Pension funds are supposed to be boring – and for good reason. Low risk and long timelines are some of the hallmarks of responsible retirement fund management.  

So the recent drama around the Alberta government suddenly sacking the entire board and senior management of the Alberta Investment Management Corporation (AIMCo) – and installing former Prime Minister Stephen Harper as chair of the $160 billion public pension fund has been described by leaders in the investment community as “shocking.” The New York Times quoted another pension expert who described the abrupt ambush of AIMCo leadership as “Soviet style.” These are not adjectives normally associated with prudent pension management. 

So what’s really going on? The AIMCo purge seems part of a larger trend to weaponize governments against the global move towards ethical climate investments. The real prize in this case was ending the arms-length independence of AIMCo that was previously respected by elected officials and is now apparently out the window. A public servant has been installed by Smith’s cabinet as interim CEO and a permanent seat on the board has been created for deputy finance minister “to ensure more consistent communications between AIMCo and Alberta’s government.”

For supposed free-enterprise champions who normally disparage politicians trying to pick winners and losers in the marketplace, Harper and Smith are in danger of perishing from sheer hypocrisy if they hijack the pension fund of 500,000 Alberta retirees for ideological ends. Even the Fraser Institute is discouraging such political meddling in pension investments. 

Dubious Narratives

Alberta Premier Danielle Smith’s stated rationale for the AIMCo executive expulsion was cost overruns and poor performance, a narrative disputed by the previous interim AIMCo chair as “misinformation.” Much oil-friendly ink has also been spilled lauding Mr. Harper for taking on the role of AIMCo chair pro bono. But how much does this public gesture really save? According to their 2023 annual report, the former chair Mark Wiseman was paid $78,375 last year in salary, per diems and expenses – or about 0.000048 percent of the $160 billion under AIMCo management. 

The turmoil at AIMCo is more evidence that as carbon divestment campaigns gain traction, politics and pension funds become troublingly entwined. Just look south of the Canadian border, where Republican congressman Jim Jordan who chairs the US House Judiciary Committee recently demanded information from 130 pension funds and companies regarding “their involvement with the woke ESG cartel Climate Action 100+.” 

Jordan’s committee crowed they had “obtained evidence that a ‘climate cartel’ of left-wing environmental activists and major financial institutions has colluded to force American companies to “decarbonize” and reach ‘net zero’” – as if that were a bad thing.

Having the U.S. government publicly pillory ethical investors for “apparent collusion between left-wing activists and major financial institutions to impose radical environmental, social, and governance (ESG) goals upon the American people” is unsurprisingly bad for business. Climate Action 100+ has seen an exodus of high-profile members, even as the climate crisis accelerates. 

Propping Up the Oil Patch

Prior to becoming Alberta Premier, Danielle Smith was crystal clear in her opinions about fighting the ESG movement and using pension fund money to prop up the oil patch – specifically by repatriating Alberta’s portion of the Canada Pension Plan (CPP) to start an Alberta pension plan. 

“The … issue with CPP is the investment board’s woke agenda, where they’re starting to divest itself of oil and gas investments … and an APP would fix this by ensuring an investment into our own industries,” she told her livestream listeners in 2022. “If the rest of the country, especially the big banks and the big pension funds, are going to be punishing our industry… one of the ways we push back is making sure that we repatriate our own investment dollars … to make sure that we can counteract some of that hostility.”

Enter Stephen Harper. A high profile conservative leader, he also has no ostensible experience in pension fund management. His main apparent asset to the Smith government is also his main liability as a dispassionate investor of other people’s money: he is a politically-connected idealogue. 

Harper co-authored the famous Alberta firewall letter in 2001 demanding that Ottawa relinquish authority in a laundry list of nationalist aspirations, most of which are now stated policies of Premier Danielle Smith’s government – including withdrawing the province from the Canada Pension Plan. 

Prior to the purge, AIMCo was already the worst preforming Canadian pension fund ranked by climate investment responsibility. This risky affinity to oil investments is also entwined with its financial performance – AIMCo lost $4 billion in 2020 on bad bets in fossil fuel companies. These two troubling traits are about to get a lot worse.

Apart from $118 billion in public pension funds, AIMCo also manages the Alberta Heritage Savings Trust Fund (AHSTF) that Smith has publicly mused about using to “assist in de-risking projects that we’re finding difficult to be able to get financing.” This likely means using the fund to bankroll oil patch projects deemed by the private sector as a bad bet.

But what do investment experts know? Smith has somehow suggested growing the AHSTF from $22 billion today to up to $400 billion by 2050, which would mean almost 12 percent returns every year for the next 26 years. 

Pensions and politics do not play well together. Smith and her ideological allies should refrain from wishful get-rich-quick thinking or imagining they can influence the future of the oil patch – particularly when they are playing with other people’s money.