Canada’s $4 trillion pension sector could enjoy immense commercial benefits by aligning with the transition to net-zero emissions and helping to mobilize $140 billion of low carbon investments per year, according to a new report by Corporate Knights, the Natural Step Canada and the Smart Prosperity Institute.
It found Canada’s 12 largest pension fund managers reported green assets accounting for more than $160 billion — roughly seven per cent — of their total assets. The report also highlighted recent net-zero efforts by the Caisse de dépôt et placement du Québec and the Ontario Teachers’ Pension Plan, which are pledging to reduce emissions by 60 per cent and 67 per cent, respectively, by 2030.
In addition to the Caisse and the Ontario Teachers’, the report looked at the Alberta Investment Management Corp., the British Columbia Investment Management Corp., the Canada Post Corp. Pension Plan, the Canada Pension Plan Investment Board, the Healthcare of Ontario Pension Plan, the Ontario Municipal Employees Retirement System, the Ontario Pension Board, the OPSEU Pension Trust, the Public Sector Pension Investment Board and Vestcor Investment Management Corp.
It found there are potential financial costs to moving too slowly in the reallocation from high carbon to low-carbon activities. To keep up with this pace of change, Canadian pensions would need to make new low-carbon investments in the order of two per cent to five per cent of net assets or assets under management per year and fully decarbonize across all asset classes, said the report, noting this action would translate into $80 billion to $200 billion per year of new investments into the low-carbon economy.
It also outlined several measures that government and pension plans could undertake to increase these investments, including updates to legislation that would require registered pension funds to demonstrate portfolio alignment with a standardized common net-zero criteria, as well as the development of regulations for pension funds to integrate environmental, social and governance factors.