Ontario Teachers, CPP Investments Chart Net Zero, 2050 Investment Strategies

By Mario Marroquin

Two of the three largest public pension systems in Canada are doubling down on sustainable investments and increasing their exposure to transition and decarbonization assets through 2030. According to two annual reports on sustainable and responsible investment by the Canadian Pension Plan Investment Board (CPP Investments) and the Ontario Teachers’ Pension Plan, the pension plans aim to reach net zero – greenhouse gasses and carbon emissions, respectively – across their portfolio by 2050 by realigning portfolio companies and capital deployment.

The pension plans said the goal of realigning their portfolios towards net-zero emissions is to increase portfolio resilience and that they will deploy over CAD$90 billion (US$66 billion) in investments towards transition and decarbonization assets.

 “We believe it is important to invest in a way that helps accelerate the transition to a low-carbon economy,” Ontario Teachers’ Chief Investment Officer Zlad Hindo said in its 2022 Annual Responsible Investing and Climate Strategy Report. “To maximize our impact, we have developed a multi-pronged climate strategy, which includes: helping our portfolio companies decrease their emissions, investing in green assets, helping high emitters decarbonize, issuing green bonds, understanding and mitigating physical and transition risks, and developing partnerships to amplify our efforts.”

The CAD$242.5 billion (US$178 billion) AUM Ontario Teachers’ plan expects to receive annual emissions data assured by a third party from companies with high greenhouse gas emissions and reported its primary focus areas will be high-emitting sectors like power generation, heavy industry, mining and transportation.

The pension reported plans to grow its exposure to green investments by up to CAD$50 billion (US$36.7 billion) through 2050 and expects 90% of its portfolio’s emissions will be covered by a ‘credible net zero by 2050 plan’ by 2030. The pension  said it plans an initial investment of up to CAD$5 billion (US$3.67 billion) in “high-emitting companies with credible decarbonization plans that [OTPP] believes can accelerate through [OTPP’s] capital and expertise.’”

On the other hand, CPP Investments, which has CAD$687 billion (US$504 billion) AUM, reiterated plans to expand its exposure to green and transition assets from CAD$66 billion (US$48.4 billion) to at least CAD$130 billion (US$95.4 billion) by 2030.

CPP’s 2022 Report on Sustainable Investing said assets considered to be in transition are in high-emitting sectors with a plan to move towards net zero.

“Many current initiatives to tackle the climate crisis do not address strategic sectors that are both essential and high emitting,” CPP’s report said. “These strategic sectors include, but are not limited to, agriculture, buildings, chemicals, cement, conventional power, oil and gas, steel and heavy transportation. The successful decarbonization of these strategic sectors is not only essential to meet wider net zero ambitions, but also to sustain economic growth, stability and a responsible transition.”

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