Ontario Teachers’ lowered carbon footprint by about 15% in 2019: report

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climate-change-green-polution-esgEven as the Ontario Teachers’ Pension Plan’s assets grew, its overall carbon footprint fell by about 15 per cent in 2019, driven in large by the sale of a particularly high-carbon-intensity private asset, according to its 2019 climate change report.

Between 2018 and 2019, the plan’s public equity exposure, including derivatives and short positions, grew from more than $16.5 billion to about $28.7 billion, while its carbon footprint fell from 283 tonnes of carbon dioxide emitted per $1 million worth of exposure to 203 tonnes.

Private assets, meanwhile, grew from about $92.2 billion to roughly $94 billion with tonnes of CO2 emitted per $1 million falling from 59 to 41. By sector, utilities accounted for 34 per cent of the fund’s emissions exposure, followed by materials (25 per cent), energy (14 per cent), industrials (11 per cent), consumers (nine per cent) and information technology and communications (four per cent). Emissions reduction efforts in the utilities, materials and energy sectors played significant roles in the overall shrinking of the fund’s carbon footprint.

Of note, the 2019 report contains the Ontario Teachers’ first-ever independently assured portfolio carbon footprint.

“The impacts of climate change on our current and future investment portfolio will be profound and the investment choices the organization makes today will have ripple effects for retired teachers in the coming decades,” said Steve McGirr, chair of the fund’s board of directors, in the report. “Boards of directors everywhere have a wide range of issues to grapple with in their oversight role but the scope of climate-related risks and opportunities is incredibly far-reaching and long term in nature. With sustainability of our pension plan top of mind, it’s essential for our board to be involved.”

While tools enabling institutional investors to better analyze their contributions to climate change are expanding and improving, investors don’t yet have all the data required to perform these analyses fully, the report said. In the near term, the Ontario Teachers’ has set the goal of integrating climate change considerations into its corporate development strategy. Further it intends to consult with internal stakeholders and conduct cost/benefit analysis on climate-related benchmarking and reporting for its portfolio companies.

“As a large institutional investor, we know that we must play a part in facing the daunting challenge posed by climate change,” said Ziad Hindo, chief investment officer at the Ontario Teachers’, in a press release. “We do this by assessing and managing climate-related investment risk, pursuing attractive climate-friendly opportunities and using our influence as active owners to encourage positive change. Our second climate change report demonstrates the breadth of activities we are undertaking to improve long-term investment returns and keep the plan sustainable for current and future members.”

The report also showcased the Ontario Teachers’ initiative with Wellington Management Co. and climate-change think-tank the Woods Hole Research Center to boost the pension fund’s integration of climate-change science into its investments decisions.

As one example, the Ontario Teachers’, in collaboration with both Wellington and Woods Hole, has been working to better understand the implications of heat, water scarcity and flooding on its current and potential infrastructure and natural resource investments, the report noted. “We are seeking to understand how these factors could affect labour, productivity, yields, asset integrity and capital expenditures. By furthering the understanding of how to price in physical risks, we facilitate better capital allocation decisions and bridges between climate science and finance.”

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