Methodology and Scoring

View the detailed methodology and scoring rubric in Appendix A of the report.

The 2023 Canadian Pension Climate Report Card is based on publicly available information collected over the course of 2023 from the public websites, annual reports, ESG/sustainable/responsible investing reports, climate plans and strategies, regulatory filings, press releases and other publications of pension managers, as well as news articles, briefing notes and reports from NGOs, academics and civil society organizations. Information is current to December 31, 2023, unless otherwise stated, to the best of the authors’ knowledge. Sources and references specific to each pension manager are listed within or at the end of each pension manager analysis.

To assign letter grades for each climate category, Shift assessed publicly available information against a scoring rubric. We acknowledge that given the nature of qualitative information and inconsistency across pension fund disclosures, these scores are necessarily subjective. We hope to highlight best practices, challenges and shortcomings, and facilitate a dialogue with pension managers, beneficiaries, stakeholders, sponsors and governments. 

The report assessed pension managers and assigned letter grades based on the following qualitative indicators.

Paris-Aligned Target

Whether or not the pension manager has a clearly-defined portfolio-level target to align its portfolio with the goal of limiting global temperature increase to 1.5°C by mid-century, as outlined in the Paris Agreement. This entails the extent to which the pension manager is committed to reducing the absolute emissions of its portfolio to net-zero by 2050 or sooner, while accounting for scope 3 emissions, the role of offsets, and reducing real-world emissions, as well as membership in a credible and accountable international body defining Paris-aligned pathways for institutional investors, such as the Net-Zero Asset Owner Alliance (NZAOA) or the Paris Aligned Asset Owners (PAAO).

Interim Climate Targets

Whether or not the pension manager has short- and medium-term targets for achieving net-zero emissions, as well as the stringency of these interim targets, including percentage of portfolio covered, inclusion of scope 1, 2 and 3 emissions, and absolute vs. intensity-based targets. Other relevant climate-related interim targets were also considered, for example for increased investments in climate solutions and percent of portfolios intended to be covered by a credible net-zero pathway.

Communication of Climate Urgency

The extent to which the pension manager is communicating the urgency and severity of the climate crisis to beneficiaries, stakeholders and the public, and the extent to which the pension manager’s language reflects an understanding of the urgency and severity of the climate crisis, its potential impacts on the fund’s assets, the financial and climate-related implications of its investment decisions, and the pension manager’s role in averting the worst outcomes of the climate crisis.

Climate Engagement

With Canadian pension managers frequently asserting their “engagement over divestment” approach, Shift analyzed the robustness of pension fund engagement programs, including:

• Existence of clear climate-related expectations in plan documents (such as sustainable/ responsible investing policies, proxy voting guidelines for climate-related shareholder resolutions, guidelines and expectations of external managers);

• Clear climate-related expectations for portfolio companies (such as commitment to net-zero emissions, prohibition of lobbying against climate action, tying executive compensation to emissions reductions, ending capital expenditures on fossil fuel expansion);

• Establishment of time limits for companies and external managers to meet climate-related expectations, and communication of escalatory consequences for falling short of these expectations;

• Examples or evidence of collaborative engagement on climate.

Climate Integration

A range of indicators which demonstrate the degree to which the pension manager has understood and embedded climate risks across the organization, including:

• Disclosure of high-carbon exposure;

• Quality and disclosure of climate scenario analysis;

• Carbon footprinting and Task Force on Climate-Related Financial Disclosures (TCFD) reporting;

• Board level climate expertise;

• Board level fossil fuel entanglement;

• Detail and contemporaneity of climate plan/strategy;

• Compensation structure linked to climate targets;

• Membership in a credible and accountable net-zero investor body such as NZAOA or PAAO.

Fossil Fuel Exclusions

The existence of pension fund investment exclusions on high-risk fossil fuel companies, including oil, gas, coal, and related infrastructure.

Additional Information

Shift has included other indicators, such as portfolio allocations to climate solutions and to fossil fuels, notable fossil fuel investments and membership in climate-focused investor groups. These indicators can be found in the “Additional Information” section in each pension fund analysis. Due to a lack of transparency, disclosure and consistency in pension fund reporting, data for these indicators is likely incomplete and so is not always comparable across funds. For these reasons, this information did not directly contribute to the assigned letter grades.

Shift recognizes that this report is comparing portfolios at different scales, from the University Pension Plan with assets under management (AUM) of $10.8 billion to the Canada Pension Plan Investment Board with over a half-trillion dollars in AUM. Different organizations have different levels of capacity and resources to take on the complex task of managing climate risks in the midst of an accelerating global crisis.

Any errors or omissions are the responsibility of Shift. The information in this report does not constitute legal, investment or financial advice. The authors welcome input, feedback and corrections from readers, companies and pension fund staff, board members and stakeholders.