The Maple Revolutionaries

Between 2020 and 2021, Canada’s biggest pensions went all in on “sustainable investments,” nearly doubling their share to reach nearly 13 percent of their total fund size. Investments in renewable energy, a subset of that category, have played a sizable role. For instance, CCPIB has more than tripled its investments in renewable energy over four years, reaching a current total of $10.3 billion, which is more than twice the rate of growth of the overall fund.

This gave the appearance of altruism and profit working hand in glove. “Now that renewable power investments are cost-competitive with coal and low-priced natural gas, many emerging markets can leapfrog into renewables, bypassing conventional energy production,” said CPPIB’s head of renewables, Bruce Hogg, in a Q&A on the pension’s website. The pension recently highlighted its renewable investments as one of the most high-yielding sectors in its portfolio.

On the one hand, these investments provide welcome relief in an economy whose transition from fossil fuels is long overdue. This year, the world is projected to allocate $1.8 trillion to clean energy. However, to achieve the goal of reaching net-zero emissions by 2050, the International Energy Agency emphasizes the need for over twice that amount by the early 2030s. Pension funds’ access to long-term wealth would seem to position them as dream investors with the patience to propel the energy transition forward.

But Canadian pensions also carry baggage: namely, an investment approach that is as novel as it is destructive.

As early as the 1990s, Canadian pensions acted as risk-averse money managers, guarding modest pools of assets invested mostly in secure government bonds. Since then, an era of sweeping deregulation in pension law meant they could invest in riskier assets like private equity, infrastructure, and debt. They also invested more of their funds in-house, deviating from the industry norm of outsourcing fund management to companies like Vanguard and BlackRock. This approach earned these pensions the nickname the “Maple Revolutionaries” due to their leading role in pension management, characterized by a willingness to make new moves in pursuit of higher returns. In the decades since switching their approach, Canadian pensions have seen those returns skyrocket — one 2017 analysis estimates that Canada’s eight largest pensions added an annual additional return of $3 billion to their portfolios relative to 132 other pensions abroad between 2006 and 2015.

Their success was due, in part, to a distinct category of investment loosely described as “infrastructure.” This category encompasses assets such as highway tolls, electrical transmission lines, and other material investments that benefit from a captive customer base reliant on their services. Four Canadian pensions rank in the global top ten of pension infrastructure investors in the world — no other country’s pensions compare.

Investments in infrastructure can entail the privatization of once publicly owned services. The Ontario Teachers’ Pension Plan (OTPP) is the single largest investor in privatized water companies in Chile, the only country in the world where private water rights are inscribed in the state’s constitution. Water in the country is often scarce, and its privatization has been roundly criticized for overexploitation, compounding the already-drying effects of climate change. In an email, OTPP stated that its investee companies have increased water coverage to 100 percent in urban areas, and reduced the incidence of diseases, noting that they are a “responsible owner.”

Pensions’ fastest-growing infrastructure investments are in renewable energy, where companies sometimes surpass the size and profit margins of oil and gas firms. That includes NextEra Energy, the largest global generator of wind and solar energy, which OTPP has almost a billion invested in, and which outpaced ExxonMobil’s market value for a brief period in October 2022. Another illustrative case is Pattern Energy, one of Canada’s largest wind power operators — wholly owned by CPPIB — which recently reported profit comparable to conventional oil production during a boom. These profit margins can come with consequences.

The Dark Side of Pension-Owned Renewables

NextEra recently earned one of the lowest rankings among the world’s largest renewable energy companies in a benchmark developed by the Business & Human Rights Resource Centre — a rank attributed to its poor or nonexistent policies on human rights, living wage pay, indigenous rights, and community benefits.

Renewable companies profit when land and labor — among major cost outputs — are cheap. That helps explain why Canadian pensions are focused on projects in India, where the cost of building solar energy is among the lowest in the world. In November, CPPIB usurped Goldman Sachs as the dominant shareholder of ReNew Power, India’s second-largest utility-scale renewable energy company by gigawatts installed. ReNew developed a three hundred–megawatt facility in one of the largest solar projects in the world, Pavagada, an expansive sea of solar panels encompassing five villages in the state of Karnataka. Facing droughts and uncertain farming conditions, landowners leased their land to the solar park for just $300 per acre a year for twenty-eight years — less than what could be earned in a good year of farming, and those rates aren’t indexed to inflation, which is on the rise.

But those without land got hit hardest. “The people who are really being devastated are the landless laborers,” said Devleena Ghosh, adjunct professor at the University of Technology Sydney. Ghosh said women, who relied on the open farmland to graze their animals and to get jobs on farms, were most impacted. On a research trip to the Pavagada park, Ghosh met women determined to share their story. “They were saying things like, ‘we can’t pay our children’s school fees anymore,’” she said.

While the Pavagada solar companies promised jobs at the solar park to replace jobs in farming, those commitments went largely unfulfilled. Ghosh says jobs often go to workers brought in from across the country willing to work for less, and less likely to unionize. And the park takes an environmental toll, drawing on scarce water resources from bore wells to clean its four hundred thousand solar panels.

ReNew Power bought its solar panels for the Pavagada park from a company linked to forced labor of Uyghur peoples in Xinjiang province in China, where the Helena Kennedy Centre for International Justice has described working conditions at such sites in the country as tantamount to “enslavement.” Along with other major solar developers, ReNew’s top solar suppliers have been flagged for a “very high risk” of exposure to forced labor.

Following the development and construction of the Pavagada project, ReNew Power sold it to its current owner and operator, Ayana Renewable Power. CPPIB did not respond to requests for comment about its investment in the Pavagada project during its development, or its ongoing investment in ReNew Power. ReNew Power did not respond to requests for comment.

Along with its penchant for cutting corners, ReNew claims to be one of the “cheapest [renewable energy] investments globally,” promising returns of 16 to 20 percent. This year, CPPIB is reported to be looking at options to buy out ReNew Power, and take the company private.

Indeed, other Canadian-based pensions have set their sights on India. Caisse de dépôt et placement du Québec (CDPQ) and Ontario Municipal Employees Retirement System continue to hold almost a billion in Azure Power, despite recent revelations of fraud and safety malpractice. Last fall, OTPP purchased a 30 percent stake in Mahindra Susten, an Indian solar company, for over $220 million.

Cutting Corners

The land and labor discounts of Indian renewables are clearly an inducement for development on the subcontinent. But pensions’ renewable investments in North America also find ways to cut corners.

“It was trash,” said a former employee of the CDPQ-owned solar project in Michigan called Calhoun. The worker, who chose to remain anonymous, said the majority of workers on-site were hired through a temp agency, making around $14 to 17 per hour with no coverage for daily expenses. Because of the low wages, workers were often unhoused or barely housed. “Some of them were staying in their cars. Some of them were staying in hotels — they were like six to eight deep in a room,” the former employee said.

Additionally, the worker alleges that the materials used were substandard. “We were using broken panels, damaged panels,” they said. Despite their efforts to alert the company, “Invenergy just looked the other way.” Invenergy denies receiving such a complaint, and CDPQ directed requests for comment to Invenergy.

Like ReNew Power, Invenergy and other portfolio companies are known in the industry as “developers.” They own the company and handle the finances and agreements with the utility, but when it’s time to build, the companies tend to outsource the operation to contractors who compete to do the job cheapest. “It’s really a race to the bottom,” said Nico Ries, lead organizer for the organization Green Workers Alliance. The winner cuts costs where they can, which often means hiring temp agencies, who themselves compete against other temp agencies to supply their laborers for the job. “We pretty much compete with each other,” said a former recruiter for the temp agency, PeopleReady, who often hires temp staff on behalf of CDPQ’s Invenergy.

To make a career as a temp in solar, travel is the unwritten rule — workers travel hundreds of kilometers from state to state out of pocket. Project delays and even rain can put projects on hold, leaving workers without pay to compensate for hotel rooms and living expenses.

PeopleReady’s own website confirms this: “you’ll only pay workers for the hours they’re needed, which is often less expensive than hiring full-time employees.” Workers are left to gauge the risk: pay to wait for a job or move on without pay. Meanwhile, companies like Invenergy benefit from an on-call workforce that will absorb the costs of project delays and unstable work.

“Value engineering” is a common approach for infrastructure investors like Canadian pensions. It’s euphemistically described as the process whereby investors fine-tool their projects to bump profits, but David Wood, Harvard University lecturer and director of the Initiative for Responsible Investment at the Hauser Center for Nonprofit Organizations, takes a more cynical view. “It’s stripping out all the good shit, so that you can make more money,” he said. The renewables business, it seems, is no different.

Undermining the Just Transition

Ex-Alberta oil journeyman Stephen Buhler is worried about how the financial interests of investors threaten to short-circuit the energy transition. For Buhler, now a community engagement officer with the pro–just transition organization Iron & Earth, the speed and success of the transition itself hangs in the balance: “It’s way more attractive for workers to take a job at an oil and gas facility, because it just pays better,” he said.

While Canadian surveys show that oil and gas workers want to transition to the renewable sector, a recent report found that 87 percent of renewable energy workers worldwide would consider quitting their job, with 51 percent expressing a willingness to transition into the oil and gas industry to capture higher wages. However, it’s important to note that oil-related jobs don’t consistently offer high wages globally, and they are can be rife with poor and sometimes dangerous working conditions. Oil companies have been known to use contract workers too, and surveys on oil workers also reflect some dissatisfaction with the industry. But when pension-owned renewable projects leave workers and communities to eke out an existence at the margins, those more climate-friendly projects become a tough sell.

Value engineering also tends to further inflame one of renewable energy’s biggest obstacles: community opposition. In the last decade, fifty-three utility-scale wind, solar, and geothermal energy projects were delayed or blocked in the United States alone. While protectionist “Not in My Back Yard” (NIMBY) values often shoulder the blame, research paints a more complex picture. A 2022 study focused on wind projects in New Brunswick revealed that project setbacks resulted from a failure to adequately compensate or engage with the communities who would bear the brunt of their impacts.

For all of their many environmental ills, fossil fuels are energy-dense — renewables, on the other hand, particularly large-scale projects, tend to require much more land. When communities don’t stand to benefit from renewable energy development, they’re more likely to be opposed to it, according to the Brookings Institute.

This bleak picture — an energy transition stymied by abysmal working conditions and displaced communities — isn’t a foregone conclusion. Community energy projects, including energy cooperatives, whether on a small or large scale, typically ensure competitive wages for workers and allow communities to reap the rewards of nearby energy production. But these projects often yield lower rates of return, according to Anthony Giancatarino, an energy democracy campaigner in the United States. “We’re not seeing full-on investment in community-governed energy systems,” he said.

“If you are building an energy system based on profit, and cost efficiency, we’re going to miss the mark,” said Giancatarino. “Someone’s gonna lose out, and it’s usually going to be the most impacted folks.”

As an uninhabitable climate draws closer, pointing at cracks in imperfect efforts to transition away from fossil fuels with renewable energy might seem counterproductive at best and dangerous at worst. “I think people are hesitant to talk about how often the majority of renewable energy jobs are not good,” said Ries. Nevertheless, he argues that the present moment could be the best time to unearth the skeleton in the closet.

“If we don’t get a grip on the industry now it’s going to be a way bigger problem down the line,” he said.

With Friends Like Financiers, Who Needs Enemies?

On the home front of Canadian pensions, wildfires raged throughout the summer, blanketing the country and the eastern United States in acrid smoke. Climate change’s erratic blows have become an annual specter around the world. They’re a reminder that the energy transition away from fossil fuels and into renewables is dangerously overdue, and still, fossil fuel production is on the rise.

Recently, Prime Minister Justin Trudeau’s government shored up its attempts to transform its energy system with arguments that the shift will be a positive one in the lives of its citizens. “There’s a huge opportunity coming for workers,” Canada’s labor minister Seamus O’Regan announced in a recent press release. “Building the net-zero economy means hundreds of thousands of good jobs — good, union jobs. We’re going to make sure that Canadian workers have the tools they need to get them.”

Ironically, citizens’ own funds — stored in the vaults of pensions like CPPIB and OTPP — appear to be funding a different transition entirely: one shaped by profit.

“When you start to look at infrastructure of any kind, be that renewable or otherwise, you realize the really significant influence that finance has over the direction it takes,” said Lucy Baker, research fellow in the Centre on Innovation and Energy Demand at the University of Sussex. Infrastructure investments in water, health care, and electrical transmission systems have been notoriously bad for people and the environments they rely on. Should we expect different when investors cast their gaze — and their vast pools of wealth — toward renewables?

The problems posed by financialization are well known. A case in point is the multibillion-dollar sector that promises to bring “ESG” or “environmental, social, governance” considerations into the private sector. ESG’s lofty gambit is that with the help of education and transparency, companies can mitigate capitalism’s externalities, while still boosting investment returns. “ESG should be marketed as something that enhances a portfolio not [something that] inhibits it” says Gina Chong, a relationship manager at RBC Wealth Management in Singapore, on the bank’s website.

Renewables and their skyrocketing returns are often cited as proof-perfect that meeting ESG principles doesn’t necessarily disturb the capitalist applecart. But pension-owned renewables suggest the “S” or “social” in ESG is getting left to the wayside.

What Is to Be Done?

The solution to the problem posed by pension investments may lie in governance. Unions have been trying to influence their pension investments since at least World War II, but their attempts have consistently been thwarted. Over the decades, pension legislation in the United States and Canada eroded the power of workers to shape their retirement investments.

But even if unions did gain control of their members’ investments, are they alone equipped to steer a just transition for the many? Sociologist Michael McCarthy doesn’t think so. He calls for a wholesale democratization of financial and pension governance that would extend across the whole citizenry, not just the workers of a particular sector. McCarthy puts forward a vision of “deliberative minipublics” assigned to make decisions in the interest of others — it borrows from a wave of deliberative models like citizen assemblies gaining a fledgling start around the world. But this transformation requires a coherent system to gather and reflect a community’s values — a democratic infrastructure as expansive as it is absent.

Still others suggest that the fix isn’t so much who is at the wheel but the car on the road: if pensions dedicated to high-yield high returns are key funders for energy transition, the social and climate consequences will follow.

“Delegating a large share of investment to actors who are structurally forced to prioritize risk-adjusted return year after year just means that the just transition aspect is going to be neglected,” said Ben Braun, senior researcher at the Max Planck Institute for the Study of Societies in Cologne, Germany. “One doesn’t have to be an extreme pessimist to think that that will have ramifications for the success of the green transition.”

In the same way that pensions’ holdings in Chile’s privatized water helped trade abundance for scarcity, infrastructure investors’ profit models for renewables appear to enact a similar vice grip on human flourishing.

Braun calls for pensions to revert back to a familiar, if mostly forgotten, form: as a vehicle to invest in state-led investment, like government bonds. After all, prior to the regulatory rollbacks that facilitated the investment strategies from which the Maple Revolutionaries earned their name, these kinds of low-yield government-backed investments were their only legal investment options. Braun argues that governments are better equipped to prioritize the needs of citizens and communities above the pursuit of maximum profit. Handing the gears of energy transition to governments whose state utilities have caused untold harms is hardly a ready-made solution, but involving indigenous nations and municipalities in decision-making strategies could yield restorative benefits.

Even short of a wholesale rewiring, governments can put strategic limits on their pensions’ investment choices in the pursuit of a more just energy transition. That could include mandating pensions invest in renewable projects boasting well-paid unionized jobs and guardrails to support the communities that host them.

As the specter of climate change looms, questioning pensions’ profit-motives on renewables might seem like an ill-timed luxury. But for Ghosh, an energy transition that fuels further dispossession and wage immiseration is not much of a transition at all.

“The maximization of profit is a main tenet driving all of this,” she said. “It always means somebody will lose or somebody will have to pay.”