Canadian pension funds embrace ESG

Large Canadian pensions are making “impressive” progress on sustainable investments, according to the second annual Canadian Pensions Dashboard for Responsible Investing.

The report examines the progress major Canadian pension funds have made in integrating ESG factors into their governance from 2020 to 2022. In just one year, the number of funds that have made public net-zero portfolio emission commitments by 2050 or sooner has grown from two to nine, which now accounts for or $1.8 trillion or 81% of total pension fund assets included in the report. 

Five of those funds have also disclosed interim targets for emissions and sustainable investment allocations, the report said. 

Sustainable investments have also grown, to $276 billion or 13% of total AUM, up from 7% in 2020. However, the report said the definition of what constitutes a sustainable investment can vary significantly across funds.

The Public Sector Pension Investment Board (PSP) leads the board, with 20% ($46.5 billion) of its total assets under management invested in sustainable solutions, followed by the Caisse de dépôt et placement du Québec (CDPQ) and the Ontario Municipal Employees Retirement System (OMERS), with 17% ($71 billion) and 15% ($18 billion) respectively. 

On the carbon emissions front, the Ontario Teachers’ Pension Plan (OTPP) reported a substantial 32% reduction in portfolio carbon intensity. OMERS reduced its intensity by 26% and the Alberta Investment Management Corporation (AIMCo) reported an 18% improvement. 

However, there has been a negligible improvement on disclosure of voting records for environmental and social resolutions from 2020 to 2021, despite expanding the number of funds included in the second annual report. 

While the reporting of the number of shareholder resolutions voted on in annual/sustainability reports increased from eight to 11 funds, the report found only seven of the 14 funds disclosed the number of ESG proposals voted on in 2021. 

“While impressive progress was made in the past year, there is an urgent imperative to speed up the pace of adaptation so that our pension funds can keep up with the pace of change in the low-carbon global economy that is rapidly ramping up,” the report said. 

The second annual report was developed by Corporate Knights and Smart Prosperity Institute, with input from a panel of experts in sustainable investing and pension funds. The assessment targeted the 28 largest funds by assets under management, with 14 providing detailed disclosure.

Maddie Johnson

Maddie is a freelance writer and editor who has been reporting for Advisor.ca since 2019.