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Analysis: Ontario Teachers’ pension fund goes net-zero

pension fund
By Paul Mackintosh   
January 27, 2021

As if last week’s move by President Joe Biden to put the US back into the Paris accord on climate change wasn’t enough testament to the tailwinds behind climate policy in 2021, here’s one that goes right to the heart of the asset management and institutional investment community. Canada’s Ontario Teachers’ Pension Plan on January 21 publicly committed “to achieve net-zero greenhouse gas emissions by 2050”. The statement came a day after Biden was inaugurated and issued an executive order to rejoin the Paris agreement after his predecessor pulled out.

The C$204.7 billion (US$160.8 billion) Canadian pension giant’s specific policy commitments to deliver net-zero emissions include: increased investments in climate-friendly investments and solutions; ensuring portfolio companies manage and report emissions annually; working with portfolio companies to achieve the plan; using proceeds of green bonds to invest in climate-friendly opportunities; increasing resiliency of assets through physical risk assessments of its direct holdings; and advocacy for clear climate policies in partnership with global organisations to effect change.

Ontario Teachers’ commitments and actual policies are liable to have considerable influence even beyond its substantial portfolio. There’s its role as a leading bellwether within the pension fund community, and a prominent example of cutting-edge institutional investment thinking. There’s its commitment to drive the policy debate and act as an influencer as well as an investor.

And there’s its own track record as a direct investor worldwide, which is liable to influence further deals and co-investments by partners who want its money and expertise on board.

“While the transition to the low-carbon economy presents many challenges, it also presents many opportunities to earn the returns we need to pay our members’ pensions while more broadly benefiting society and the environment,” Ziad Hindo, chief investment officer of Ontario Teachers’, said in the statement.

Are there still any climate change sceptics left anywhere within the asset management and institutional investor community? Presumably there must be some somewhere. If there are, they’re making a pretty poor fist of influencing the policy debate and hard money choices among their peers anywhere, but above all, at the top levels with the largest amounts at stake and the longest investment horizons.

Entities such as Ontario Teachers’ have some of the most substantial and pressing fiduciary commitments to their members. According to the pension fund, its defined-benefit plan for some 329,000 active and retired teachers was fully funded as of January 1, 2020, which is a pretty enviable position in the global pensions context.

If they, with their sterling track record, their reputation, and their great resources and expertise, deem net-zero essential to meet their long-term obligations to pensioners, then what other pension fund would be foolish enough to contradict them? And yes, that is an invitation for answers, if any of the last-ditch climate sceptics – like a certain US ex-president – care to speak up on the matter.