What’s Happening
Since June 2024, Canada’s new anti-greenwashing regulations under the Competition Act have left pension funds in suspense. The regulations require environmental claims—from companies or funds—to be supported by sound, internationally accepted practices and adequate testing. Unclear or untested claims may now get funds into court, as individuals can bring action for greenwashing if considered to be in the “public interest” by the Canadian Competition Tribunal.
Consequently, several of Canada’s largest pension funds are reconsidering, postponing, or even abandoning their climate and net-zero targets to prevent legal exposure.
What’s Changing
CPPIB’s Retreat: The Canada Pension Plan Investment Board (CPPIB) has shelved its Net Zero 2050 goal, attributing this to “recent developments in law” related to the new regulations.
No Short-Term Targets: CPPIB did not establish short-term emissions targets, which is an issue today since the regulations call for quantifiable, uniform milestones.
Data Gaps in Scope 3: Portfolio companies report scope-3 emissions (indirect emissions such as supply chains) only around 30%, so it is challenging for funds to support aggressive goals.
Legal Concerns: Pension funds fear lawsuits if their claims are imprecise or untested. Others are toning down climate targets to play it safe.
The Balancing Act
These regulations present pension funds with a dilemma:
Credibility vs. Risk: Committing publicly to climate goals increases credibility, but short of irrefutable evidence, funds risk expensive lawsuits.
Global Challenges: Most funds invest worldwide, including in developing countries where emissions data is incomplete. Standard metrics don’t always reflect these nuances.
Unclear Rules: The boundary between “investor-facing” and “consumer-facing” claims is fuzzy, and historical reports might be interpreted as environmental commitments, leading to legal issues.
Who’s Doing What
CDPQ Double Down: The Caisse de dépôt et placement du Québec is doubling down, introducing a fresh five-year climate plan, heavily investing in “climate action” assets, and building internal data tools.
Risk-Averse Players (HOOPP, OMERS, BCI): These funds are supportive of climate aims but are further clarifying their disclosures and targeting strict approaches to remain compliant.
CPPIB’s Hold Back: CPPIB is postponing some public promises, particularly where rules or standards appear ambiguous.
Why It Matters
Legal Risks: Suits from the new “private rights of action” mean money must make their claims airtight.
Data Demands: Compliance calls for improved ESG data, more precise scope-3 reporting, and more robust internal teams (think legal, data people, and governance).
Lower Ambition?: Certain funds may choose more conservative, less ambitious climate targets to steer clear of criticism and thereby hinder progress on reducing emissions.
Regulatory Uncertainty: Phrases such as “internationally accepted methodologies” or “sufficient tests” are not precisely defined, keeping funds wary.
Reputation vs. Safety: Stakeholders demand robust climate action, but retreating opens up criticism, whereas charging ahead unclearly invites legal issues.
What Pension Funds Can Do
Here’s how funds should be responding to this new world:
Sharpen Your Metrics: Establish crisp emissions metrics, validate them with reliable methods, and make attainable short-term targets.
Collaborate with Regulators: Advocate more definitive definitions of terms such as “adequate tests” to inform usable standards.
Honesty Regarding Limits: Confess where data is scarce or techniques are still under development. Honesty establishes credibility without making promises that are too good to be true.
Stress-Test Commitments: Test the legal, financial, and reputational risks of your climate ambitions. Determine what’s safe to talk about publicly and what requires polishing.
Build Strong Teams: Hire legal, ESG, and data specialists to make governance more robust and claims more enduring.
Focus on Action: Prioritize actual impact—reduced emissions, wiser investments, and affecting portfolio companies—over glossy PR.
The Bottom Line
Canada’s anti-greenwashing regulations are compelling pension funds to change the way they speak about and deliver climate action. It’s all about process, measurement, and defensibility. Some funds are raising the bar with rigor, and others are taking a step back. The victors will be those who marry strong ambition with transparent, truthful, and measurable progress. Sustainability is not a vow—it’s an obligation that requires substance.
