May 26, 2021
Considering Climate Change is Part of Pension Trustees’ Legal Responsibilities, A New Analysis Reveals
26 May 2021, Vancouver – The Canada Climate Law Initiative has today released an opinion from one of Canada’s most respected pension lawyers, Randy Bauslaugh of McCarthy Tétrault LLP. Mr. Bauslaugh concludes that pension fund trustees have obligations to consider climate change as part of their fiduciary duty.
“In view of widely accepted evidence of climate change and its financial implications, including evidence recently accepted by the Supreme Court of Canada in the Greenhouse Gas Pollution Pricing Act Reference, pension fund fiduciaries ignore at their peril the financial risks climate change poses to the investments they have a duty to manage,” says Mr. Bauslaugh. He goes on to say that “this decision, along with other mainstream scientific and financial evidence makes it easy to conclude that pension fund fiduciaries who fail to consider or manage climate-related financial risks and opportunities, may find themselves personally liable for economic, reputational or organizational loss resulting from that failure.”
Catherine McCall, Executive Director of the Canadian Coalition for Good Governance whose members have approximately $5 trillion in assets under management, observes that “climate change is an observable fact recognized by our Supreme Court. Pension investment fiduciaries can’t ignore the financial implications without legal risk.”
Mr. Bauslaugh also points out that Canada has almost 17,000 registered pension plans that vary dramatically in size and type. Some, like the Canada Pension Plan and Ontario Teachers’ Pension Plan, are among the largest and best managed plans in the world. But the vast majority are very small, have no in-house expertise and must rely on outside experts. The opinion surveys the practices of 40 of Canada’s largest plans in order to provide some practical guidance gleaned from the experts, but it also recommends legislative changes to ensure climate change is on the radar screens of those responsible for investment oversight, no matter what degree of investment sophistication they may have.
Mr. Bauslaugh also notes that climate change has intergenerational implications. It is not only a long-term issue to protect the interests of younger pension contributors, but one that imposes short-, medium, and long-term risks and opportunities that cannot be overlooked in properly discharging duties of intergenerational fairness.
Mr. Bauslaugh emphasized that his legal opinions and recommendations “do not arise from any ethical, moral, environmental, cultural or social desire to address climate change, or to save the planet. They arise out of a basic application of fiduciary obligation imposed by minimum pension standards legislation, the common law and civil law, to widely accepted evidence of the economic consequences of climate change. Importantly, for purposes of this paper, that evidence includes evidence that not only is climate change real and a serious threat to the planet and to people, but that it presents material risks to investment performance and the stewardship role fiduciaries play in the investment of pension plan assets.”
About Randy Bauslaugh
Randy Bauslaugh is co-Chair of McCarthy Tétrault’s national Pensions, Benefits & Executive Compensation practice, and co-Chair of its 45-lawyer national Pension Funds Group. Randy provides legal advice to plan sponsors, administrators, service providers and governments on a wide range of pension and benefit matters. He has been involved in many of the leading pension and benefit cases over the past 35 years.
Randy strives to provide practical solutions. As a trustee of one of Canada’s largest ELHTs and as a corporate director, he understands the need for diligent, practical and comprehensible legal advice when advising or representing decision makers and in-house counsel. He is an active supporter of many industry associations: for example, he is a member of the Pension Policy Council of the C.D. Howe Institute, the editorial advisory board of Benefits and Pensions Monitor and a former Chairman of the International Pension and Employee Benefits Lawyers Association.
Randy obtained a BA from the University of Waterloo in 1977 and his LLB from Osgoode Hall Law School in 1981. He was called to the Ontario Bar in 1983.
About the Canada Climate Law Initiative
The Canada Climate Law Initiative (CCLI) is an inter-disciplinary research initiative that advances the understanding of climate governance across Canada through research, dialogue and knowledge sharing. CCLI conducts rigorous legal analysis and consult with a national network of 66 Canadian Climate Governance Experts to bring up-to-date governance knowledge and tools to corporate and pension boards across Canada. CCLI is led by three principal investigators, Dr. Janis Sarra and Dr. Carol Liao from the Peter A. Allard School of Law, University of British Columbia, and Professor Cynthia Williams from the Osgoode Hall Law School, York University.
CCLI acknowledges that the UBC Point Grey campus is situated on the traditional, ancestral and unceded territory of the xʷməθkʷəy̓əm (Musqueam).
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