-Pacific. OTPP is already stepping up its Asian investments. Earlier in August, the fund invested up to US$1 billion in an Indian sovereign wealth fund and participated in a US$489-million investment in Dream Cruises from Genting Hong Kong.

 

Correction: A previous version of this briefing used the pronoun she for Jo Taylor. The correct pronoun is he. The piece has been updated. 

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The pension plan bought 20,000-plus shares of GEO Group in the first quarter of 2019, according to U.S. Securities and Exchange Commission records. Lisa Papas, a spokesperson for the OTPP, said the fund divested in April from the Florida-based company, which owns or operates over 130 prisons. She said the fund often trades “in and out of companies that are part of major stock indexes.” (CBC)

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Talking point: The OTPP had $191.1 billion in assets under management in 2018, of which $31.6 billion is in public stocks, including investments that passively track major markets. This news comes one week after my colleague Zane reported that the Canada Pension Plan Investment Board (CPPIB) had also sold its investments in GEO Group and in CoreCivic, which operates private prisons and detention centres, as well. The two funds’ divestments come as investors face increased pressure from the public to make socially responsible investments, considering factors like human-rights abuses. The CPPIB faced protests and two separate petitions which gathered a combined 56,000 signatures over its investments in the two U.S. prison firms. A 2018 inspection of several GEO Group-owned detention facilities found issues like inadequate health care, restrictive segregation and rotting food.