The following is a statement published by Shift Action for Pension Wealth & Planet Health on November 21, 2022.
Toronto, ON | Traditional territories of the Huron-Wendat, Anishnaabeg, Haudenosaunee, Chippewas and Mississaugas of the Credit First Nation – Today, the Investment Management Corporation of Ontario (IMCO) took a big step towards a credible plan that can put it on track to meet its “net-zero by 2050 or earlier” commitment, which was announced one year ago. IMCO’s new Climate Action Plan underscores growing acknowledgement from Canadian pension managers that investments in fossil fuels must be phased out to protect the global climate and beneficiaries’ retirement security.
IMCO’s plan includes “climate guardrails” to “limit (IMCO’s) exposure to investments that are incompatible with a net-zero future” and a commitment to “phase out new investment commitments in development of new unabated fossil fuel assets, in line with appropriate global, science-based scenarios and limit exposure to investments in thermal coal mining and arctic drilling” (p.9).
The language IMCO uses to describe these “climate guardrails” contains some concerning and confusing loopholes, but it indicates that the investment manager recognizes that its net-zero commitment requires an immediate halt to new investment in coal, gas and oil. IMCO cites credible, global, science-based net-zero scenarios, all of which are unambiguous about ending fossil fuel expansion, as the basis for its climate guardrails (p.12).
Recent analysis of the latest climate science from the International Institute for Sustainable Development reinforces warnings from the International Energy Agency (IEA), the Intergovernmental Panel on Climate Change (IPCC) and the UN High-Level Expert Group that new fossil fuels are incompatible with the 1.5℃ goals enshrined in IMCO’s net-zero commitment, as well as the Paris Agreement. IMCO itself says its interim emission reduction target is aligned with IEA and IPCC pathways (p.12).
Other laudable highlights of IMCO’s Climate Action Plan include:
- A major commitment to invest 20% of its portfolio in climate solutions by 2030 (p.2), with clear definitions in line with the Green Bond Principles set out by the International Capital Markets Association (p.4);
- An interim target to reduce its portfolio’s Scope 1 and 2 emissions intensity by 50% below a 2019 baseline by 2030 (p.5). This puts IMCO’s ambition close to the 2030 targets of Canadian pension leaders Caisse de dépôt et placement du Québec (60% below a 2017 baseline by 2030), Ontario Teachers’ (67% below a 2019 baseline by 2030) and Ontario’s University Pension Plan (60% below a 2021 baseline by 2030);
- A commitment to escalate its climate-related engagement with companies, file climate-related shareholder resolutions, and consider divesting when extensive engagement has not proved successful (p.7);
- An intention to prioritize working with external investment managers with net-zero commitments and robust procedures to manage climate risks (p.5);
- Confirmation that IMCO is undertaking scenario analysis using credible 1.5℃ global heating scenarios to assess the climate risks to its portfolio.
While IMCO’s Climate Action Plan demonstrates significant progress that puts it in the orbit of leading Canadian pension funds on climate, IMCO must strengthen a few key pieces:
- IMCO must clarify its timeline for “phas(ing) out new investment in development of new unabated fossil fuel assets” and for phasing out its existing investments in fossil fuel assets. IMCO must also explain how any new investment in fossil fuel assets could be aligned with the science-based net-zero scenarios informing its decisions.
- IMCO must clarify what role, if any, carbon capture technologies might play in its investments toward achieving net-zero emissions by 2050;
- IMCO must measure and report the Scope 3 emissions associated with its portfolio, as Scope 3 is an essential indicator of climate-related transition risks.
Background information on IMCO
IMCO is the manager of Ontario’s $33.8 billion Public Service Pension Plan (PSPP), the pension fund for over 93,000 active and retired Ontario public servants. IMCO has $79 billion in assets under management, including the PSPP, the Provincial Judges’ Pension Plan, and the insurance and benefit funds of the Workplace Safety and Insurance Board.
Contact information for interview requests:
Adam Scott, Executive Director, Shift Action for Pension Wealth & Planet Health
Laura McGrath, Pension Engagement Manager, Shift Action for Pension Wealth & Planet Health
To read the original statement, click HERE.