Climate and energy analysis of OTPP’s 2024 Annual Report
Last week, the Ontario Teachers’ Pension Plan (OTPP) released its 2024 Annual Report, which included an update on the fund’s climate strategy. OTPP continues to make progress on its climate strategy and invest in opportunities that “help to accelerate the broad transition to a low-carbon future.” But the pension manager’s most recent annual report comes a month after OTPP fell out of the top three spots on Shift’s 2024 Canadian Pension Climate Report Card because of its lack of ambition and continued investments in high-risk fossil fuels.
The pension fund seems to be coasting, and hasn’t released a comprehensive update to its climate strategy since September 2022. OTPP’s 2024 Annual Report does little to re-assure Ontario teachers that OTPP intends to reclaim its climate leadership.
Do you want to press OTPP for bolder climate leadership and ask tough questions about its risky investments in fossil fuels? Register today for OTPP’s 2025 annual general meeting (AGM) on Thursday, April 10th, and submit your climate question.
Read on for the climate and energy highlights from OTPP’s annual report.
Achieving its 2025 emissions intensity target
By the end of 2024, OTPP reduced the emissions intensity of its portfolio by 49% below a 2019 baseline, surpassing its target of 45% by 2025 a full year early. OTPP aims to achieve a 67% emissions intensity reduction by 2030. OTPP had one of the most ambitious short-term emissions intensity targets among Canadian pension plans, and it is encouraging to see the fund achieve its 2025 goal. OTPP also achieved a 16% reduction in total portfolio carbon emissions in 2024 below a 2019 baseline, suggesting its investment and asset management decisions are beginning to reflect the urgent need to reduce carbon pollution in the real economy.
Paris Aligned Reduction Target (PART) program
In 2021, OTPP outlined its strategy to establish credible net-zero-by-2050 plans at the portfolio companies in which it has significant stakes. This is known as its Paris Aligned Reduction Target (PART) program. Through PART, OTPP works with portfolio companies to develop credible emissions reduction plans and provides companies with resources to accelerate decarbonization.
Between 2023 and 2024, OTPP expanded its PART engagements from 24 to 30 companies, with nearly all of these companies having completed a decarbonization study and the number with Paris-aligned targets increasing from eight to 13. OTPP also set a new target to have 67% of eligible emissions (scope 1, 2 and 3 “where material”) under the PART program covered by credible net-zero plans by the end of 2025. OTPP allows a two-year grace period for new investments that don’t yet have emissions reduction targets.
OTPP’s report highlights SSEN Transmission, which operates the electricity transmission network in the north of Scotland, as a case study. OTPP highlights how SSEN implemented energy efficiency measures, installed solar panels at its offices and substations, deployed a network of EV chargers to help electrify its vehicle fleet, and dramatically reduced the leakage of sulfur hexafluoride, a highly potent greenhouse gas.
OTPP also features its investment in InstaGrid as an example of the effectiveness of its PART program, noting how its investment helped scale up the European climate tech company, which can replace off-grid diesel and gasoline generators with an innovative battery technology, reducing total greenhouse gas emissions by 97%.
Despite encouraging progress on its PART program and a few featured companies, Ontario teachers are largely left in the dark on the OTPP portfolio companies aligned with net-zero by 2050. OTPP does not disclose which companies have credible climate targets and plans and which do not, and reports virtually nothing about its significant fossil fuel assets, for which the only credible pathway to decarbonization is phase-out.
Investing in climate solutions
OTPP reported that its green investments reached over $34 billion by the end of 2024, including $3.9 billion in green bonds. This represents a tiny increase over 2023, while OTPP has committed to increase green investments to $50 billion by an unspecified date.
OTPP’s annual report did not provide an update on the fund’s 2022 commitment to invest $5 billion in “high carbon transition assets”, defined as “very high-emitting companies with credible decarbonization plans that (it) believe(s) (it) can accelerate through (its) capital and expertise,” with a focus on power generation, heavy industry, mining and transportation.
Proxy voting guidelines
OTPP released new proxy voting guidelines in January 2025. After strengthening its guidelines in January 2024 to include an expectation for companies’ audit committees to have climate literacy as a core competency, the January 2025 update did not include any notable changes to the pension manager’s approach to climate risks. The guidelines continue to contain loopholes that allow OTPP to vote against climate-related shareholder proposals and permit corporate boards to maintain inadequate oversight of climate-related risks.
OTPP’s annual report provided virtually no reporting on how it voted on climate-related shareholder proposals in 2024. However, an analysis by Investors for Paris Compliance of OTPP’s 2024 votes on key climate-related shareholder proposals at fossil fuel companies, banks, insurers and other large companies, showed that OTPP voted for six and against two. The analysis also showed that OTPP withheld votes for directors for climate-related reasons at a tiny number of companies.
New fossil fuel entanglements on the OTPP board
Despite OTPP reporting that ten of its board members have “Corporate Responsibility/Climate/ESG” skills, the pension fund now has two directors who concurrently sit on the boards of fossil fuel companies, compared to one the previous year.
OTPP director Deborah Stein continues to sit on the boards of NuVista Energy, Trican Well Service and Washington Gas. OTPP’s 2024 annual report also discloses that M. George Lewis, who chairs the OTPP board’s Investment Committee, now serves on the board of South Bow Corp. Lewis appears to have joined South Bow’s board in October 2024, when the crude oil pipeline company was spun off from TC Energy. South Bow operates nearly 5,000 km of crude oil pipelines, including the Keystone Pipeline System that connects the Alberta tar sands to U.S. markets.
Just last week, South Bow’s CEO joined Canada’s largest fossil fuel companies in sending a letter to federal political party leaders asking them to use emergency powers to enable unfettered oil and gas development. In a Trumpian push for Canada to declare an energy emergency, South Bow’s CEO demanded that Canada's elected officials build new oil and gas pipelines and LNG terminals, gut the federal Impact Assessment Act, eliminate the oil and gas emissions cap, repeal the carbon levy on large emitters, and increase oil and gas production– effectively abandoning Canada's climate commitments.
Ontario teachers might be interested to know that a director responsible for investing in their best long-term interests is legally beholden to the shareholders of a company that wants to build crude oil pipelines and take a wrecking ball to Canada’s climate policies. It’s difficult to understand how OTPP can credibly claim that Lewis has “Corporate Responsibility/Climate/ESG” skills.
Fossil fuel assets incompatible with net-zero by 2050
Despite OTPP’s commitment to net-zero and progress on emissions intensity reductions, it remains impossible for Ontario teachers to ascertain OTPP’s exposure to the fossil fuel sector based on publicly-disclosed information. OTPP reported that 9% of its $54 billion inflation-sensitive portfolio – or $4.86 billion – was invested in “oil and gas” at the end of 2024. OTPP continues to obscure its fossil fuel assets in other portfolios, reporting that 7% of its $60.4 billion private equity portfolio is invested in “sustainability and energy transition” and that 47% of its $43.2 billion infrastructure portfolio is invested in “energy infrastructure.” The latter portfolio in particular contains significant natural gas infrastructure assets.
In another step backward in providing transparency to members, OTPP raised the threshold for the value of assets that it reports to plan members. In previous years, OTPP provided a list of individual investments that exceeded $200 million in value. But the 2024 annual report raises this threshold to $250 million, providing Ontario teachers with even less insight into how their retirement savings are invested.
OTPP remains the private owner of significant fossil fuel assets, including:
At least $250 million in each of Aethon III LLC and Aethon United LP, which are investment vehicles for Dallas-based oil and gas exploration and production company Aethon Energy;
A 5.8% stake in the state-owned Abu Dhabi National Oil Company Gas Pipeline Assets LLC;
A 100% ownership stake in HRG Royalty, one of Canada’s largest private oil and gas royalty leaseholders;
A 37.5% stake in SGN (Scotia Gas Networks), the second largest gas distribution network in the UK;
A joint 69.4% stake in Società Gasdotti Italia S.p.A (SGI), the largest gas distribution network in Italy; and
An undisclosed stake valued at less than $250 million in:
Canbriam Energy, a Calgary-based oil and gas exploration and development company;
GRP Energy Capital, which manages oil and gas mineral rights in the U.S.; and
Hawkwood Energy, an oil and gas exploration and development company focused on the Rockies and Mid-Continent regions.
Indigenous rights
OTPP appears to be hearing calls from members and teachers’ unions to develop an Indigenous rights policy, reporting that it tailored an information webinar to new Indigenous plan members and designed a “Legacy Space” in its new Toronto office to “encourage and support… conversations and education about the land we call Canada and our collective journey towards reconciliation.” OTPP also says it will introduce its “first Indigenous Action Plan to support advancements in Indigenous inclusion” in 2025.
It appears that this progress on Indigenous reconciliation is focused on staff and operations. It continues to fall far short of a comprehensive Indigenous rights policy for the OTPP portfolio.
Conclusion
While OTPP continues to implement its climate strategy and reduce the emissions intensity of its portfolio, there are major gaps that undermine the strategy’s comprehensiveness and credibility. By failing to address the deficiencies that earned OTPP an overall B grade in Shift’s 2024 Canadian Pension Climate Report Card, OTPP is failing to augment its early leadership with an ambitious plan to align its investments with a safe climate future. As the climate crisis worsens, Ontario teachers have reason to be worried about both the stability of the climate and the sustainability of their pension fund.
Want to ask OTPP for bolder climate leadership and ask tough questions about your pension fund’s risky investments in fossil fuels. Register today for OTPP’s 2025 AGM on Thursday, April 10th and submit your climate question.