The Public Sector Pension Investment Board, the manager of several federal employee plans, released a climate-action strategy on Thursday that stops short of a “net zero” commitment.
Instead, the pension manager, with more than $200-billion in assets, says it believes that sometimes, the best thing to do is to take on carbon-intensive investments and get the companies to reduce their environmental impact – even if that means PSP’s environmental metrics get worse in the short term.
That is a departure from other major Canadian pension plans that have made a public commitment to get their portfolios to “net zero” – or no negative climate impact – by 2050. Some, like Caisse de dépôt et placement du Québec and the Ontario Teachers’ Pension Plan, have fleshed out their commitments by releasing specific policies or interim goals. Other pension plans’ public pronouncements have had less detail.
“Our commitment, and it is a strong commitment, is to use our capital and our influence to support that transition to a global net zero, recognizing that it’s not something that we can do on our own,” PSP chief executive officer Neil Cunningham said in an interview on Thursday. “When we said, ‘well, what can we do?’ we said we’ll set short-term objectives on things that we specifically are going to commit ourselves to do between now and 2026.”
PSP says by 2026, it aims to:
- Increase investments in green assets to $70-billion from $40.3-billion baseline in 2021.
- Increase investments in transition assets to $7.5-billion from $5.1-billion in 2021 and ensure that assets representing 50 per cent of its carbon footprint will have commitments to implement mature, science-based transition plans by 2026.
- Reduce holdings in carbon-intensive assets that lack transition plans by 50 per cent from $7.8-billion in 2021.
Many pension plans globally have announced goals to divest totally from fossil fuels, or adopt other measures that would likely remove from their portfolio any companies that lack a transition plan.
“We were obviously aware of what our peers say, but we look at our own operation, we look at our own assets and our own strategies and, frankly, our own mandate,” Mr. Cunningham said. “And we said this is what we can do, which we think is concrete and will lead to where we need to go, and once we achieve these targets, then we’ll set new ones.”
Mr. Cunningham cited the views of former Bank of Canada governor Mark Carney, a climate crusader who now advises a multibillion-dollar energy transition fund at Brookfield Asset Management.
“He’s saying let’s invest where the carbon is, and let’s remove the carbon,” Mr. Cunningham said. “So when you think of our carbon footprint as an investor, when we put money into that [company], it would increase our carbon footprint. It’s got a certain level of emissions, but our capital will be used to reduce that emission over time.”
The point has also been made by the Canada Pension Plan Investment Board, which pledged in February to reach net-zero by 2050. CEO John Graham said carbon emissions across its portfolio could climb in the initial stages of a net-zero plan that features a focus on seeking opportunities to decarbonize operations in high-emitting sectors.
PSP manages money for the pension plans of the federal public service, the Canadian Forces, the RCMP and the Reserve Force.
Shift Action for Pension Wealth and Planet Health, a climate advocacy group, said on Thursday in a statement that PSP’s broad commitment to support global net-zero emissions “is not the same as a commitment to align PSP’s portfolio with the Paris Agreement goals committed to by its government of Canada sponsors. This is a missed opportunity.” However, SHIFT said, “it’s clear that PSP is listening to the growing concerns of beneficiaries and beginning to recognize the scale and urgency of the climate crisis.”
With a report from Jeffrey Jones
Your time is valuable. Have the Top Business Headlines newsletter conveniently delivered to your inbox in the morning or evening. Sign up today.