An excerpt from the new book, Invested in Crisis: Public Pensions Against the Future, by Tom Fraser, published by Between the Lines.
The tentacles of the Canadian pension fund are far reaching. It is reflective of a totally bananas system that Hudson Yards, which is the largest real estate project in US history, and some rural public schools on the Canadian East Coast are owned by the same entity. And it is reflective of an even more bananas system that that entity is a pension fund, the Ontario Municipal Employees Retirement System (OMERS). And yet, that has become a remarkably normal state of affairs.
Travel the world with Canadian pension funds in mind and you will find that you cannot escape them, no matter how hard you try. On a recent trip to London, everywhere I went I was greeted with the logo of Thames Water—maintenance vans, sewerhole covers, sidewalk grates. Thames Water was, frankly, inescapable. Thames Water might be, perhaps more than any other company, the best symbol of the horrors of pension fund capitalism—just as Hudson Yards is a remarkable synecdoche for the modern system of financialized real estate, so too does Thames Water encapsulate the modern system of financialized infrastructure.
Thames Water is owned by OMERS, in partnership with a few other investors, including the British Columbia public sector pension. It has been owned by this consortium since 2017, but its history of privatization goes further back than that. Margaret Thatcher’s Conservative Government privatized the UK’s water utilities in 1989, creating a government utility regulator—Ofwat—and clearing the debts of the preexisting utilities so that profiteers could start with a blank slate.
Thames Water is an unmitigated disaster, hemorrhaging money, charging exorbitant rates, and skirting environmental regulations. In September 2023, it was fined £100 million by Ofwat for not meeting sewage spill targets for a third straight year, just months after having been fined £3.3 million for a separate one-off spill. All the while, the company is falling apart. In June 2023, faced with exorbitant debt levels related to infrastructure renewal (apparently the pipes are bursting!), and already having maxed out shareholder cash injections, Thames Water was forced to put out a bond issue at an enormous premium just to fulfill its basic obligations. The UK government has had to draw up contingency plans for a scenario in which the company went bust, including temporary nationalization. Ironically, the supposedly left-wing British Labour Party, for its part, has stated that it has no interest in renationalizing water utilities.
Revelations continued to roll out even following the levelling of fines and the debt crisis. In November 2023, The Guardian reported that Thames Water had dumped 72 billion litres of sewage into the River Thames. A Liberal Democrat MP lambasted the British government for “standing idly by whilst our rivers are poisoned and water firm execs pocket millions.” It is all the more embarrassing that such ecological devastation cannot be simply blamed on a single dipshit CEO but instead leaves the entire Canadian pension system red in the face. Speculation grew that, barring another major cash injection from OMERS and its partners, Thames Water could go under in April 2024 (it managed to hang on). The company is also under investigation from the national water regulator over potential dividend payments to shareholders.
Thames Water has become an enormous symbol in the UK of the failures of privatization. It has continuously been front-page news through 2023 and 2024, both for its backroom calamities and for its horrifying impacts on the day-to-day lives of Londoners. Reports of water-borne illness due to contamination came in May 2024, while—in a rare instance of the misfortunes of Oxford and Cambridge evoking anything other than schadenfreude—the famed Oxford-Cambridge rowing race was threatened with cancellation due to the risk of splashing water causing participant illness. And now the saga has hit its climax. OMERS wrote off its investment in Thames Water in June 2024, accepting it as a dead asset on their books and as a loss that will have to be stomached going forward. The stage is now set for, likely, a renationalization of London’s water infrastructure.
OMERS’ ownership of Thames Water has not coated the fund in glory—indeed, it has coated the fund in sewage. The privatization of critical infrastructure has yielded nothing but misery, from ecological devastation to skyrocketing utility bills. That workers in Canada can only afford to retire because of this suffering from their British counterparts makes it an altogether terrible scheme. Fascinatingly, however, the pension angle has not been a key component of the many, many condemnations of Thames Water. The horrors of pension fund capitalism are so aggressively normal at this point that pension ownership does not even warrant a mention outside of an aside.
But Thames Water is just a single suction cup on a single tentacle of the Canadian pension octopus. If you were to take a “spot the pension fund” vacation, the odds of your flight going through a Canadian pension-owned airport are very decent. Across Europe especially (airports in Canada have—for now—evaded privatization, even as their governance was restructured during the 1990s privatization-mania), airport investments became a hot item for Canadian funds. Airports in London, Birmingham, and Brussels are all owned by OMERS, and more were owned by Canadian pension funds in the past.
But the circulation of goods is more lucrative than the circulation of people, and so port facilities are also critical to these portfolios. Port facilities, which in many countries had historically been nationalized as critical infrastructure (in Canada they remain so), have grown into lucrative investments amid the rise of “just-in-time” supply chains. For one of the major OMERS port investments, the prehistory is similar to that of Thames Water—a Thatcherite privatization. OMERS has owned a major share in Associated British Ports, which manages a quarter of the United Kingdom’s shipping trade, since 2006. The expansion of Canadian pension funds into port ownership was so vigorous that, in 2017, Benefits Canada called it a “love affair” and a “frenzy.”
Many of the key nodes of the unbelievably precarious international trade system are owned, through the pension funds, by Canadian trade unionists. Even though the pandemic turned “supply chains” into a household term, and the seemingly distant world of global shipping suddenly felt remarkably intimate, our own financial relationship to the ports never came to the foreground. But as Deborah Cowen argues, the world of logistics is the defining industry of twenty-first century capitalism. To locate OMERS and OTPP within that world is to underscore that we are living in pension fund geographies.
Perhaps more significant than any other asset class, however, is energy. Almost half of OTPP’s infrastructure portfolio is in energy, and OMERS has significant exposure to it as well. Many of these investments are in public power utilities, ranging from the production to transmission stages. OMERS wears its ownership of Ontario’s Bruce Power—an enormous nuclear power facility that supplies 30 percent of the province’s electricity—as a badge of honour, citing it in every report where it reaffirms its positive contributions to the province. In a strange ownership arrangement, meanwhile, OMERS also has a very small stake in Alectra Utilities, the otherwise entirely municipally-owned electricity utility that covers areas in the north and west of the Greater Toronto Area. OTPP, for its part, is co-owner of Enwave, a company that provides energy structures for buildings across the province.
The reach of this investment segment, however, is beyond Ontario. Pipelines in Texas form a major part of the OMERS portfolio—a $1.4 billion outlay in 2018 secured their 50 percent stake in a system linking crude oil in West Texas to refineries and shipment in Houston—while Puget Sound Energy, the primary power utility for a decent chunk of Washington State, is co-owned by OMERS and OTPP. Not to be outdone on pipelines, OTPP also owns pipeline networks connecting gas fields in the United Arab Emirates to power plants.
Most corners of the world are touched, in some way or another, by pension fund infrastructure portfolios. They cannot be escaped because they are the basis of everyday life—the water we drink, the electricity that lights our homes, the schools we attend.
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