The Ontario Teachers’ Pension Plan (OTPP) has “solidified its position as a climate leader among Canadian pension funds,” but still isn’t fully heeding its members’ calls to invest in a climate-safe future, according to an independent analysis of its annual report released late last month.
The OTPP “has made laudable progress toward its 2050 net-zero target,” Shift Action for Pension Wealth and Planet Health states in a release, reducing the emissions intensity of its portfolio 32% between 2019 and 2021 and absolute emissions by 13%, while “dramatically ramping up investments in climate solutions, including renewable energy, sustainable agriculture, electricity infrastructure, and green bonds.”
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But the fund, which claims its “private exposure to oil and gas” makes up less than 3% of its investment portfolio, is still refusing demands from hundreds of working and retired teachers that it publish an inventory of those investments, Shift says. Without that information, it’s impossible to verify OTPP’s claims about the emissions it’s helping to finance.
In a recent feature interview with the Globe and Mail, OTPP President and CEO Jo Taylor said the fund was moving out of fossil fuels—but with conditions.
“We’ve always been very low in oil and gas, and we’ve been reducing it recently because we know members aren’t that keen on us holding fossil fuel assets,” he said. But “just for clarity, we are looking at carbon intensity emissions, different from absolute carbon reduction. We have to look at the overall intensity for assets we own, because if you buy more assets and just look at absolute footprint reduction, it gets quite difficult to deliver.”
Carbon intensity refers to emissions per unit of oil or gas produced, meaning that if carbon intensity falls, but production grows even faster, overall emissions will continue to increase. But Taylor still positioned the strategy as a win for climate action and for OTPP’s financial returns.
“We’ve had very clear feedback from our members that they expect us to do it,” he told the Globe. “We do it because we think we’ll make better returns, because if we improve these companies with a better carbon footprint, they’re more attractive and more valuable to third parties. And we do it to avoid having businesses that nobody wants to own, in case we want to dispose of them at a later date.”
He added that OTPP is “walking the talk” with $30 to $35 billion in green assets in a portfolio valued at $241.6 billion.
An annotated version of the post placed [pdf] oil and gas exploration at 3% of the fund’s assets, or about $7.2 billion. “Apparently the OTPP’s definition of ‘low on oil & gas’ is very different from that of the teachers who want their pension savings invested in a safe climate future,” Shift Action tweeted.
Another gap in OTPP’s climate disclosure is its failure to report the Scope 3 emissions that occur after a product reaches its end users, Shift says. Those emissions account for 80% or more of the carbon pollution in a barrel of oil.
That’s “particularly problematic considering the OTPP’s significant ownership of fossil fuel assets,” the release states, including an oil and gas holding company that the plan bought from Canadian fossil producer Cenovus Energy in 2015 for C$3.3 billion, $200 million in oil and gas investment firm Aethon Energy, a 69.4% stake in a 1,700-kilometre fossil gas pipeline in Italy, a 37.% share of the UK’s second-largest gas distribution company, and part ownership of fossil gas pipelines run by the Abu Dhabi National Oil Company.
“The OTPP allocates entire web pages to its investments in climate solutions, but reports next to nothing about the high-risk fossil fuel infrastructure purchased with teachers’ retirement savings,” the Shift Action release states. “For the OTPP’s net-zero target to be credible, it must be transparent on how its fossil fuel linked assets have credible, profitable, Paris-aligned transition plans. If it can’t do so, it should remove these assets from its portfolio.”