2024 Canadian Pension Climate Report Card
OVERALL SCORE
C
OPTrust
Climate Urgency
C+
Climate Engagement
D+
Climate Integration
C+
Fossil Fuel Exclusions
F
Interim Targets
C-
Paris-Aligned Target
B
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.
OPTrust invests and administers the OPSEU Pension Plan for more than 111,000 active and retired Ontario public servants. Most OPTrust members work for the Ontario Public Service, municipal governments and service providers, and Ontario’s public college system. Members also include Ontario Public Service Employees Union members who work for private companies or organizations contracted to deliver public services, such as hospitals and medical laboratories. And through OPTrust Select, OPTrust manages the retirement savings of employees of participating non-profit organizations.
Assets Under Management (AUM): $25 billion (December 31, 2023)
OPTrust has focused on improving its processes to measure and manage climate risks while noting its exposure to renewable energy and sustainable real estate. The pension manager has made the case that its size and investment approach render some typical climate measurement tools and strategies less applicable. But other funds of varying size and approach, including the smaller University Pension Plan in Ontario, have not identified this as an impediment to establishing more ambitious commitments and reporting progress.
While OPTrust improved its score on Paris-aligned Target and Climate Integration this year thanks to defining net-zero, reiterating a limit on offsets, improving portfolio carbon footprinting and introducing additional tools to identify and monitor climate-related risks, it missed opportunities on other indicators. OPTrust could make clearer net-zero-aligned moves in areas such as expectations for external managers, stewardship plans for high-carbon assets and exclusions on fossil fuel investments.
The Ontario pension manager has made relevant process and stewardship commitments, but noted that it would not be reporting progress on these until its 2025-2026 climate disclosures.
2024 UPDATES
Defined net-zero in its 2023-2024 Task Force on Climate-Related Financial Disclosures.
Reiterated that offsets would be limited to addressing residual emissions.
Demonstrated some efforts at real-world decarbonization by reporting investments in renewable energy, sustainable real estate and green bonds.
OVERVIEW
OPTrust has committed to net-zero by 2050, set 2030 interim targets, defined net-zero and placed a limit on the role of offsets. The pension manager has yet to incorporate scope 3 emissions into its reporting and targets, has not yet set absolute emissions reduction targets, and has not joined a credible and accountable Paris-aligned investor body.
For a comparison of OPTrust’s targets with respect to other Canadian pension managers, see this report’s Table 1: Emissions Reduction Targets (total portfolio).
DETAILS
OPTrust committed in October 2022 to reach net-zero financed emissions by 2050. In 2023, the pension manager added an interim target to reduce the scopes 1 and 2 emissions intensity of its portfolio by 30% below 2022 levels by 2030. OPTrust has not yet committed to continue setting interim targets at five-year intervals and has not yet begun to report scope 3 emissions.
The pension manager has defined net-zero and demonstrated an understanding that carbon offsets cannot be used to manage climate-related financial risks to the portfolio. OPTrust should go further and place a formal limit on the use of offsets toward its own emissions reduction targets, and those of its portfolio companies.
OPTrust committed in 2023 to align its strategy with the Net-Zero Investor Framework– “which is the preferred approach of the Paris Aligned Asset Owners initiative”—but fell short of joining an investor body that will help hold it publicly accountable for its net-zero commitment.
When it comes to contributing to real world decarbonization while navigating its portfolio to net-zero, OPTrust pointed in 2024 to its $3.6 billion invested in renewable energy and sustainable real estate and $653 million in Canadian green bonds.
2024 UPDATES
Restated baseline and subsequently revised 2030 emissions intensity reduction target.
Stated it will not report progress on process and stewardship targets until its 2025-2026 climate-related financial disclosures.
Disclosed $3.6 billion invested in renewable energy and sustainable real estate, although the pension manager has not set a target for investments in climate solutions.
OVERVIEW
OPTrust has a relatively unambitious 2030 emissions intensity reduction target, some process and stewardship targets, and no climate solutions target.
To view the different climate-related interim targets across 11 Canadian pension managers, see this report’s Table 2: Additional Climate-Related Targets.
DETAILS
OPTrust’s Building a Resilient Portfolio for the Long Term - Our Climate Change Strategy in Action, released in December 2023, identified that the pension manager would track metrics in five categories: carbon exposure, climate exposure, stewardship, solutions and process.
Emissions reduction
OPTrust committed to reduce the portfolio’s emissions intensity (scope 1 and 2) by 30% below 2022 levels by 2030. In December 2024, OPTrust revised its target after restating its portfolio carbon footprint baseline. The revised target is a 20% reduction in emissionsintensity below 2023 levels. The pension manager also reported that, on a like-for-like basis, it has achieved an 11% reduction in emissions intensity below 2022 levels, as of December 31, 2023.
The revision of OPTrust’s target does not appear to be a weakening of the target. However, the target was lacking in ambition to begin with. The commitment is less ambitious than that of OPTrust’s smaller and larger peers, such as the University Pension Plan and the Investment Management Corporation of Ontario, respectively.
The role of interim targets is to drive investment-making decisions today toward alignment with net-zero. A weak commitment for 2030 is unlikely to be a significant driver of OPTrust’s investment and stewardship decisions in the near-term.
Climate solutions
OPTrust’s 2021 Task Force on Climate-Related Financial Disclosures (TCFD report) suggested that the pension manager would set a target for investments in climate solutions, but OPTrust has not yet set such a target. However, in December 2024, OPTrust reported $3.6 billion invested in renewable energy and sustainable real estate and $653 million in Canadian green bonds.
Other targets
OPTrust’s Building a Resilient Portfolio for the Long Term - Our Climate Change Strategy in Action committed the pension manager to additional targets, including completing climate evaluations on investment partners, engaging with partners and assets to improve emissions data, and implementing climate due diligence on new direct investments and external partner commitments, all by 2025. In December 2024, OPTrust stated that it would report progress toward these targets in its 2025-2026 TCFD report.
2024 UPDATES
None.
OVERVIEW
OPTrust has acknowledged the existential nature of the climate crisis, the risks and opportunities that the crisis poses to the plan, and that the pension manager has a role in addressing it. OPTrust communicates that the plan must position itself to adapt to different climate trajectories, but avoids acknowledging that OPTrust’s investment and stewardship decisions have the potential to affect climate trajectories.
DETAILS
The pension manager tended to lump “ESG” and “sustainability” together in its 2023 Funded Status Report, with less emphasis on climate as a stand-alone issue. OPTrust’s 2023-2024 Task Force on Climate-Related Financial Disclosures spoke more directly to climate specifically. However, this document did not communicate any increased urgency or place more emphasis on the role that OPTrust can play.
Sample quotes:
“The global transition toward a net-zero economy presents significant investment risks and opportunities across asset classes and industries. As countries, industries and companies chart their paths to reduce reliance on fossil fuels, the journey will be shaped by various factors, including consumer behaviour, regulatory shifts, technological advancements and actions taken by corporations and investors.”
- 2023-2024 Task Force on Climate-Related Financial Disclosures
“Recognizing that maintaining Plan sustainability requires addressing climate sustainability, OPTrust has a long-standing commitment to building portfolio resiliency and adaptability against an uncertain and volatile climate trajectory.”
- 2023 Funded Status Report
“Our role as an asset owner uniquely positions us to drive positive change within our portfolio and the capital markets more broadly, and we recognize the importance of using our voice to promote sustainable investment for the benefit of our members and other stakeholders.”
- 2023 Funded Status Report
2024 UPDATES
Disclosed it would not report on climate stewardship targets until 2025-2026.
Reported adding climate criteria in 2023 to the internally-developed Responsible Investing Partner Evaluation (RIPE) framework; completed RIPE evaluation of all new externally managed investments in 2023.
Found that a “minority” of external partners have net-zero commitments.
Submitted comments and signed a joint statement in support of aligning Canadian sustainability standards with an international standard.
Signed on to the 2024 Global Investor Statement to Governments on the Climate Crisis.
OVERVIEW
OPTrust’s portfolio make-up means the investor has less climate influence through shareholder voting rights but could potentially have more impact as an investor collaborator and through its partnerships with external managers. While OPTrust reports participating in collaborative investor groups and using evaluation frameworks to assess external partners, the pension manager has set no net-zero aligned expectations for investee companies or partners and has no timebound engagement and escalation process.
OPTrust has not disclosed stewardship plans for carbon-intensive assets including the Cascade gas plant and fossil gas infrastructure company Superior Midstream, even though the pension manager’s 2022 Climate Change Strategy states that its 2022-2023 priorities included implementing stewardship plans for high-risk assets.
DETAILS
Expectations and escalation
OPTrust expects investee companies to “proactively manage and adapt to the risks and opportunities arising from climate change and the transition to a lower-carbon economy,” but falls short of setting expectations for its portfolio companies to have credible net zero transition strategies to align with net-zero. This absence of net-zero aligned expectations is underscored by the pension manager’s lack of quantitative stewardship and engagement targets.
OPTrust had said in its 2022 Climate Change Strategy that 2022-2023 priorities included implementing stewardship plans for high-risk assets. But now it looks as if OPTrust will be providing no update on this until 2025-2026, beyond a mention in its 2023-2024 Task Force on Climate-related Financial Disclosures (TCFD report) that “we are actively engaging with our private markets investment partners to source better quality data over time, with the aim of measuring and targeting their decarbonization in a future interim target.”
OPTrust’s Our Climate Change Strategy in Action 2023: Frequently Asked Questions document states that, “In our privately owned companies where we have a board seat, we work closely with management to address relevant climate priorities. We also engage via our external managers to share innovative practices across our portfolio and ensure our decarbonization objectives are clear.” However, it is unclear what OPTrust’s near- or mid-term decarbonization objectives actually are.
OPTrust has acknowledged that it may exclude companies from investment where “[t]he likelihood of effectively mitigating associated ESG risks through active ownership avenues, such as engagement, is low,” and that “divestment may ultimately be necessary in certain situations where a company’s activities or conduct are incompatible with long-term value.”
Examples of engagement and active ownership
OPTrust’s 2023 Funded Status Report provided an “engagement milestone” example of Banco Bradesco publishing its first standalone climate report. No details are provided regarding OPTrust’s engagement with the company. The Funded Status Report noted that climate change was the “thematic area” of 25% of OPTrust’s 2023 corporate engagements.
OPTrust also provided the example of Zenith Energy as a portfolio company contributing to decarbonization. Zenith, an Australian power producer that installs and operates off-grid energy generation systems, is “committed to transitioning their portfolio of energy assets to 100 per cent renewable power generation, focusing on solar and wind power,“ by 2035. It is not disclosed what role, if any, OPTrust played in stewarding Zenith to this commitment.
Proxy Voting Guidelines
OPTrust has a relatively small allocation to public equities and primarily invests in public equity via derivatives. As such, the pension manager has a limited ability to yield influence on public companies through voting rights.
OPTrust’s Proxy Voting Guidelines, effective December 5, 2024, include some climate-related details. OPTrust expects boards to “adequately reflect on the impact of climate change to their business strategy” and supports Task Force on Climate-related Financial Disclosure (TCFD) incorporation “[w]here climate change may present a material impact.” OPTrust will vote against annual reports and/or the audit committee chair “when material risks associated with climate change are not disclosed or there is not enough evidence to demonstrate appropriate climate risk evaluation.”
OPTrust states that it expects companies to disclose their approach to social and environmental risks and “set targets where appropriate,” including target-setting in line with the CDP (formerly the Climate Disclosure Project) and TCFD.
OPTrust will vote for resolutions calling for TCFD-aligned disclosure, calling for companies to have "climate competent boards”, and “may support reasonable proposals calling for companies to improve oversight and management of climate risks, including setting clear performance targets aligned with the Paris Agreement's goals.”
On the matter of political lobbying and contributions, OPTrust expects companies to disclose their activities and policies related to such.
OPTrust does not publish its proxy voting record, but states it will make information available upon request.
External managers
While OPTrust’s shareholder voting rights are a less influential lever, the pension manager’s reliance on external partners makes its engagement with partners and managers more important. But OPTrust has not stated a preference for net-zero aligned managers or set targets or timelines for having its assets managed by net-zero aligned partners.
OPTrust is tracking “ESG” data points on its external partners through its Capturing OPTrust’s Management and Progress Around Sustainability (COMPAS) initiative. The pension manager had reported in 2023 that one quarter of its external managers and funds had net-zero by 2050 commitments. At the completion of its first full COMPAS collection cycle in 2023, OPTrust found that while partners for the most part had ESG policies, a minority had a net-zero commitment. OPTrust identified this as “an opportunity for us to support further adoption of decarbonization commitments and improve portfolio alignment with our net-zero ambition.”
OPTrust’s Responsible Investing Partner Evaluation (RIPE) framework is used to conduct due diligence on external funds and managers, and OPTrust reported that the framework was “augmented in 2023 with climate-focused criteria to facilitate rigorous evaluation of our partners’ climate risk management and alignment of our externally managed investments with OPTrust’s net-zero ambition.” OPTrust noted that 100% of new externally managed investments in 2023 went through the RIPE process. OPTrust’s 2023-2024 TCFD report stated that external manager due diligence includes “criteria on how the managers evaluate, monitor and report climate risks in their investments, including any initiatives to track emissions data and set decarbonization targets.”
Collaborative engagement
OPTrust is an investor supporter of Climate Action 100+ and reports being “actively engaged” in other groups including Ceres and the Transition Pathway Initiative.
As noted in Shift’s previous report cards, OPTrust has made efforts to share with peer asset owners the fund’s process for integrating climate considerations.
Policy engagement
OPTrust participated along with other Canadian pension funds in calling for clearer and improved disclosure standards by signing a joint statement in support of aligning Canadian Sustainability Standards Board (CSSB) standards with International Sustainability Standards Board (ISSB) standards; the pension manager also reported submitting its own response to the CSSB consultation. OPTrust also joined more than 600 other institutional investors in signing on to the 2024 Global Investor Statement to Governments on the Climate Crisis, a call for climate policy implementation and a whole-of-government climate approach from all levels of government.
2024 UPDATES
Improved portfolio carbon footprint reporting by expanding coverage and obtaining limited quality assurance.
Disclosed some details of an updated climate scenario analysis, although the scope of the analysis was limited to the likelihood of increased contribution rates.
Introduced additional tools to identify and monitor climate-related risk in parts of the portfolio, including climate risk reporting and a taxonomy (in development) to track climate risk exposure, among others.
OVERVIEW
OPTrust’s score on this indicator improved from a C to a C+. In 2024, the pension manager reported improving its portfolio carbon footprint coverage, conducting a refreshed climate scenario analysis, and described additional tools it is implementing to identify and monitor climate-related risks. OPTrust has yet to join an accountable and credible Paris-aligned investor group, disclose its holdings, or require climate expertise on its board. While OPTrust has disclosed a climate-compensation link for staff and executives, details are vague.
DETAILS
Accountable Paris-aligned membership
OPTrust is not a member of any accountable and credible Paris-aligned investor body, but has committed to align its strategy with the Net-Zero Investor Framework.
Transparency and disclosure of holdings
OPTrust does not disclose its holdings or their valuation. The pension manager must enhance its disclosure practices, particularly concerning high-risk, high-carbon assets.
Climate disclosures and climate risk
Contemporaneity of climate plan
OPTrust’s 2018 climate plan was updated in 2022 with a commitment to achieve net-zero emissions by 2050. In 2023, OPTrust added an interim emissions reduction target and further details, such as a climate-compensation link, an initial carbon footprint, and a framework for climate metrics.
Greenhouse gas metrics
In 2024, OPTrust reported significant improvements to its greenhouse gas metrics to the end of 2023. In the pension manager’s 2022-2023 Task Force on Climate-Related Financial Disclosures (TCFD report), the portfolio carbon footprint covered around 40% of OPTrust’s AUM. At the end of 2023, OPTrust was able to report its portfolio carbon footprint for 72% of AUM, including all asset classes with established footprinting methodology. OPTrust also obtained limited quality assurance on a subset of footprint data.
OPTrust has yet to include financed scope 3 emissions data “due to the early stage and unreliability of associated methodologies and data.” The pension manager stated it will “look to incorporate” scope 3 data as it improves, but has no timebound targets for doing so.
Scenario analysis
OPTrust undertook an updated scenario analysis using five scenarios from Ortec Finance, ranging from an orderly and optimistic scenario in which global heating is limited to 1.5°C to a high warming scenario with 3.7°C of warming. OPTrust’s scenario analysis focused on assessing the probability of a contribution rate increase in excess of 2% as a “good quantification of the true risks faced by our pension plan members.” This seems like a strange metric by which to assess scenarios as severe as 3.7°C, which could result in global social and economic breakdown, threatening the very existence of the pension fund and the ecological, financial and economic systems on which it relies.
OPTrust reported that its findings were “less severe than those observed three years ago”. However, recent research by Ortec found that the Canadian pension sector as a whole was especially vulnerable to both transition and physical climate risks compared to pension funds in other countries. In the near term, transition risks were most salient, as sudden net-zero transition moves could trigger asset stranding or devaluation triggered by a mass sell-off of carbon-intensive assets. By the late 2030s, in a high-warming scenario—defined as 2°C warmer than pre-industrial levels by 2050 and 3.7°C warmer by 2100—Canadian pension funds could see their investment returns decline by 40%, largely as a result of severe physical climate impacts.
Additional tools for assessing risk
In its 2023-2024 TCFD report, OPTrust noted additional ways it is identifying and monitoring climate-related risks to the portfolio, including:
A climate risk report for OPTrust’s public market exposures, to be expanded to private market exposures in 2025. The climate risk reporting metrics help identify “holdings where individual climate risk factors are highest”.
A taxonomy (in development) to categorize infrastructure and private equity assets based on their exposure to climate-related risks and ability to address the risks.
Enhanced climate-related due diligence, including a review process for assets in the energy, materials, utilities, industrials, real estate and transportation sectors.
Assessment of country and sector allocation, using the University of Notre Dame Global Adaptation Index to assess a country’s vulnerability to climate disruptions and ability to adapt.
Board climate expertise and/or fossil fuel entanglement
No OPTrust board members appear to have fossil fuel entanglements.
OPTrust does not provide a board competency framework and does not identify any Trustees as having climate expertise. In 2024, the pension manager reported that “several” board members had completed the Institute of Corporate Directors’ (ICD) “Board Oversight of Climate Change” course. However, this ICD course appears to have ties to the fossil fuel sector through its faculty; through the Climate Strategy Advisory Board Members of the course’s co-host, Chapter Zero Canada and through Cenovus Energy’s sponsorship of Chapter Zero Canada and the ICD.
OPTrust additionally reported that the board participated in “a collaborative peer review engagement on climate change governance practices.” No further details were provided.
Executive and staff compensation and climate
OPTrust reported in 2023 that it has linked climate change considerations to performance objectives since 2022, but details remain vague. In 2024, OPTrust described this link as follows: “To strengthen the delivery of our climate change strategy and promote cross-organizational collaboration and accountability, climate priorities for the upcoming fiscal year are embedded into the annual performance objectives of multiple departments, the achievement of which influence compensation.”
2024 UPDATES
None.
OVERVIEW
OPTrust is beginning to look like an outlier with no disclosed exclusions on investments in coal, oil, gas or related infrastructure. Five Canadian pension funds examined in this report, including all three of those committed to the Net-Zero Asset Owners Alliance or Paris Aligned Asset Owner groups, have placed at least limited exclusions on fossil fuel investments.
For a comparison of fossil fuel exclusions across 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
OPTrust has no fossil fuel exclusions, nor has the pension manager disclosed phase-out plans for its existing fossil fuel assets or explained how these assets can be profitably aligned with OPTrust’s net-zero by 2050 commitment.
OPTrust has acknowledged that countries, industries and companies are “chart[ing] paths to reduce reliance on fossil fuels”; has noted that “divestment may ultimately be necessary in certain situations where a company’s activities or conduct are incompatible with longterm value”; and that it “may choose to exclude, based on [Responsible Investing] considerations, entities from the investment portfolio where [...] [t]he likelihood of effectively mitigating associated ESG risks through active ownership avenues, such as engagement, is low.”
The United Nations’ High-Level Expert Group declared in 2022 that “non‑state actors cannot claim to be net zero while continuing to build or invest in new fossil fuel supply,” while the coal, oil and gas sector has repeatedly shown itself to be either unable or unwilling to align with a safe climate trajectory despite years of investor engagement. It is difficult to understand why OPTrust would not conclude that fossil fuels meet its criteria for exclusion and divestment.
ESTIMATED INVESTMENTS IN FOSSIL FUELS
Unknown
OPTrust does not disclose enough information for stakeholders to estimate the pension manager’s fossil fuel exposure.
OPTrust’s known fossil fuel investments include:
$125 million in financing to construct the Cascade gas plant.
100% joint owner of Superior Midstream (through joint ownership of SP Investor Holdings LLC).
Overall
Publicly acknowledge the consensus science, including from the Intergovernmental Panel on Climate Change and the International Energy Agency, that limiting global temperature increase to 1.5°C requires an immediate end to expansion as well as the rapid phase-out of oil, gas, coal and related infrastructure.
Become a vocal proponent of stringent, ambitious, Paris-aligned climate and energy policies that provide certainty for companies and investments.
Build on commitment to align strategy with the Net-Zero Investor Framework by joining a credible and accountable Paris-aligned investor body, such as the Net-Zero Asset Owner Alliance or the Paris Aligned Asset Owners.
Paris-aligned target
Commit to setting interim 5-year emissions reduction targets.
Report scope 3 emissions and develop scope 3 targets.
Build on disclosure of investments in renewable energy and sustainable real estate to demonstrate investments that impact real-world decarbonization.
Interim targets
Strengthen ambition of 2030 target to reduce emissions intensity.
Commit to setting interim 5-year emissions reduction targets.
Pair target to reduce emissions intensity with target to reduce absolute emissions.
Set targets for investments in climate solutions.
Set targets for the proportion of AUM covered by a credible net-zero plan or managed by external managers with net-zero commitments.
Communication of climate urgency
Articulate an ambition, determination and responsibility to centre climate in its investment strategy.
Acknowledge that OPTrust’s investment decisions and stewardship approach have the potential to affect climate trajectories.
Climate engagement
Publicly state expectation that owned companies have credible science-based net-zero pathways.
Engage owned companies using time-bound criteria and a process that escalates to divestment to ensure companies rapidly develop profitable and credible net-zero pathways. Set targets to measure the success of climate engagements.
Set an expectation that owned companies:
tie executive compensation to the achievement of climate targets;
refrain from lobbying against climate action, directly or through industry associations; and
refrain from directing capital toward fossil fuel expansion.
Strengthen Proxy Voting Guidelines to require companies to have science-based decarbonization plans.
Begin disclosing proxy voting record in real-time, with rationale for votes.
Establish timebound, results-based targets for engaging with external fund managers on Paris-alignment.
Require that all new or renewed external fund manager contracts adhere to a Paris-aligned investment strategy.
Set targets for the proportion of AUM covered by a credible net-zero plan or managed by a manager with a net-zero commitment.
Climate integration
Disclose all investments, including high-risk, high-carbon assets.
Continue to improve emissions reporting, including by adding scope 3 data.
Disclose how different climate scenarios, including a 1.5°C scenario analysis, will affect the portfolio.
Require climate expertise on the Board of Directors.
Disclose how executive and staff compensation is tied to the achievement of climate targets.
Fossil fuel exclusions
Place an exclusion on any new investments in coal, oil, gas and related fossil fuel infrastructure.
Commit to a time-bound and managed phase-out of existing fossil fuel assets.
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