The Canada Pension Plan Investment Board says it will meet its goal of holding $130 billion in green and transition assets by 2030, according to a new report by the investment organization.
The CPPIB’s current green asset mix was $79 billion as at March 31, 2023, up 17.9 per cent year-over-year from $66 million. “We expect [the transition to a low-carbon economy] to be a hugely capital-intensive process, with tremendous opportunities for patient capital like ours,” said John Graham, the investment organization’s president and chief executive officer, in a press release.
In the report, the CPPIB reaffirmed its commitment to avoid making blanket divestments from entire sectors of the economy, since it would mean potentially missing out on returns from sectors that are currently in transition periods brought about by regulation, economic incentives and engagement from shareholders.
In order to better review its real estate investments — which stood at $52 billion as at March 31, 2023 — the CPPIB has implemented a climate-related physical risk screen, accounting for both physical and transition risks.
Richard Manley, the organization’s chief sustainability officer and managing director of the global leadership team, said he expects to see the development of a green premium for products across asset classes that constitute climate solutions. The real estate sector, which Manley said contributes to 30 per cent of annual global carbon emissions, will continue to be impacted by institutional investors’ preference for low-carbon, energy-efficient buildings.
He added this expected green premium will signal a volume and price benefit for decarbonizing efforts and will also create a ‘grey discount’ that will serve as a warning to institutional investors that don’t have a sustainability strategy.