The Canada Pension Plan Investment Board has announced a plan for the pension fund to commit its C$550.4 billion (US$433.6 billion) portfolio and operations to becoming net-zero of greenhouse gas emissions by 2050.
“The impacts of climate change on the investment landscape are undeniable and have fundamentally transformed the nature of business risks and opportunities,” CPPIB President and Chief Executive Officer John Graham said in a statement. “Committing our portfolio and operations to net-zero by 2050 will help us manage the risks.”
The pension fund said that to reach its goal, it will nearly double its investments in green and transition assets to at least C$130 billion by 2030 from C$67 billion as of the end of 2021. It also said it will achieve carbon neutrality for its internal operations by the end of fiscal 2023. The fund said it deems an asset to be green if at least 95% of its revenue can be classified as being derived from green activities, per the International Capital Markets Association. And it considers an asset to be in “transition” if it has committed to reaching net-zero with a credible target and plan, and if it is making “meaningful contributions” to the reduction of global emissions.
CPPIB also said it would emphasize active engagement with its portfolio companies over divestment, and use an investment approach that aims to identify attractive opportunities to fund and support companies that are committed to creating value by lowering their emissions over time.
“Though encumbered with high emissions today,” CPPIB said in its plan, “we believe select companies can profitably transition over the mid- to long-term, with the right interplay of leadership, accountability, innovation, and capital.”
The pension fund also said that if its expectations on climate-related oversight are not being met by any of its portfolio companies, it will not support the reappointment of the company’s directors. It also said in its net-zero plan that as an active manager, it is “prepared to make prudent sell decisions,” when it concludes that companies are at risk of permanently impairing shareholder value.
CPPIB joins fellow Canadian pension funds Caisse de dépôt et placement du Québec and Ontario Municipal Employees’ Retirement System, which made pledges in October and December, respectively, to reach net-zero emissions by 2050.