The Ontario Teachers’ Pension Plan is setting new targets to accompany its plan to tackle climate change and curb greenhouse gas emissions tied to its multi-billion dollar portfolio.
The pension fund said it aims to slash the carbon emissions intensity of its investments by 45 per cent by 2025 and by two-thirds by 2030, compared to its 2019 baseline. The pledge reflects the mounting pressure on major institutional investors to bankroll clean energy and divest assets that contribute to climate change.
Advocates have long called on large fund administrators around the world to invest in more ethical and sustainable ways, a call that some institutional investors are heeding. For example, the manager of Norway’s sovereign wealth fund said earlier this year that it plans to halt investments in a number of Canadian oil and gas companies after concluding they produce unacceptable levels of greenhouse gas emissions.
Canada’s largest pension plans have also been targeted by environmental and human rights campaigns in recent years. The Canadian Pension Plan Investment Board came under scrutiny for its stake in two private prison operators that ran migrant detention camps along the U.S.-Mexico border. The CPPIB eventually sold its shares in 2019.
In January, an environmental coalition appealed to the Ontario Teachers’ membership to pressure their pension fund to divest from companies that develop or transport fossil fuel products. Weeks later, the organization announced its commitment to achieving net-zero greenhouse gas emissions by 2050.
While the latest commitment stops short of outright fossil fuel divestment, the pension fund is focused on investing in green companies and encouraging its portfolio companies to decarbonize. It will also use proceeds from its green bond offering to invest in climate-friendly opportunities.
Ziad Hindo, chief investment officer at the Ontario Teachers’, says the fund’s targets are industry leading and could encourage other large funds to invest in environmentally-friendly assets. “The entire global economy needs to be retooled towards climate transition. We see this as an opportunity for us to be an active, engaged investor.”
Part of the fund’s commitment is to work with companies on developing decarbonization plans to make them more sustainable, he says. “We have more than 100 portfolio companies on the private asset side and part of our commitment is to work with our private holdings, through our governance channels, to make sure they can have their own Paris [agreement]-aligned net-zero targets. . . . Part of our secret sauce is value creation, to help those companies — given our meaningful stakes in them — to transition, decarbonize and play a role in helping the economy get to net-zero.”
Shift Action for Pension Wealth and Planet Health, part of the environmental coalition that appealed to the Ontario Teachers’ plan earlier this year, welcomed the new targets, but said the pension plan needs to go further if it wants to be a global leader on climate.
“While this announcement describes how [the Ontario Teachers’] will invest in solutions to the climate crisis, it makes no mention of how it will eliminate its exposure to the primary cause of it — namely high-risk fossil fuels,” said the advocacy group in a statement.
Natasha Bartels, a high school teacher in Toronto, says the plan “still isn’t addressing the elephant in the room — its multi-billion dollar investments in oil, gas, coal and pipelines. I’ve asked [the Ontario Teachers’] again and again to explain how their ongoing and growing investments in fossil fuel companies and infrastructure are aligned with their net-zero emissions commitment and they’ve failed to provide a credible answer.”