The Ontario Teachers’ Pension Plan is allocating $5 billion to businesses with high-carbon emissions, according to its annual responsible investing and climate strategy report.
“Recognizing the urgency of the climate crisis, we have committed to actively investing in select emissions intensive assets with the express goal of helping them decarbonize faster,” wrote Zlad Hindo, chief investment officer at the Ontario Teachers’ in the report. “These investments, which we are referring to as high-carbon transition assets, will allow us to make a significant real-world impact through decarbonization of high-intensity businesses while also making good returns.”
The report also provided an update on the pension fund’s ongoing efforts to reduce the carbon in its portfolio by 67 per cent of its 2019 levels by 2030. By the end of the second quarter, the portfolio’s emissions was about 32 per cent lower than in 2019.
The Ontario Teachers’ expects this figure to rise in the near term. “Our net-zero commitment and interim targets help ensure our long-term trajectory is pointed in the right direction. Just like investment returns, our portfolio carbon footprint may vary and is not expected to have a linear path year after year. For instance, as the economy adjusts to a post-pandemic world and companies revamp operations, carbon emissions could reach pre-pandemic levels.”
To calculate the intensity of its portfolio emissions, the pension fund adopted a methodology based on the Partnership for Carbon Accounting Financials. By using the method, it identified which proportion of its total emissions were related to individual sectors.
The highest-emitting area was the materials sector, which accounts for five per cent of the Ontario Teachers’ overall portfolio, but is responsible for 24 per cent of total emissions. The least carbon-intensive area was the financial sector, which accounts for 11 per cent of the portfolio and just one per cent of emissions.