Archives for November 2025

What’s Happening — and Why It Matters

In October 2025, four CPP contributors—Aliya Hirji, Travis Olson, Rav Singh, and Chloe Tse—filed a landmark claim in Ontario Superior Court. They argue the Canada Pension Plan Investment Board is underestimating climate risk in its portfolio decisions. Their counsel includes Ecojustice and Goldblatt Partners LLP. The statement of claim and backgrounders have been summarized by Shift here: CPPIB legal challenge over climate.

Their goal isn’t damages. It’s court guidance—so CPPIB factors climate risk more rigorously and protects contributors’ long-term interests. Given CPPIB manages $700B+ for 22M+ Canadians outside Quebec, the implications for pensions—and for insurers who invest and price long-tail risks—are significant.

Why Now? The Risk Lens Is Changing

Climate risk is financial risk. It shows up as physical losses (wildfire, flood, heat) and transition pressures (policy shifts, stranded assets). Earlier in 2025, CPPIB reportedly withdrew its net-zero-by-2050 target, rattling some contributors and advocates. Independent modeling from firms like Ortec Finance has warned Canadian pensions could see materially lower returns under delayed climate action scenarios.

For pensions and insurers, small compounding gaps become big holes over decades. That’s the heartbeat of this case: are long-term, systemic climate risks being priced and managed prudently?

How This Ties to Insurance

Insurers and pensions are cousins: both collect cash now and pay obligations later. Both invest premiums/contributions in capital markets. When climate shocks hit, the pain is double: higher claims (property, BI, health) and potentially weaker investment returns.

Canadian carriers have already flagged rising catastrophe costs. Example: the Insurance Bureau of Canada reported that severe weather events—such as February 2025 storms—caused hundreds of millions in insured losses, pressuring rates and availability. When losses trend up, underwriting tightens and premiums drift higher.

On the investment side, the transition to a low-carbon economy creates winners and losers. Assets linked to long-lived fossil infrastructure risk devaluation (stranding). If a pension fund or insurer leans too hard into assets that underperform in a warming world, future benefits—or balance sheets—feel it.

The Legal Angle: Fiduciary Duty Meets Climate Risk

Under Canadian law, CPPIB must maximize returns without undue risk of loss and act in the best interests of contributors and beneficiaries. Plaintiffs say that standard should include robust, decision-useful climate risk management—models that capture tail risks, tipping points, and correlated, system-wide shocks.

Regulators have been nudging in the same direction. The Office of the Superintendent of Financial Institutions (OSFI) has signaled that climate risks can drive traditional financial risks (credit, market, liquidity, insurance) and create strategic and operational challenges. Translation: ignoring climate risk isn’t “neutral.”

Examples: What Pensions Are Already Doing

Global peers show a spectrum of approaches. Europe’s largest pension fund announced in 2024 it exited all liquid oil, gas, and coal holdings (≈€10B), citing performance and risk alignment. In Canada, CDPQ committed in 2021 to exit oil producers and completed core steps by 2024, reallocating toward renewables and transition assets. CDPQ reported five-year returns north of 18% in renewables versus ≈8% for oil producers in the index over a similar window.

Takeaway: clarity of mandate plus transparent reporting helps contributors gauge real exposure—and helps boards steer away from stranded-asset traps.

Where the Lawsuit Could Land

• Precedent on fiduciary duty: Court guidance could establish that pension managers—and by extension insurers—must integrate climate risk more deeply into portfolios and strategy.
• Better disclosure: More granular reporting of fossil exposure (including pipelines, LNG, gas-fired power) and scenario outcomes that incorporate compounding and tipping dynamics.
• Portfolio shifts: Less capital to new fossil expansion; more to renewables, grid, storage, and adaptation infrastructure.
• Insurance knock-ons: Underwriting standards that reflect forward-looking risk (e.g., flood/heat maps), stronger capital buffers, and investment tilts that reduce correlation in climate stress events.

The Policyholder’s Journey

Picture a 35-year-old renter in Calgary. She pays premiums today, expecting claims will be honored decades from now. Her insurer invests those premiums. If those investments underperform due to mispriced climate risk—at the same time catastrophe claims climb—her future premiums rise and product choice shrinks. That same risk loop hits her CPP: lower long-run returns could mean tougher policy choices tomorrow.

The lawsuit is a nudge to break that loop: price risk honestly, invest accordingly, and keep the promise.

Action Tracks for CPPIB—and a Signal to Insurers

1) Strengthen policy and targets

Re-commit to science-aligned, net-zero pathways with clear 2030/2035 interim targets. Avoid funding new fossil expansion where project economics hinge on optimistic policy or price assumptions.

2) Upgrade scenarios

Stress test with multiple, decision-useful models (not one VaR lens). Include compounding shocks, feedback loops, and sector spillovers. Report results in plain language.

3) Increase transparency

Publish full fossil exposure (including midstream and power), plus methodology notes. Share stewardship and lobbying alignment reports so contributors can see what’s advocated in their name.

4) Reallocate capital

Lean into clean power, grid modernization, storage, building retrofits, EV supply chains, and adaptation infrastructure (e.g., flood defenses). Favor assets with resilient cash flows under a range of climate paths.

5) Engage and educate

Use biannual public meetings to explain portfolio shifts and invite scrutiny. The more contributors understand the “why,” the more stable the mandate becomes.

Recent Coverage You Can Read

• 4 Youth Sue CPP Investments for Failing to Protect Pensions from Climate Risk — Shift Action (Oct 31, 2025)
• Young Canadians sue CPP Investments over climate risks — MoneySense (Oct 29, 2025)
• Young claimants take CPP to court over climate risks — National Magazine (Oct 29, 2025)

For the full case background, see Shift’s explainer above and Ecojustice’s case page. Contributor discussions often surface at CPPIB’s public meetings—watch agendas on the CPPIB site.

FAQ

Is this a “political” case?

It’s primarily about fiduciary duty and risk management. The question is whether long-term, systemic climate risks are being handled with the care beneficiaries are owed.

Could this change my CPP benefits soon?

Unlikely in the short term. The nearer-term impact is on how risk is modeled, disclosed, and invested—changes that aim to protect value over decades.

Why should insurers care?

Because they face the same two-sided climate problem: claims trending up and investment returns at risk if portfolios are misaligned.

What can contributors do?

Read the sources, attend CPPIB’s public meetings, and submit questions. Ask for transparent exposure data and scenario methods that reflect compounding risk.

Bottom Line

The CPPIB climate lawsuit is a stress test of how Canadian institutions—pensions and insurers alike—price the future. Win or lose, the wake-up call is clear: measure climate risk with eyes open, invest with discipline, and keep promises made to contributors and policyholders.

If climate risk is changing how money works, your coverage strategy should keep pace. When you’re ready to compare options and connect with licensed brokers fast, use the marketplace built for Canadians.

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