Ontario’s Pension Fund Managers Are Propping up the Fossil Fuel and Real Estate Industries

The Ontario Municipal Employees’ Retirement System (OMERS) is one of Canada’s largest pension funds. OMERS serves 289,000 urban workers employed in cities across Ontario and has over $ 105 billion in net worth to support retired members. However, that year OMERS was inundated by numerous scandals.

She is currently in the crosshairs of her 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 pension fund of chronic underperformance of its investments. While other large funds managed to get through 2020 without any significant losses, OMERS ‘asset shrank nearly 3 percent. Given that 70 percent of OMERS ‘annuities are funded by investment income, this has raised serious concerns among plan members.

CUPE Ontario was quick to point out that this wasn’t just one case of a bad year, either. OMERS has missed its own benchmarks several times over the past decade and has lagged behind other pension funds of comparable size. The problem is not just a diminishing return on investment. OMERS, like other Canadian pension funds, is deeply involved in investing in fossil fuels and financializing what should be social goods. The consequence of these investment decisions is that pension funds often inadvertently harm the people for whom they exist – working members who depend on public services and plan a safe retirement.

CUPE Ontario calls for more transparency and an independent review of OMERS ‘investment decisions. So far, the only reaction from the pension fund has been to publish mid-year returns to prove they are becoming more reliable asset managers.

OMERS is also in conflict with CUPE Ontario over early retirement options for paramedics. As workers in a high risk job, Ontario paramedics believe they should be able to retire five years early without a reduced pension – an option already available to law enforcement officers and firefighters.

OMERS ‘reluctance to acknowledge this – and hence the implicit insistence on reducing paramedic benefits – has led to legal proceedings between the pension plan and the union. The pension fund is desperately trying to minimize its obligations in order to allow its members a comfortable retirement.

All of this comes just one year after the OMERS board voted to lift the indexation guarantee on pensions after 2022, which means that any savings paid out after that point will not necessarily be associated with an increase in the cost of living. This move will almost certainly limit future benefits. Between the paramedics and the cost of living indexing, OMERS seems to do whatever it takes to minimize the benefits.

OMERS ‘inability to maintain full levels of funding and its efforts to reduce its payment obligations are at an extremely uncomfortable tension with the social corrosiveness of its investment decisions. A look at his investments reveals an abundance of socially harmful acquisitions and speculations.

While neoliberal governments have pursued privatization plans through direct sales and public-private partnerships, OMERS has built an amazing portfolio of infrastructure. The fund has an astonishing geographic reach. From docks in the UK to toll roads in India, from power grids in Australia to public elementary schools in Nova Scotia, OMERS tentacles stretch around the world. For the pension fund, critical benefits that are vital to the day-to-day functioning of society are reduced solely to balance sheet items – assets to complete portfolios.

The infrastructure for non-renewable energies is a significant part of OMERS’s holdings. In 2018, it spent over $ 1.4 billion to buy a 50 percent stake in BridgeTex, a crude oil pipeline that connects West Texas with the Gulf Coast. A year earlier, it had acquired 34 percent of the shares in GNL Quintero, the largest natural gas terminal in Chile. The climate catastrophe means little for an infrastructure department that describes itself as “unique” to the expansion of its holdings.

OMERS’s extensive 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 apart as Toronto and Sydney. Ontario urban workers own high-end retail stores and office complexes in London, Paris, Berlin and elsewhere. OMERS has ensured that community workers are – often unknowingly – involved in global gentrification.

Through Oxford, OMERS owns 50 percent of Hudson Yards, the multi-billion dollar real estate mega-project on Manhattan’s outermost West Side. The largest private development in US history, Hudson Yards is an amazing monument to real estate finance and just one of several OMERS-owned properties that adorn the luxury real estate landscape of New York City. In mid-September, OMERS and its partners in the Canadian Pension Plan sold St. John’s Terminal in SoHo to Google for over $ 2 billion. In the global game of hyper-financial real estate capitalism, pension funds have become critical players, and few have done it as voraciously as OMERS.

The retirement savings of hundreds of thousands of Ontario workers depend on environmental devastation, privatized critical infrastructure and luxury real estate. As the necessities of daily living become fertile ground for profit, retirement funds have excitedly begun to rummage around these blooming gardens of happiness.

The financialized pension system is based on the Faustian Agreement that potential returns for plan beneficiaries justify the broader social consequences of the fund manager’s investment decisions. The statutory gospel of “fiduciary duty” upheld by financial managers is said to ensure that pensioners’ needs are put first. Then why is OMERS generating terrible returns, cutting benefits and trying to limit eligibility to the plan?

In its current form, the pension system does not work for its members, but for the financial sector. Retirement provision is above all investment capital. Their function as old-age insurance is unimportant compared to their role as the engine of the global financial system. The less a fund is obliged to pay benefits, the more it can let its funds flow back into 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 inaccessible to most.

So the Faustian trade seems to be based on a lie. Many workers do not enjoy the benefits of their pension fund’s enormous portfolios, and OMERS sidelines members while doing significant social harm. A recent report from the Canadian Center for Policy Alternatives shows that the Canadian Pension Plan Investment Board, one of the largest pension funds in the country, shamelessly ignored calls for divestments. The Canadian pension plan has invested billions in the fossil fuel industry, according to the report. Yet the fund’s services for retirees who want to live on it remain woefully inadequate. Such investments would basically be unjustifiable, even if they ended up being a decent retirement for members – and they can’t even offer that.

Hoping to protect its members’ retirement savings, CUPE Ontario has launched a campaign calling for more accountability and transparency at OMERS. But to “fix OMERS” – as the campaign uses it – would require a major overhaul of Canada’s pension system. The 2008 economic crash demonstrated the structural uncertainty of financialized retirement and nothing has been done to resolve the problem since then. As long as retirement is embedded in the finances, both retirees and the general public will grapple with the consequences. The former due to inadequate performance, the latter due to bearing the brunt of the investment decisions.

Then what is to be done? First, the state pension system needs to be fully funded through a combination of contributions and taxes. Second, members should have democratic control over work-related pensions such as OMERS, and they should be funded mainly through higher employer contributions. Third, and most importantly, unions fighting to consolidate the pension system must fight for universal public housing, pharmaceutical care, dental care and long-term care.

From today’s perspective, pension funds actively contribute to the commodification of demand through their investments in real estate. A high pension – which is dependent on massive investment returns – is only necessary as long as the costs of comfortable old-age provision remain high. In order to define pensions, we must also decommodify the necessities of daily life.