Statement on the UPP’s Net-Zero by 2040 Emissions Commitment and Coal Exclusion Policy

Statement from Shift on the UPP’s Net-Zero by 2040 Emissions Commitment and Coal Exclusion Policy

For Immediate Release: July 21, 2022

Toronto, ON | Traditional territories of the Huron-Wendat, Anishnaabeg, Haudenosaunee, Chippewas and Mississaugas of the Credit First Nation - With today’s release of its new Climate Action Plan, Investment Exclusion Policy and inaugural annual report, Ontario’s new University Pension Plan (UPP) has unequivocally established itself as a climate leader in Canada’s pension sector. It’s clear that the UPP is listening to, learning from and acting on the concerns of its members, including those who are experts in climate science, sustainable finance and climate and energy policy.

Several aspects of the UPP’s Climate Action Plan demonstrate that the pension plan’s leadership has a better grasp of the urgency and severity of the climate crisis than that of other large Canadian public pension funds. Details include:

• A commitment to net-zero emissions by 2040– ten years ahead of its Canadian peers that have made a 2050 net-zero commitment (although the UPP says it will rely on offsets to address any portfolio emissions remaining in 2040);

• Interim emissions reduction targets of 16.5% below a 2021 baseline by 2025 and 60% by 2030– equivalent to the 2030 target set by the Caisse de dépôt et placement du Québec and nearly as stringent as the Ontario Teachers’ Pension Plan’s commitment to a two-thirds reduction by 2030; 

• A clear and specific recognition of “double materiality”– the reality that the UPP’s ability to achieve adequate investment returns for its members depends on a stable climate, at the same time that the UPP’s investment decisions themselves impact the stability of the climate;

• An explicit and formal exclusion of companies involved in the production of coal-fired electricity and the mining of thermal coal (although the revenue and capacity thresholds for both could be more stringent), as well as a commitment to “selectively exclude investments in companies that present significant climate risk”;

• Becoming the first Canadian pension fund to publish an assessment of its portfolio’s Scope 3 emissions from oil, gas and mining (approximately 1 million tonnes CO2e as of December 31, 2021);

• Recognition that investors have a responsibility to respond to real-world challenges and promote a just, sustainable society and economy;

• A commitment to set a target for new investments in climate solutions.      

While the UPP is implementing a “Climate Transition Investment Framework” with a commitment to invest “only in new mandates and assets that align with a net zero transition and reduce the emissions intensity of UPP’s assets,” the fund does not explain how oil and gas investments are aligned with this mandate. Considering that the UPP recognizes the environmental, economic, financial and social imperative of mitigating climate change, it is unclear why the UPP would treat oil and gas companies differently than it treats the thermal coal industry, which it has specifically excluded. The UPP has not yet demonstrated how it is fully protecting its members from the growing financial risks associated with staying invested in the oil and gas companies that are fueling the climate crisis and that, to date, have proven recalcitrant to engagement efforts.

The science is indisputable that limiting global temperature increase to 1.5°C requires the rapid phaseout of oil and gas, beginning immediately– not after an unspecified number of years spent engaging companies that are exploring for more fossil fuels, expending capital on production increases and waging lobbying and public relations campaigns to undermine, delay and block ambitious government climate policies and regulations. If the UPP thinks that its engagement efforts will convince these climate laggards to align their high-carbon businesses with its own investment beliefs, it must rapidly demonstrate progress– or remove oil and gas companies from its portfolio.      

Background information on the UPP and beneficiary calls for the exclusion of fossil fuels

• The UPP is the new $11.8 billion pension fund for faculty and staff from Queen’s University, the University of Guelph (UofG), the University of Toronto (UofT) and Trent University.

• UPP members from all four universities have repeatedly expressed their expectations for a climate-safe pension portfolio that excludes fossil fuels.

  • In consultation sessions hosted by the UPP in spring 2021, an overwhelming majority of participating plan members asked the UPP to develop a robust climate policy and exclude fossil fuels from their pension portfolio.

  • The UPP itself reports that “combatting climate change” is members’ number one priority for responsible investing, according to its member engagement survey results. The survey also found that:

    • Half of respondents “feel that a mix of setting hard lines and engaging for change makes the most sense.”

    • 64% of respondents “prefer UPP to invest in companies that are leaders on ESG issues,” while just 23% prefer UPP to focus only on returns.

    • Nearly half of respondents “want to see UPP set firm expectations for companies to address ESG issues promptly, and help those companies evolve.”

  • In November 2021, 100 faculty and staff from Queen’s, UofG and UofT signed a letter outlining a detailed approach to climate-aligned investing.

  • UPP members, including academics who are leading experts in climate science, sustainable finance, and climate and energy policy, also developed a comprehensive climate-aligned investment plan for the UPP in 2021 and shared it with UPP staff, board members and executives.  

  • Both UofG and UofT have already committed to divest from fossil fuel companies in their endowment portfolios, while the Queen’s University Faculty Association passed a motion at its fall 2021 general meeting advocating for the decarbonization of the UPP portfolio and the adoption of a comprehensive, Paris-aligned investment plan that included divestment from fossil fuels and reinvestment in green industries.

Contact information:

Laura McGrath, Pension Engagement Manager, Shift Action for Pension Wealth & Planet Health 

laura@shiftaction.ca

Shift Action for Pension Wealth and Planet Health is a charitable initiative that works to protect pensions and the climate by bringing together beneficiaries and their pension funds to engage on the climate crisis.