Ontario Teachers’ Pension Releases Inaugural Climate Report

Fund details how it works climate risk into investing its nearly $150 billion in assets.

The C$191.1 billion ($146.7 billion) Ontario Teachers’ Pension Plan (OTPP) has released its inaugural climate change report, which outlines its practices for assessing and managing climate-related risks and investments.

“There are risks to traditional economic and business models associated with the transition to a low-carbon economy, the chronic and acute risks of a warming climate, and the interaction between these forces,” Barbara Zvan, OTPP’s chief risk and strategy officer, said in a release. “Actively managing the related opportunities and risks is central to the plan’s investment strategy and will be a critical factor to our future success.”

The report details the fund’s approach to climate change, which includes investing in climate-related opportunities; integrating climate factors into its investment decisions; engaging with companies to encourage climate-positive action; and using its influence with policymakers and regulators to promote stable long-term policies.

“Managing climate change in a highly interconnected global economy involves many underlying uncertainties,” said the report, adding that “climate change impacts are considered alongside myriad other risks in the decisions we make and actions we take as an organization.”

The fund recently launched its Low Carbon Economy (LCE) Transition Framework, which is intended to help understand the potential impacts of climate change and make more informed decisions on investments.

The framework is centered on three scenarios that describe what the future could look like in 2030: an orderly transition to a low-carbon economy; a high-carbon world where fossil fuels dominate; and a middle scenario that extrapolates from current climate policies and actions.

“We have processes in place that consider material climate change impacts in our investments,” said the report. “We integrate climate change considerations across the investment cycle, from the opportunities we look for, to the assessment and decision-making processes before acquiring an asset, to how we manage an asset once we own it.”

The fund said in its report that it is developing its own system to quantitatively assess a company’s environmental, social, and governance (ESG) practices. It said it is doing this through a combination of assessing existing practices across a range of companies, consultation with third-party industry associations, and accessing and analyzing appropriate data sets.

“We also look to the GRESB real asset sustainability assessments to support our evaluation of sustainability performance for our real estate and infrastructure investments,” said the fund in its report.  “We are evaluating data and working with peers, industry and service providers to develop metrics that can be applied to portfolios that are diversified across geographies and asset classes.”

The OTPP said the report is part of an ongoing process in which it has been honing its approach to climate change.

“We will continue to refine this process as understanding of the interconnectedness of physical and transition risks associated with climate change improve, and robust data and tools emerge.”

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