Canadian Pension Scheme Commits to Net-Zero GHG Emissions

2050 pledge covers Scope 1 and 2 emissions; roadmap to be published later this year. 

The Ontario Teachers’ Pension Plan (OTPP) Board, one of Canada’s largest pension schemes, has committed to achieving net-zero greenhouse gas (GHG) emissions from its investment activities by 2050.

The defined benefit scheme, with C$204.7 billion (€132.6 billion) AUM, said it would establish “concrete targets”, including interim goals, both for its portfolio emissions and investments in climate solutions “over the coming months”. OTPP said it is currently creating a roadmap and progress will be reported annually.

In an accompanying Q&A document, the OTPP said its commitment to achieving net-zero GHG emissions associated with its portfolio “covers our share of the Scope 1 and 2 emissions of companies we invest in”.

The scheme aims to achieve its emissions reduction strategy by increasing its exposure to climate-friendly investments and solutions, including use of proceeds from its green bond issuance. The OTPP issued its first green bond in Q4 2020, in line with Green Bond Principles.

Proceeds from the €750 million 10-year bond are earmarked for investment in environmentally and socially responsible assets, largely related to reduction of emissions and adaption to climate change impacts.

The OTPP said it would engage with portfolio companies to report and manage their emissions down to net-zero by 2050, as well as advocating for clear policies and “partnering with global organisations to effect change”.

As part of a group of Canadian pension managers, the OTPP recently called on companies and investors to measure and disclose performance on ESG factors via Sustainability Accounting Standards Board (SASB) standards and the Task Force for Climate-related Financial Disclosures (TCFD) framework.

A further leg of the strategy involves increasing the resilience of the scheme’s assets with physical risk assessments of its direct holdings.

Investment in fossil fuel companies already accounts for “a significantly smaller proportion” of OTPP’s portfolio versus climate-friendly investments, the scheme said, but it asserted its preference for engagement over divestment.

Emissions-intensive businesses are “an essential part” of today’s economy, it added, noting that the transition would take place at different speeds across economies.

“As the scope and importance of decarbonising technologies and green infrastructure is increasing, the economic relevance of fossil fuels is declining. We will continue to assess our options and invest selectively in companies that we believe possess the capacity to decarbonise and perform well in the low-carbon transition,” it said.

As Canada’s largest single-profession pension plan, the OTPP manages 80% of its diverse global portfolio in-house, on behalf of approximately 330,000 beneficiaries.

The OTPP’s existing low-carbon investments include Australia’s Sydney Desalination Plant, which uses reverse osmosis to desalinate seawater and is powered 100% by renewable energy sources, with the capacity to supply around 15% of the City’s drinking water needs.

“We will leverage our scale and influence to transition to a low-carbon economy and create a sustainable climate future. With coordinated action net zero by 2050 is an ambitious but achievable goal,” said Jo Taylor, OTPP President and CEO.

“While the transition to the low-carbon economy presents many challenges, it also presents many opportunities to earn the returns we need to pay our members’ pensions while more broadly benefiting society and the environment,” said CIO Ziad Hindo.

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