AIMCo struggling to walk and chew gum at the same time; other pension funds figuring it out

Alberta’s public pension manager, the Alberta Investment Management Corporation (AIMCo), is suggesting that its failure to set credible climate targets somehow makes it better at decarbonizing assets. We break down for AIMCo how other pension funds have figured out how to walk and chew gum at the same time.

In AIMCo’s 2023 Report, released June 27, the investment manager’s Chief Investment Officer (CIO) writes that AIMCo is “in a more flexible position compared to some investors, who have aggressive net-zero carbon targets. Such investors may find themselves having to offload higher emitting assets to reach the targets while we are able to invest in those assets, support them through lowering their carbon emissions where warranted, aiming to reap the rewards of doing so” (p.13).

Let’s take a look at some of AIMCo’s peers and see if they are able to invest in decarbonization and have net-zero targets and interim emissions reduction targets.

Quebec’s public pension manager, Caisse de dépôt et placement du Québec (CDPQ), has exceeded its 2025 emissions reduction target and set a more ambitious 2030 target while also offloading oil and coal assets that are “not energies of the future.” But does this mean CDPQ is sitting out decarbonizing high-emitting assets? Hardly - the fund has $10 billion set aside to support the decarbonization of high-emitting industries that have credible transition pathways. The selected companies have to meet specific standards set by the Climate Bonds Initiative or the Science Based Targets initiative (SBTi), including having a proven decarbonization strategy, having an implementation plan, and disclosing their progress both internally and externally. In 2022, CDPQ completed three transactions in its transition envelope, investing in electric utilities that have a plan to phase out coal, ramp up renewable energy, and invest in electricity transmission and distribution. Based on these companies’ decarbonization plans, CDPQ expects the carbon footprint of these three investments to decrease by almost 60% by 2030 and close to 70% by 2035. (For sources and more details, see Shift’s CDPQ analysis in the 2023 Climate Pension Report Card).

The Ontario Teachers’ Pension Plan (OTPP) is another fund with some of the strongest emissions intensity reduction targets of its Canadian peers. OTPP is working to decarbonize those assets that do have Paris-aligned pathways, for example through its Paris Aligned Reduction Targets (PART) program and decarbonization playbooks. The fund has also earmarked $5 billion to invest in “high carbon transition assets” (HCTAs), defined as “very high-emitting companies with credible decarbonization plans that we believe we can accelerate through our capital and expertise,” with a focus on power generation, heavy industry, mining and transportation, and with the intention of accelerating their path to decarbonization. OTPP has figured out how to partner its transition investments with its interim emissions reduction targets: HCTAs will not be covered by the fund’s interim emissions reduction targets, but will be accounted for under the fund’s commitment to net-zero by 2050. (For sources and more details, see Shift’s OTPP analysis in the 2023 Climate Pension Report Card).

Similarly, the Ontario Municipal Employees Retirement Fund (OMERS) has surpassed its 2025 interim emissions reduction target and lowered its exposure to fossil fuel assets without transition pathways. Yet OMERS is also figuring out how to invest in decarbonizing high emitters: the fund announced it will put $3 billion toward a “transition sleeve” for “assets playing a key role in the global transition towards a lower-carbon economy”. As with OTPP’s HCTAs, the emissions of OMERS’ transition sleeve investments will be tracked separately and not included in OMERS’ carbon footprint. (For sources and more details, see Shift’s OMERS analysis in the 2023 Climate Pension Report Card). 

AIMCo has not yet put all the pieces together

AIMCo has only part of the picture. It made a modest move toward climate alignment with its announcement earlier this year of a $1 billion fund "dedicated to investing in the global energy transition and decarbonization sectors," but has not stated that assets must have credible net-zero aligned pathways to receive this investment. Nor has AIMCo filled out its climate approach with a commitment to reduce financed emissions in the near-term or the long-term. In its December 2023 Climate-related Financial Disclosures the fund reported that its portfolio emissions increased, on both absolute and intensity measures, between 2021 and 2022.

The commitments of CDPQ, OTPP and OMERS are not perfect. CDPQ is the only one of the three already reporting on transition sleeve investments and the expected emissions reductions that will result. CDPQ is also the only one of the three to have formally placed an exclusion on new investment in oil and coal. OMERS recently instituted a weak coal exclusion, while OTPP has no public exclusions on new investments in fossil fuels. In order to have comprehensive and credible climate strategies, all of these funds must recognize that the scientific consensus calls for the rapid phase-out of fossil fuels. It might make sense to invest in decarbonizing an electrical utility when there is a credible decarbonization plan to phase out coal from the power generation mix, but it does not make sense to invest in marginally lowering scope 1 and 2 emissions of fossil fuel extraction and production companies. Some sectors will thrive in the transition to a zero-carbon economy, but other sectors will not. Investors looking to “reap the rewards” (AIMCo’s words) of investing in decarbonization will best serve their members and beneficiaries by investing in decarbonizing assets that have a profitable long-term future.

AIMCo might believe now that its failure to set emissions reduction targets somehow makes it more “flexible”, but this ignores that investing without a net-zero strategy is locking in a world of climate breakdown for the AIMCo members and beneficiaries that are counting on the investment manager to invest for their safe and dignified retirement. AIMCo’s beneficiaries should be wary of a strategy that calls for running into a burning building to look for bargains.

For the sake of those members and beneficiaries, AIMCo must put forward a credible climate plan that navigates its portfolio to zero emissions and puts hard stops on investing in fossil fuel expansion.