Canada Pension Plan Investments Board (CPP Investments), with assets of more than $550 billion, has committed to achieving net-zero greenhouse gas emissions across all scopes of its portfolio and operations by 2050.
Deborah Orida, global head of real assets & chief sustainability officer, said climate change is the defining challenge of the 21st century.
“Contributors and beneficiaries expect to know those managing their pension monies deeply understand this complex issue which will shape capital markets for decades to come. Net zero is consistent with our investment objectives and mandate,” she said.
“We undertook rigorous analysis, pragmatism, and debate to ultimately conclude that this commitment is in the best interests of the CPP Fund. We have been considering the impact of climate change and came to the conclusion that committing to net zero is the right approach.
“Incorporating climate change factors into decision-making helps create sustainable value for the fund.”
CPP Investments’ commitments
To meet the commitment, CPP Investments said it will:
– continue to invest in and exert its influence in the whole economy transition as active investors, rather than through blanket divestment;
– achieve carbon neutrality for its internal operations by the end of fiscal 2023;
– increase its current investments in green and transition assets from $67 billion to at least $130 billion by 2030; and
– build on its new decarbonization investment approach that seeks attractive returns from enabling emissions reduction and business transformation in high-emitting sectors.
“Our role is to generate superior, sustainable long-term returns for generations of Canadians,” Orida said. “As it relates to the global path to net-zero, that may mean; investing in innovation to accelerate the energy transition; clearly articulating our expectations to the companies we invest in that they should have transition strategies and supporting them through their unique transition pathways; and continuing to increase our investments in green and transition assets, from $67 billion today to at least $130 billion by 2030, across asset classes and geographies.
“Our ability to take large stakes in enterprises, and hold those stakes for the long term, gives us additional tools to support the overall transition to net-zero and generate superior long-term investment returns. We will support and directly partner with energy companies that are innovating and developing new technologies as well as those committed to reducing their emissions.”
She said the performance of CPP Investments’ portfolio and the generation of long-term returns relies on its ability to adapt to a global economy that is moving toward net-zero.
CPP’s Climate Change Principles
CPP investments, which is headquartered in Toronto with offices in Hong Kong, London, Luxembourg, Mumbai, New York City, San Francisco, São Paulo and Sydney, invests in public equities, private equities, real estate, infrastructure and fixed income around the world. It is governed and managed independently of the CPP and at arm’s length from governments.
CPP said in the announcement its net-zero commitment was made on the basis of, and with the expectation that, the global community will continue to advance toward net-zero GHG emissions by 2050.
“These advancements include the acceleration and fulfillment of commitments made by governments, technological progress, realization of corporate targets, changes in consumer and corporate behaviours, and development of global reporting standards and carbon markets, all of which will be necessary to help enable us to meet our commitment. CPP Investments is dedicated to staying ahead of these developments that will impact our portfolio’s path to net-zero,” it said.
– Achieving the net-zero commitment will be accomplished through its Climate Change Principles which are:
– Invest for a whole economy transition;
– Evolve its strategy as transition pathways emerge and global standards for decarbonization materialize;
– Exert influence to create value and mitigate risk;
– Support a responsible transition based on its investment beliefs and expertise; and
– Report on its actions, their impacts and its portfolio emissions.
The commitment follows significant advancements CPP says it made in 2021, including the appointment of the organization’s first chief sustainability officer, the proposal of a reporting framework that guides companies to project their capacity to abate GHG emissions, and the launch of its investment approach focused on attractive opportunities to support the decarbonization of essential, high-emitting businesses.
CPP’s Q3 2022 financial results
CPP Investments’ position paper on how it will achieve net-zero by 2050 can be found on cppinvestments.com.
On the same day it announced its net-zero commitment, CPP Investments also announced its third quarter of fiscal 2022 for the period ending December 21, 2021, which showed net assets of $550.4 billion was up compared with $541.5 billion at the end of the previous quarter.
The $8.9 billion increase in net assets for the quarter consisted of $13 billion in net income less $4.1 billion in net CPP outflows, it said. The fund, which includes the combination of the base CPP and additional CPP accounts, achieved five-year and 10-year annualized net returns of 11.7 per cent and 11.6 per cent, respectively. For the quarter, the fund returned 2.4 per cent.