Ontario Pension Fund Managers Support Fossil Fuel and Real Estate Industries

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The Ontario Municipal Employees Retirement System (OMERS) is one of the largest pension funds in Canada. Serving 289,000 municipal workers employed by cities across Ontario, OMERS has net assets of more than $ 105 billion that are intended to support retired participants. This year, however, OMERS has been overwhelmed by numerous scandals.

It is currently in the crosshairs of its largest constituent union, the Ontario chapter of the Canadian Union of Public Employees (CUPE). In May 2021, CUPE Ontario, the public sector union that represents nearly half of the fund’s membership, released a report accusing the fund of chronic underperformance on its investments. While other great funds managed to navigate 2020 without taking any major hits, the value of OMERS assets contracted by almost 3%. Since OMERS pension plans derive 70% of their funding from investment returns, this has raised serious concerns for plan members.

CUPE Ontario was quick to point out that it was not just a bad year. OMERS has failed to meet its own benchmarks several times over the past decade and has fallen behind other pension funds of comparable size. The problem is not simply the weakening of returns on investment. OMERS, like other Canadian pension funds, is deeply involved in investing in fossil fuels and the financialization of what should be social goods. The consequence of these investment decisions is that pension funds often inadvertently harm the people they serve – active members dependent on public services and providing for a secure retirement.

CUPE Ontario has called for increased transparency and independent review of OMERS investment choices. So far, the pension fund’s only response has been to publish mid-year returns in an attempt to prove that they are becoming more reliable fund managers.

OMERS is also in conflict with CUPE Ontario over early retirement options for paramedics. As workers in high-risk jobs, Ontario paramedics believe they should be able to retire five years earlier without a pension reduction – an option already available to police and firefighters.

OMERS ‘reluctance to acknowledge this – and, therefore, its implicit insistence that paramedical benefits be cut – has resulted in litigation between the pension plan and the union. The pension fund is desperate to minimize its obligations in order to provide its members with a comfortable retirement.

All of this comes just a year after the OMERS board of directors voted to remove the indexation guarantee on pensions after 2022, which means any savings payment after that date would not necessarily be tied to retirement benefits. increases in the cost of living. This move is almost certain to limit benefits in the future. Between paramedics and cost-of-living indexation, OMERS appears to be doing everything possible to minimize benefits.

OMERS ‘inability to maintain full funding levels and its efforts to reduce its payment obligations are in extremely uncomfortable tension with the social corrosiveness of its investment choices. Examination of its investments reveals an array of socially harmful acquisitions and speculations.

As neoliberal governments continued their privatization programs through direct sales and public-private partnerships, OMERS has built up an astonishing infrastructure portfolio. The fund has a surprising geographic scope. From port facilities in the UK to toll roads in India, from power grids in Australia to public elementary schools in Nova Scotia, OMERS tentacles are spreading around the world. For the pension fund, the critical utilities, vital to the day-to-day running of society, boil down to balance sheet items – assets to build portfolios.

Non-renewable energy infrastructure is a significant portion of OMERS ‘holdings. In 2018, he spent more than $ 1.4 billion to buy a 50% stake in BridgeTex, an oil pipeline connecting West Texas to the Gulf of Mexico coast. A year earlier, he had bought a 34% stake in LNG Quintero, Chile’s largest natural gas terminal. The climate catastrophe means little to an infrastructure division that describes itself as being “singularly focused” on expanding its inventory.

OMERS ‘vast real estate holdings are managed by its subsidiary Oxford Properties. With assets of over $ 60 billion, Oxford is an active player in the luxury real estate market in cities as far away as Toronto and Sydney. Ontario municipal workers own upscale shopping areas and office complexes in London, Paris, Berlin and beyond. OMERS has ensured that municipal workers are, often unwittingly, complicit in global gentrification.

Through Oxford, OMERS owns 50% of Hudson Yards, the multi-billion dollar real estate megaproject located in far west Manhattan. The largest private development in U.S. history, Hudson Yards is an astonishing landmark of real estate finance and one of the many OMERS-owned properties that dot New York City’s luxury real estate landscape. In mid-September, OMERS and its Canada Pension Plan partners sold the St John’s Terminal in SoHo to Google for more than $ 2 billion. In the global game of hyperfinancialized real estate capitalism, pension funds have become essential players, and few have done so as voraciously as OMERS.

The retirement savings of hundreds of thousands of Ontario workers depend on ecological devastation, privatized critical infrastructure and luxury real estate. As the necessities of daily life became fertile ground for profit, pension funds began to rummage with enthusiasm in these burgeoning profit gardens.

The financialized pension system is based on the Faustian market where the potential returns for plan beneficiaries justify the broader social consequences of fund managers’ investment decisions. The gospel of “fiduciary duty”, enshrined in law and held up in the air by money managers, supposedly ensures that the needs of retirees are brought to the fore by pension investors. So why is OMERS generating appalling returns, reducing benefits, and attempt to limit eligibility for the plan?

In its current form, the pension system does not work for its members, it does work for the financial sector. Retirement savings are first and foremost investment capital. Their role in supporting the elderly is irrelevant to their role as the driving force behind the global financial system. The less a fund is obliged to pay benefits, the more it can redirect its resources to the capital markets. Pension funds are growing to obscene sizes – Canada’s public plans have total assets of over $ 1.5 trillion – while retirement remains elusive for most.

The Faustian market therefore seems to be based on a lie. Many workers are missing out on the benefits of their huge pension fund portfolios, and OMERS is sidelining its members while causing significant social damage. A recent report from the Canadian Center for Policy Alternatives shows that the Canada Pension Plan Investment Board, one of the country’s largest pension funds, has blatantly ignored divestment requests. The Canada Pension Plan, according to the report, has invested billions in the fossil fuel industry. And yet, the benefits of the fund remain largely insufficient for retirees who hope to live on it. Such investments would be fundamentally impossible to justify, even if their end result was a decent retirement for the members – and they can’t even deliver that.

In hopes of protecting the retirement savings of its members, CUPE Ontario has launched a campaign calling for greater accountability and transparency at OMERS. But to “fix OMERS” – in campaign parlance – would require a major transformation of the Canadian retirement system. The 2008 economic crash demonstrated the structural precariousness of financialized retirement, and nothing has been done since to address the problem. As long as retirement is anchored in finance, retirees and the general public will face the consequences. The former by insufficient services, the latter by the weight of investment choices.

What to do then? First, the public pension system must be fully funded by a combination of contributions and taxes. Second, participants should have democratic control over work-based pension plans like OMERS, and they should be primarily funded by increased employer contributions. Third, and most important, the unions fighting to fix the pension system must fight for universal public housing, drug coverage, dental care and long-term care.

As it stands, pension funds actively help commodify necessities by investing in things like real estate. A large pension, which therefore relies on massive returns on investment, is only necessary as long as the cost of a comfortable retirement remains high. To define pensions, it is also necessary to decommodify the necessities of daily life.


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