Are Canada’s pensions sleepwalking into a climate crisis?

Canada’s $1tn in public pensions could face severe financial risks from climate change if systemic threats are not properly reflected in federal actuarial assessments, according to a warning issued by Shift: Action for Pension Wealth and Planet Health (Shift) and Ecojustice. 

In a letter to Chief Actuary Assia Billig, the groups said the Office of the Chief Actuary (OCA) is underestimating cascading economic and financial consequences of global warming in its valuations of the Canada Pension Plan (CPP) and Public Sector Pension Plan (PSPP).  

The submission was also sent to Finance Minister François-Philippe Champagne, Treasury Board President Shafqat Ali, and senior executives at CPP Investments and PSP Investments. 

Adam Scott, executive director of Shift, said Canada’s largest pensions are “sleepwalking into a climate crisis with existential consequences for their members.”  

He added that the Chief Actuary must ensure its valuations of federal plans and programs properly reflect climate risks so they can be managed before it is too late. 

The watchdogs cited research from Ortec Finance showing Canadian pension funds could see investment returns fall by as much as 50 percent by 2040 if average global temperatures rise 3.7°C, with potential declines nearing 60 percent under severe scenarios.  

These risks, if ignored, could leave younger workers facing significantly higher contribution rates or reduced retirement benefits. 

The letter highlighted key shortcomings in current assessments: 

• Worst-case scenarios excluded: OCA’s “failed transition” scenario projects only an 8 percent GDP decline by 2050 and 30 percent by 2100. Climate science points to potential GDP losses of 65–73 percent by 2100 at 4°C warming. 

• Tipping points overlooked: Irreversible impacts such as permafrost melt or ice sheet collapse that could trigger runaway warming are not accounted for. 

• Fossil fuel exposure: CPP Investments held over $22bn in fossil fuel assets as of October 2024, while PSP Investments held between $6.2bn and $8.1bn as of March 2024, exposing members to stranding and liability risks. 

• Implausible baseline assumptions: Current projections assume a world without climate impacts through 2100, despite evidence that climate change is already slowing economic growth . 

Tanya Jemec, finance lawyer at Ecojustice, said pension plans are “meant to provide a measure of future financial security.”  

She added that the Chief Actuary has a key role in showing the public, government, and pension decision-makers how that security could be at risk, especially for younger generations, if high global warming scenarios are not addressed. 

Shift and Ecojustice made several recommendations to the OCA. They urged it to: 

• Incorporate climate tipping points and cascading impacts into its risk models, 

• Reassess assumptions to capture worst-case outcomes, 

• Rrovide clearer narratives on climate uncertainty, 

• Examine fossil fuel investment risks more closely, and 

• Integrate climate effects into baseline financial projections.