2024 Canadian Pension Climate Report Card
OVERALL SCORE
A-
Stichting Pensioenfonds ABP (ABP)
Climate Urgency
A
Climate Engagement
B+
Climate Integration
B
Fossil Fuel Exclusions
A-
Interim Targets
A
Paris-Aligned Target
A
The 2024 Canadian Pension Climate Report Card analyses, assesses and ranks the progress made by eleven of Canada’s largest pension managers and two international pension managers in their approach to climate risk and investment decisions as they relate to the climate crisis. The report is based on publicly available information to December 31, 2024.
ABP is a pension fund for government and education employees in the Netherlands, and is among the five largest pension funds in the world. Around one in six people in the Netherlands currently receive or will receive a pension from ABP. The administration of the pension scheme is placed with APG Groep NV, in which ABP holds 92.16% of shares. ABP's assets represent 88% of APG’s assets under management.
Assets Under Management (AUM) by APG: $569 billion ($831.4 billion CAD) (December 31, 2023)
ABP’s total assets: $501 billion ($732.2 billion CAD) (December 31, 2023)
ABP pledges to act in line with the Paris Agreement and clearly acknowledges that investors must take “significant additional efforts” to meet Paris Agreement goals. ABP has committed to reduce absolute greenhouse gas emissions in all asset classes by 50% below 2019 levels by 2030, including scopes 1, 2 and 3.
The pension fund has already met a previous commitment to invest €15 billion in clean and affordable energy by 2025, with €20.4 billion invested by 2023. ABP has now revised these targets, committing to reach €30 billion invested in the climate transition by 2030, including €10 billion in climate related impact investments. ABP has also committed to invest at least €10 billion in nature and biodiversity by 2030, including €1 billion in impact investments.
The fund’s Climate Policy sets high expectations for owned companies, stating that ABP will invest “only in businesses that do not make any products or provide any services with which damage to the climate is inextricably bound,” and will require companies with a large climate impact to have Paris-aligned targets.
Since October 2021, ABP has excluded investments in companies that derive more than 1% of revenue from coal mines or oil or gas extraction. The majority of these companies were divested from ABP’s portfolio as of the first quarter of 2023.
Shift last analyzed ABP in its 2023 Canadian Pension Climate Report Card. This year we have updated our ABP analysis, and the fund saw increases in its scores on Paris-Aligned Target, due to its placing a limit on the use of offsets, and Climate Engagement, due to the approach disclosed in the fund’s 2024 Engagement with Policymakers document.
ABP has committed to achieve “net-zero emissions from our portfolio by 2050.” This commitment covers the entire portfolio and includes scope 3 emissions., ABP improved its score this year by stating that it will not count carbon credits or offsets toward achieving its objectives.
For a comparison of ABP’s targets with respect to Canadian pension managers, see this report’s Table 1: Emissions Reduction Targets (total portfolio) and Table 2: Additional Climate-Related Targets.
DETAILS
ABP states: “The goals of our climate policy are based on the notion of a sustainable economy. We strive to conduct our business in line with the Paris climate accord. That means that we strive to limit the global increase in temperature to less than 2°C and preferably 1.5°C. This in turn means rapidly reducing GHG emissions. So the footprint of our investment portfolio must also be reduced.”
ABP states that “In calculating attainment of the CO2 reduction objectives, we take no account of carbon credits purchased or carbon offsetting. At present we have no systematic insight into the use of these techniques by businesses in our investment portfolio. Our preference is for businesses in our portfolio to strive to reduce CO2 emissions related to their business activities.” As a result of this clarification, ABP’s score on this indicator increased to an A.
ABP is a member of the Paris Aligned Asset Owners initiative, while its asset manager APG joined the Net Zero Asset Managers initiative in 2021.
ABP has committed to reduce absolute financed emissions by 50% below 2019 levels by 2030 in all investment categories, including scopes 1, 2 and 3. ABP has committed to invest €30 billion in the climate transition by 2030.
For a comparison of ABP’s targets with respect to Canadian pension managers, see this report’s Table 1: Emissions Reduction Targets (total portfolio) and Table 2: Additional Climate-Related Targets.
DETAILS
ABP
Absolute emissions reduction including scopes 1, 2 and 3
ABP has committed to reduce absolute financed emissions in “all investment categories, not just the equity portfolio” by 50% by 2030, from a 2019 baseline, including scopes 1, 2 and 3 and across the entire value chain.
Climate solutions
ABP had committed to invest €15 billion in clean and affordable energy by 2025 and by the end of 2023 had already surpassed this target: “Our investments contributed about €20.4 billion in 2023 to “affordable and clean energy.” ABP has now revised its commitment to reach €30 billion invested in the climate transition by 2030. This amount includes €10 billion for “impact investments,” defined as investments that “demonstrably make a difference.” ABP actively seeks climate transition opportunities in the Netherlands.
APG (APB’s asset manager)
APG joined the Net Zero Asset Managers (NZAM) initiative in 2021, requiring the asset manager to set interim targets to achieve a net-zero portfolio by 2050.
APG, along with ABP, is also a signatory to the Climate Commitment of the Financial Sector, through which APG pledges to measure and report on the carbon impact of its relevant financing and investment activities and to develop action plans to contribute to the goals set out in the Dutch Climate Agreement and the Paris Agreement, including 2030 targets.,
Absolute emissions reduction targets
APG aims to reduce the absolute emissions of its listed equity (32% of AUM at December 31, 2021) and credit (13% AUM at December 31, 2021) portfolios by 50% by 2030 compared to 2019, including scopes 1 and 2 emissions, but not yet scope 3.
Real estate
APG uses the Carbon Risk Real Estate Monitor (CRREM) tool to measure climate risk in the real estate portfolio, which represents 8% of APG’s AUM. This method has been adopted worldwide to determine whether a building meets the objectives of the Paris Agreement. For its real estate portfolio ABP requires “100% CRREM alignment in 2030 or investments with a sustainability plan.” APG states “Our 2030 goal is that on average the real estate portfolio is Paris-aligned based on the CRREM pathways.”
ABP clearly communicates the urgency of the climate crisis, that greenhouse gas emissions are threatening the stable economy on which it relies, and the role it must and will play as an investor.
DETAILS
ABP acknowledges that despite climate agreements, little global progress has been made, and that “we will not stay within the 1.5°C or even within the 2°C global warming threshold. At the moment we seem to be even heading for 2.5 to 2.9 °C. A lot needs to happen if we are to avert climate change. Reports of the UN climate panel (IPCC) and the International Energy Agency (IEA) make that clear. These changes become even more urgent in light of January 2024 was the hottest January ever recorded. It also confirmed that, for the first time, the 1.5°C global warming threshold had been breached for a full twelve month-period.”
ABP sets out its sustainability objectives clearly: “Building good pensions together in a liveable world: that is our mission. We aim to offer our participants a good pension, now and in the future. For us this means: a financially sound pension that our participants can enjoy in a liveable world.” ABP continues: “A liveable world demands a sustainable economy. A sustainable economy is one that produces what is needed but not at the expense of people, society and the planet. This is the ‘planetary boundaries’ model. This model identifies nine boundaries that people must respect if they are not to harm the earth. These boundaries all address aspects of climate and nature and biodiversity, such as global warming, water scarcity and chemical pollution.”
ABP clearly communicates that greenhouse gas emissions are threatening the stable economy upon which it relies: “Since we invest in many segments of the global economy, it is very important to us to maintain a stable and sustainable economy and society. A sustainable economy produces what is necessary, without this being to the detriment of people, society or the Earth. Today’s economy is not sustainable. With the excessive emission of greenhouse gases (GHGs) we are burdening and heating the earth.”
Noting that climate change is a “social and political problem, but it’s also an economic problem,” ABP acknowledges that it has a role as a “social-societal financial institution” in addressing the climate crisis and to “invest pension premiums sustainably and responsibly for current and future generations of participants.”
Sample quotes
“In a sustainable economy, businesses cannot shift the negative consequences (“externalities”) of their operations, such as GHG emissions, on to the environment or society. They have to bear their responsibility. In a sustainable economy, it is not possible to take all the benefits without suffering the burden.”
“In a sustainable economy there is money to be made through honesty and integrity. Negative effects on people and the environment must be passed on to businesses. In this way innovation is encouraged and the costs of negative effects go where they belong. Businesses that cannot survive without shifting these negative effects on to others have no place in a sustainable economy. In the area of climate, this is particularly true of GHG emissions. We cannot invest in businesses where environmental damage is inextricably linked to what they do. They do not belong in a sustainable economy and we see that there are major risks to their long-term viability.”
“We make deliberate choices about the companies we invest in. Companies that are inextricably linked to climate change and are unable or unwilling to address this issue have no place in our portfolio.”
ABP acknowledges double materiality:
“As we invest in many segments of the global economy, we have a deep interest in maintaining a stable and sustainable economy and society. Conversely, as a universal owner, we are in a position to play a role in making the economy more sustainable and promoting long-term stability. We also call this interaction ‘double materiality’: on the one hand, trends and events in the world affect ABP’s investments, and on the other hand, ABP’s investments affect the world.”
“Climate change affects us all. To be able to provide a good pension in a liveable world, pension funds like ABP must anticipate what the world will look like in the future. Our participants expect this from us. The impacts of climate change are already evident and will only intensify.”
ABP has strong expectations for investee companies to align with the goals of the Paris Agreement and participate in the climate transition. The fund has committed to using its voting power through APG (ABP’s asset manager) to influence owned companies and drive them toward net-zero alignment. ABP published both a Voting Policy and a Policy on Engagement with Companies in 2024, clarifying the frameworks for these tools. While ABP and APG have escalatory processes, these aren’t explicitly timebound, and there is no mention of performance targets and measurements for climate engagements. The fund could provide more disclosure on how it evaluates and drives improvement of external managers on climate-related criteria. ABP improved its score to B+ with the release of its 2024 Engagement with Policymakers, which clarifies the work ABP is doing on engaging policymakers to work towards ABP’s vision “for the global economy to be climate-neutral by 2050.”
DETAILS
Expectations for owned companies
Through its membership in the Paris Aligned Asset Owners (PAAO) and application of the Net Zero Investment Framework (NZIF), ABP provides some signals to owned companies regarding the pension fund’s climate-related expectations. Additionally, ABP sets out expectations in its Climate Policy 2022-2030 and Policy on Engagement with Companies.
In its Climate Policy 2022-2030, ABP states it will:
“Invest only in businesses that do not make any products or provide any services with which damage to the climate is inextricably bound
We will invest in sectors with long-term prospects, in businesses with the ability and determination to make the climate transition
We will require businesses with substantial impacts on the climate to submit a climate plan in line with the Paris accord:
Objectives in line with net-zero emissions in 2050;
Reporting on emissions.”
ABP’s Policy on Engagement with Companies, released in 2024, set an explicit framework for APG’s engagement, as ABP’s administrator, with companies. These range from “broad engagements” with a large group of companies, to “intensive engagements" with a select group of around 50 companies “to create a positive impact through expectations tailored for each company.” ABP’s expectations for climate engagement for high-emissions businesses are set out, including:
“We expect electricity companies to invest in generating power without fossil fuels in the long term.
We expect car manufacturers to produce cars sustainably and manufacture electric vehicles.
We expect cement producers to reduce emissions from cement production.
We expect the chemical industry to set targets to reduce emissions and increase the use of renewable energy sources.
We expect banks to set targets to reduce the emissions of the companies they finance.”
In its Climate Action Plan, APG states that “If a company does not meet ESG criteria, we can only invest if we believe we can encourage it to improve its sustainability performance.” In its Stewardship Overview APG adds “The combination of engagement and voting is a powerful tool in encouraging companies to change. That said, if a company does not show enough progress as a result of our efforts, we will reconsider our investment.”
In its Equity Portfolio, ABP makes it clear that it has a minimum expectation that has to be met before a company even gets invested in: ”we no longer invest in every company” – instead ABP has a “basket of companies that meet our minimum criterion" which must be met before investment will be considered. This “minimum criterion” is established in alignment with “international standards such as the Paris Agreement and the Kunming-Montreal Agreement” – an agreement to reverse biodiversity loss by 2030.
Proxy Voting
ABP stated in its Climate Policy 2022-2030 that “If businesses do not move sufficiently as regards the climate transition, we turn up the tone of the dialogs. In such cases, we will use our vote in shareholders’ meetings to support, propose or second resolutions. If this does not bring about the necessary change, we may eventually divest.”
ABP’s 2024 Voting Policy states that it “generally votes in favor of climate proposals submitted by shareholders.”
If companies submit their climate transition plans for shareholder approval, ABP will only support the strategy if all of the following conditions are met: it “includes a net-zero ambition (scope 1, 2 and 3); includes medium- and long-term climate targets; is demonstrably in line with 1.5°C or the sector-specific criteria from the International Energy Agency Net Zero Emissions Scenario; includes all major business units (>90% coverage); is measurable and realistic; and does not include investment in new fossil capacity.”
ABP expects all companies to “report on Scopes 1, 2 and 3 CO2 emissions”. Where companies do not disclose their emissions, ABP “votes against the chair of the Supervisory Board/non-executive board or (if not up for vote) against approval of the annual accounts”.
ABP also expects companies in sectors or with activities that have a high climate impact to set targets in line with a 1.5°C path. Without a climate plan, ABP “votes against the chair of the Supervisory Board/non-executive board or (if not up for vote) against approval of the annual accounts.”
Where “companies in high-impact sectors fail to take responsibility for relevant sustainability issues”, ABP will withhold support for the (re)appointment of directors on the nomination committee.”
ABP generally votes in favor of a company’s remuneration report and policy unless a high climate impact company has not included a “sustainability or climate-related performance criterion in its remuneration policy.”
APG also expects companies in high-impact sectors to have a governance structure that supports their climate strategy, to be transparent about their climate impact and to set clear, science-based targets for reducing scope 1, 2 and3 emissions. If a company fails to meet one or more of these expectations, APG will vote against reappointment of the Chair of the company’s Board. APG also votes against remuneration proposals at companies in high-impact sectors that do not contain clear and relevant “sustainability-linked” performance targets, although a climate link is not specified in APG’s 2022 Climate Action Plan.
Escalation up to and including divestment
Where engagement fails, however, ABP makes it clear that “Companies whose business activities are inextricably linked to damage to the climate or biodiversity, and where there is no realistic prospect of improvement, do not fit into ABP’s equity portfolio.”
Collaborative engagement
ABP is an investor supporter of Climate Action 100+, and its asset manager APG is an investor participant.
Policy engagement
ABP’s 2024 Engagement with Policymakers states that “ABP invests with a sustainable long-term vision. Our Sustainable and Responsible Investment (SRI) Policy outlines this vision for 2050 and sets concrete goals for 2030 on that basis. ABP uses various instruments to achieve these objectives. One of these instruments is engaging with policymakers. These include executives, legislators, civil servants, advisors, advisory bodies, and regulators at local, national, and European levels.”
The document continues:
“We engage with policymakers to increase support for our sustainable and responsible investment policy. Our discussions with policymakers help us to put important topics on the agenda. In these dialogs, we share our views and seek support for the choices we make.
We also engage with policymakers to better protect ourselves against systemic risks. These are risks that affect our investment portfolio but are beyond our direct control, such as climate change or biodiversity loss. By engaging with legislators, we stay informed about new laws or regulations that may directly or indirectly impact ABP.
Additionally, ABP aims to actively contribute to solutions for societal issues through its investments, such as the energy transition. As a long-term investor with substantial invested capital, we can work with policymakers to bring societal solutions within reach.“
ABP gives examples of its engagement with policymakers: “We engage with policymakers on carbon pricing. Our vision is for the global economy to be climate-neutral by 2050. If this is to be achieved, companies must pay a price for the negative externalities of their operations, such as greenhouse gas emissions, on the environment and society. This means stricter pricing of CO2 emissions. We engage with governments to communicate this view and urge them to implement further CO2 pricing in industry.” This greater clarity on ABP’s active role in policy engagement drove an increase in its score to B+.
ABP is a member of the Paris Aligned Asset Owners initiative, and publishes an overview of listed investments twice yearly. In 2024, ABP’s carbon footprint covered 85% of the portfolio, with scopes 1, 2 and 3 reported. Neither ABP’s, nor its administrator, APG’s board members appear to have any fossil fuel entanglements. APG’s investment staff appear to have “sustainability” linked targets as part of their remuneration package, but would be stronger with a specific link to climate target attainment in the portfolio.
DETAILS
Accountable Paris-aligned membership
ABP is a member of the Paris Aligned Asset Owners initiative and has signed the Net Zero Asset Owner Commitment. ABP’s asset manager APG joined the Net Zero Asset Managers initiative in 2021.
Transparency and disclosure of holdings
ABP publishes an overview of listed investments twice yearly.
Climate disclosures and climate risk
ABP states that it: “monitors the climate risks by means of a dashboard that uses short-term, medium-term and long-term data and scenarios. There is not yet a standardized method for measuring climate risks, but ABP has developed its own method together with APG. The dashboard helps us keep track of these crucial risks, both to society and to our investment portfolio, and take targeted action where required.”
APG currently applies the dashboard to approximately 70% of all investments and expects to reach 100% coverage “in the coming years”. The climate dashboard provides insight into: “Transition speed towards a below 2-degree scenario (world view); Overview of portfolio exposure regarding transition risks and opportunities per sector (22 sectors in scope) for the short (2022), medium (2030), and long term (2040); Overview of physical vulnerability per sector (22 sectors covered); Sector views with insights in the type of risks and opportunities as well as mitigation measures that are in place to mitigate risks or seize opportunities.” However, neither ABP nor APG disclose precise data from the dashboard.
ABP also implements measures to control climate risks in portfolios, distinguishing between physical risks and transition risks. For example, ABP uses ND-GAIN indicators to determine a country’s physical climate risk and provide an indication of how vulnerable the country is to the consequences of climate change. Thus, ABP can assess which part of their government bond portfolio is invested in countries with a high climate risk.
Climate scenario analysis
APG performs climate stress tests to evaluate the potential effects and implications of strategic asset allocation, using a business-as-usual scenario (IEA Stated Policies Scenario, 3°C) and two climate scenarios with different levels of ambition (IEA Sustainable Development Scenario, 1.65°C, and IEA Net Zero Scenario, 1.5°C). Other than this disclosure, neither ABP or APG provides information about their findings from climate scenario analysis.
Carbon footprinting
In April 2024, ABP released The CO2 footprint of our investments, reporting on the carbon footprint of its investments in equities, corporate bonds, real estate, private equity and – for the first time – government bonds, infrastructure, commodities, mortgages and the Opportunity Fund – in total reporting on the CO2 footprint for 85% of the portfolio and including scopes 1, 2 and 3.
Board climate expertise and/or fossil fuel entanglement
ABP does not appear to have a public board competency framework and has not identified any Board members as having climate expertise. No climate-specific staff or board training is mentioned. Neither ABP’s nor APG’s board members appear to have any fossil fuel entanglements.
Executive compensation and climate
In April 2022 the pension fund stated that “ABP will only agree to remuneration proposals if achieving sustainable targets is part of the process of determining remuneration.” But ABP does not appear to have a compensation policy that incentivizes climate targets or emissions reduction for its own staff. APG does include general "sustainability" targets as part of the variable element of remuneration for its investment staff.
“ABP decided some time ago to cease investing in businesses whose business model is based on exploration and production of fossil fuels. Damage to the climate is inextricably bound up with these businesses, and attempts at engagement were insufficiently effective. If governments take their responsibilities seriously and start legislating for a sustainable economy, assigning costs and stopping subsidies, these business models will suffer severe negative effects (transition risks).”
SUMMARY
Companies that derive more than 1% of revenues from coal mines or oil or gas extraction
These companies were excluded as of October 2021 and were mostly divested by the first quarter of 2023 (details below).
Thermal coal
These companies will be excluded by 2030 in OECD countries without CO2 capture.
Companies expanding coal-based energy production
ABP’s 2024 Equity Portfolio guide states explicitly that, as well as fossil fuel producers and companies involved in serious climate-related controversies, companies “expanding their coal-based energy production” are “not investable” within ABP’s equities portfolio.
For a comparison of ABP’s exclusions with respect to Canadian pension managers, see this report’s Table 3: Fossil Fuel Exclusions. For a list of all of the disclosed fossil fuel investments held by Canadian pension funds analysed in this report, see this report's Table 4: Fossil Fuel Investments.
DETAILS
ABP announced in October 2021:
“Pension fund ABP will stop investing in producers of fossil fuels (oil, gas and coal). Reasons for this decision are recently published reports by the International Energy Agency (IEA) and the UN Climate Panel (IPCC). Groups of ABP pension participants and employers have shown broad support for this decision. ABP will divest from the fossil fuel producers in phases; the majority of which is expected to be sold by the first quarter of 2023. This concerns more than 15 billion euros in assets, almost 3% of ABP's total assets . The fund does not expect this decision to have a negative impact on long-term returns.”
As of June 2021, ABP had already divested of companies that derive more than 30% of revenue from coal mines and companies that derive more than 20% of revenue from oil sands. In October 2021, the policy was strengthened to exclude and divest producers of fossil fuels that generate more than 1% of their revenue from coal mines, oil extraction, and/or gas extraction.
ABP’s fossil fuel exclusion covers both conventional and unconventional oil and gas, but remains limited to the upstream part of the value chain and allows exceptions for businesses with substantial impacts on the climate where they “submit a climate plan in line with the Paris accord” – meaning that they set out objectives in line with net-zero emissions in 2050 and they report on emissions. The Dutch asset owner should address more firmly the issue of expansion in oil and gas activities by stopping new bond purchases from companies with midstream expansion plans, and engaging the companies remaining in the portfolio so that they stop developing new oil and gas midstream projects.
In 2022, ABP began to implement its decision to sell investments in producers of oil, gas and coal. It has reported progress on this commitment for its equities and bonds portfolio separate from its illiquid investments.
Selling fossil fuel equities and bonds: At year-end 2021, ABP’s investments in fossil fuel equities and bonds totaled €8.5 billion. By year-end 2022, that figure had decreased to €0.9 billion. By the beginning of 2024, ABP had completed the sale of all of its fossil fuel producers equities and corporate bonds.
Selling illiquid investments in fossil fuels: As of March 2024, APG still had €4.8 billion in illiquid investments in the fossil fuel industry in long term contracts that could not be sold as quickly as equities and bonds. “These will be sold as soon as possible when the time is right for participants.” In its Annual Report 2023, ABP expanded that “We are gradually phasing out our positions in illiquid investments in fossil fuel producers, but this may take until 2028.”
ABP's assets represent 88% of APG's AUM. There are some minor differences in ABP’s and APG’s fossil fuel exclusion and climate investing policy. Thus, the Dutch pension fund and its asset manager have additional work to do to harmonize their fossil fuel exclusion policies, and complement them with impactful measures targeting the fossil fuels downstream value chain.
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