Stand.earth warns pension funds of legal risks in LNG investments
The environmental group sent letters to six major pension administrators, citing climate and fiduciary risks.
An environmental group has sent formal legal warnings to six of Canada's largest pension administrators, arguing that investments in liquefied natural gas projects could expose them to lawsuits. Stand.earth hired the Montreal law firm Trudel Johnston & Lespérance to send letters last week. The recipients were the Canada Pension Plan Investment Board, Public Sector Pension Investment Board, Ontario Municipal Employees' Retirement System, Ontario Teachers' Pension Plan, University Pension Plan and Healthcare of Ontario Pension Plan. The law firm has a history of major class action cases, including one against tobacco companies that resulted in a multi-billion dollar settlement. The letters urge the pension funds to avoid investing in LNG Canada, Ksi Lisims LNG or similar projects unless a transparent assessment proves the investments meet their fiduciary duties.
Anne-Julie Asselin, a partner at the law firm, wrote that the financial risks tied to fossil fuel investments are growing more significant and foreseeable. "Prudence demands an increasingly rigorous assessment of those investments," Asselin wrote. "Disregarding such risks becomes more difficult to justify and may carry legal consequences." The warning was issued after news emerged that a consortium including several of the pension funds plans to invest in LNG Canada. The consortium, led by U.S. asset manager Blackstone, includes CPPIB, OMERS, the Investment Management Corp. of Ontario and the PSP Investment board. It aims to buy a non-controlling stake in a Mitsubishi Corp. subsidiary that holds an interest in the LNG project.
Asselin said in an interview that the timing of the investment decision was unexpected. "We weren't expecting (decisions to make LNG investments) that quickly. And we were hoping that it would never happen," she said. She added that the firm will consider next steps and that the warning was sent because the status of the Mitsubishi deal remains unclear. LNG Canada, located in Kitimat, B.C., is the first natural gas export facility on Canada's West Coast. Its partners, including Shell and several Asian companies, recently approved an expansion to double the plant's output. The second phase has been designated a national-interest project under federal law.
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Geoff Souter, a managing director at CPP Investments, previously called LNG Canada a high-quality, strategic asset with strong fundamentals and attractive returns. Representatives for CPPIB, Ontario Teachers' and the University Pension Plan did not respond to requests for comment by late Tuesday. OMERS and HOOPP declined to comment. PSP Investments confirmed it received the letter but said it does not share Stand.earth's assessment of LNG investment risks. The pension fund said its decisions are made in accordance with its legal obligations and mandate to seek maximum returns without undue risk.
In a separate legal matter, four young Canadians sued CPPIB last year, alleging its fossil fuel investments fail to protect the long-term interests of future retirees. The group Shift: Action for Pension Wealth and Planet Health said CPP members and advocates will gather outside an Ontario court on Thursday as CPPIB seeks to have the lawsuit struck. Brooks said legal action is considered a last resort for groups concerned about pension investments in fossil fuels. "We're certainly prepared to go there if the pension funds move ahead with investments (in LNG), particularly after they've been duly warned and reminded of their responsibilities," he said.
With files from Castanet