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Ontario Teachers’ Pension Plan Board has no plan to immediately divest its sizable fossil fuel holdings as part of a new goal to achieve net-zero carbon emissions in its portfolio by 2050.

Canada’s third-largest pension plan and one of its most influential institutional investors announced the target on Friday, saying it will boost investments in climate-friendly assets, work with corporations it invests in to cut emissions and increase the resiliency of its assets against climate-change risks.

“We’re expanding our capabilities to evaluate and invest in more climate-smart and green economy related opportunities,” Ziad Hindo, Teachers’ chief investment officer, said in an interview. “We want to invest in those solutions that will help accelerate the shift away from fossil fuels. So you’re going to see a very important commitment from here to grow our investments in that sector.”

Some of that will be making sustainable investments from the proceeds of 750 million euros in green bonds that Teachers issued in November, he said. Proceeds from such securities must be used to finance projects that are certified for their environmental benefits.

Teachers follows the federal government and a growing list of other funds, banks and corporations in setting targets to get to the point where greenhouse gas emissions are simultaneously cut and offset. In 2019, the Caisse de dépôt et placement du Québec made a net-zero pledge alongside 11 other international pension funds. That group, the Net­Zero Asset Owner Alliance, now includes 33 global investors with US$5.1-trillion in assets under management.

The Canada Pension Plan Investment Board is not one of them. Activists have criticized the manager of the national pension fund for talking about the green future while also maintaining and occasionally adding to a portfolio of conventional energy assets, including fracking companies.

CPPIB spokesman Michel Leduc said “a specific target is, by definition, a public-policy decision rather than an investment calculation.” He said CPPIB’s investing insights, plus its engagement with companies it invests in, may drive it to a lower-emissions portfolio “faster than any distant arbitrary target that’s not based on data.”

Indeed, net-zero is not carbon divestment, and Teachers also plans to manage its portfolio by balancing new-energy initiatives with legacy energy projects. Three per cent of Teachers’ $205-billion of assets are in oil and gas, mostly in North America, and Mr. Hindo said there would be no immediate selloff of those holdings as it works toward its goals for carbon emission reductions.

“Fossil fuel is part of the fabric of the economic structure today. There is no, unfortunately, easy solution for the world economy to wean itself off that,” he said. “What we do recognize is the world is transitioning away from it. And our investment plan, of course, will evolve with that as well. Hence, going forward, we will really emphasize investments in cleaner energy.”

The Teachers announcement is insufficient, argues Patrick DeRochie of Shift Action for Pension Wealth and Planet Health, a non-profit climate advocacy group. He says the fund needed to, for example, stop new oil, gas and coal investments and commit to phasing out existing ones by 2025.

Mr. DeRochie said the Caisse committed to increase low-carbon investments by 80 per cent from 2017 to 2020 and reduce portfolio carbon intensity by 25 per cent per dollar invested from 2017 to 2025.

“A commitment to net-zero emissions has little credibility on its own without announcing the concrete steps [Teachers] will take to achieve this goal,” Mr. DeRochie said. “Without a plan for major changes to the way the pension fund makes investment decisions, a net-zero commitment runs the risk of becoming a cynical example of greenwashing.”

Teachers aims to provide more details of its plans, including concrete targets, in the coming months, Mr. Hindo said.

He pointed out that many of the fund’s investments are already working toward net-zero goals, such as its holdings in five European airports. In energy efficiency, it owns Techem GmbH, a leader in providing heat and water sub-metering services. Another investment, Cubico Sustainable Investments, is one of the world’s largest privately owned wind and solar energy companies.

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