Healthcare of Ontario Pension Plan (HOOPP) released its plan to reach net-zero emissions across its portfolio by 2050 through billions of dollars in green investments, engaging with companies where it has invested and excluding some direct fossil fuel funding.
HOOPP is the defined benefit pension plan for Ontario’s healthcare workers, serving over 420,000 members and holding more than $114.4 billion in assets at the end of 2021, according to its website.
In March 2022, it announced a commitment to have a net-zero portfolio and be a net-zero organization by 2050, aligning it with similar pledges made by other Canadian pension funds.
“We really did take some time to think through exactly how we wanted to do that (its 2050 net-zero plan) . . . I think it’s safe to say that people were wanting HOOPP to be more forthcoming publicly with how we’re going to do it . . . We’re hopeful this is a really meaningful and constructive development,” Michael Wissell, chief investment officer of HOOPP, told SustainableBiz.
Sustainable investment is like any investment requiring risk management, he said, and HOOPP is performing its fiduciary duty to minimize risk by taking climate action.
Acquiring information with its 2025 climate goals
HOOPP set several interim goals between now and 2050 to maintain progress on decarbonization. Its 2025 goals are:
- Having 80 per cent of its assets reporting Scope 1 and 2 emissions;
- HOOPP initiating Scope 3 portfolio emissions measurement;
- and excluding new direct investments in private thermal coal and oil exploration and production companies.
The information acquired from the 2025 goals will help HOOPP create targeted outcomes for 2030, Wissell said.
The pension fund historically did not focus on thermal coal and oil exploration and production nor intends to make them a part of its future investments. However, it may make exceptions for high-emitting assets with credible and fully costed decarbonization plans.
Creating results with its 2030 climate goals
By 2030, the healthcare workers’ pension fund hopes to reduce its portfolio’s carbon footprint to 28 tonnes of carbon dioxide equivalent per one million dollars invested against a 2021 baseline of 41 tonnes of carbon dioxide equivalent per one million dollars invested.
“We’re holding ourselves accountable by working directly with the holdings in our investment companies one by one and working to reduce their carbon footprint, and thereby reducing our carbon footprint,” Wissell said about HOOPP's planned portfolio emissions cut, which is described as an aggressive but achievable target.
This helps promote decarbonization through engagement, the report states, and HOOPP will be using external frameworks to create criteria to assess the credibility of the transition plans of its portfolio companies and external asset managers. The criteria include having science-based near-term targets, a plan that applies across the company’s main business activities and major sources of emissions, and reporting on progress at least annually.
To take on its portfolio emissions, HOOPP will engage with high-emitting companies through coalitions with collaborative engagement groups, including Climate Engagement Canada.
HOOPP also aims to reduce its real estate portfolio’s absolute emissions by 50 per cent through decarbonization efforts at its owned properties, and expects 50 per cent of its infrastructure and private equity assets under management to have credible transition plans.
Another expectation is to spend $23 billion on green investments according to the Climate Bonds Initiative taxonomy.
The green investments encompass green investment opportunities and diverting funds toward “green bonds that provide funding for clean energy and technology, energy efficiency and conservation, and more,” according to HOOPP’s report.
Wissell said HOOPP does not disclose the exact investment figures of its portfolio, but gave an example like deploying about one per cent of its plan on climate change equities like the MSCI Climate Paris Aligned Indexes and the S&P Global Clean Energy Index.
It is described as a public and private approach to deploying the green capital, which Wissell said is a model for HOOPP's future investment activities.
Earlier this year, HOOPP was criticized by Shift Action for Pension Wealth and Planet Health, a charity organization analyzing Canadian pension funds on their climate strategies. Shift Action alleged HOOPP "(lacked) a climate strategy or interim targets," and had "low overall disclosure, undefined engagement expectations or process, lack of evidence of climate integration and lack of fossil fuel exclusions."
While Wissell respects the views of people who argue divesting from fossil fuels is a critical part of a low-carbon future, he does not share that opinion. Instead, he holds that HOOPP can lower its carbon emissions by engaging with its investment companies on limiting their carbon emissions.
Emitters that work with like-minded plans like HOOPP are already making progress, Wissell said, like the companies on the S&P index that produce emissions disclosure.
In a release, Shift Action said it was “pleased to see considerable effort” to address its criticisms, such as fossil fuel investment exclusions and acknowledging the threat of climate change to its stakeholders. But it did voice concern over the speed of HOOPP's transition plan and said HOOPP has "no demonstrated track record of climate engagement."
At the least, Wissell said HOOPP’s policy on excluding new direct investments in private thermal coal and oil exploration and production companies shows its decision to avoid industries like oil due to its high risks as long-term, illiquid investment.