2024 Canadian Pension Climate Report Card
OVERALL SCORE
B
Ontario Teachers’ Pension Plan (OTPP)
Climate Urgency
A
Climate Engagement
B+
Climate Integration
B-
Fossil Fuel Exclusions
F
Interim Targets
B
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.
The Ontario Teachers’ Pension Plan (OTPP) is Canada’s largest single-profession pension plan. It administers a defined benefit pension plan for 340,000 active and retired teachers across 170 organizations, including public school boards and private schools throughout Ontario.
Assets Under Management (AUM): $255.8 billion (June 30, 2024)
While OTPP established itself as an early Canadian leader in 2021 with a net-zero commitment and strong interim targets, the fund has not improved its score on any indicator since. It has fallen out of the top 3 spots in Shift’s annual ranking. The pension manager seems to be coasting, content to be a B student. A comprehensive and ambitious update to the fund’s climate strategy is required in 2025 for OTPP to reclaim its leadership.
2024 UPDATES
No updates.
OVERVIEW
OTPP remains committed to net-zero portfolio emissions by 2050 and continues to focus on real-world emissions reductions, starting with credible net-zero plans for its portfolio companies. But OTPP still hasn’t joined a credible and accountable Paris-aligned climate investor body, hasn’t fully accounted for its portfolio’s scope 3 emissions in its net-zero target, and hasn’t yet placed a strict limit on the role of offsets.
For a comparison of OTPP’s targets with respect to other Canadian pension managers, see this report’s Table 1: Emissions Reduction Targets (total portfolio) and Table 2: Additional Climate-Related Targets.
DETAILS
OTPP set a target in January 2021 for net-zero portfolio emissions (scope 1 and 2) by 2050 and announced ambitious emissions intensity reduction targets in September 2021. OTPP defined net-zero as “a balance of emissions released into and removed from the atmosphere” and has continued to use that definition.
OTPP’s climate strategy remains “rooted in driving real-world impact”, “reduc(ing) the environmental impact of (its) portfolio”, “capitaliz(ing) on opportunities supporting the broader transition to a low-carbon future”, and “invest(ing) in transition assets to advance and measure real world decarbonization, and mitigate the impacts of climate change and the loss of natural capital”. To that end, OTPP has initiated decarbonization efforts with 24 of its privately-owned companies and engaged with 80% of eligible portfolio emissions under its Paris Aligned Reduction Targets framework to develop transition plans using its “decarbonization playbook.”
Unlike the Canada Pension Plan Investment Board, OTPP’s net-zero target does not explicitly cover scope 3 emissions. But OTPP has set an expectation for new portfolio companies to report material scope 3 emissions within two years of OTPP’s investment.
2024 UPDATES
Portfolio emissions intensity decreased to 39% below 2019 levels, as of December 31, 2023, on track to achieve targets of 45% by 2025 and two-thirds by 2030.
Absolute emissions decreased to 7% below 2019 levels, as of December 31, 2023 (no target).
$34 billion invested in "companies that generate clean energy, reduce demand for fossil fuels and build a sustainable economy," as of December 31, 2023, on way to $50 billion target (no target date).
No update on 2022 commitment to invest $5 billion in “High Carbon Transition Assets” (no target date).
No update on 2022 commitment for two-thirds of the portfolio's emissions to be covered by credible, science-based net-zero plans and targets, including scope 3 when material, and 90% of portfolio emissions by 2030.
OVERVIEW
OTPP has some of the strongest interim targets among Canadian pension funds, but still needs to pair its emissions intensity reduction targets with targets for absolute emissions reduction. OTPP also needs to report on its 2022 commitments to invest $5 billion in “High Carbon Transition Assets” and ensure 90% of its portfolio emissions are covered by credible, science-based net-zero plans by 2030.
For a comparison of OTPP’s targets with respect to other Canadian pension managers, see this report’s Table 1: Emissions Reduction Targets (total portfolio) and Table 2: Additional Climate-Related Targets.
DETAILS
Portfolio emissions intensity
OTPP committed in 2021 to reduce the carbon intensity of the portfolio by 45% by 2025 and 67% by 2030, using a 2019 baseline.
As of December 31, 2023, OTPP reduced portfolio emissions intensity by 10% over the previous year and by 39% below 2019 levels – on track to achieve a 45% reduction by 2025 – “primarily driven by an increase in market value and decrease in absolute emissions of (its) portfolio carbon footprint.” OTPP’s absolute emissions decreased by 7% since 2019.
OTPP is notable among Canadian pensions for reporting changes in its emissions intensity and absolute emissions by asset class, although it does not have asset-class-level targets for either of these metrics. OTPP reported that:
Its private assets portfolio achieved a 7% emissions intensity reduction and a 6% absolute emissions reduction between 2022 and 2023, “primarily as a result of a normal course sale of certain higher-emission assets as well as successful decarbonization initiatives at select utility assets.” OTPP specifically highlights a 12% decrease in emissions at Washington state electric and gas utility Puget Sound Energy;
OTPP’s corporate fixed income portfolio decreased its absolute emissions by 5% and emissions intensity by 13% below the previous year, which OTPP credits to “strategic portfolio construction decisions and the acquisition of lower carbon intensity credit products”;
OTPP’s public equities emissions intensity decreased by 36% year-over-year, but the portfolio’s absolute emissions increased by 8%, “due to the impact of portfolio construction decisions and lower carbon intensities for certain large global equity index investments.”
The emissions intensity of OTPP’s credit assets is particularly high due to that portfolio’s passive index investments that are exposed to all sectors of the economy.
Green investments
OTPP committed in 2022 to increase “green investments” to $50 billion, although it has not provided a target date to get there. Green investments are defined as “companies that generate clean energy, reduce demand for fossil fuels and help build a sustainable economy.”
OTPP reported that it increased green investments by $600 million in 2023 for a total of $34 billion as of December 31, 2023. OTPP also issued a $1 billion green bond in 2023 and reported for the first time in 2024 that it is developing a framework for impact investing to intentionally pursue positive impact through businesses that are “advancing environmental action” or “leveling the playing field” (positive environmental and/or social outcomes).
Proportion of portfolio emissions covered by science-based net-zero plans and targets
OTPP committed in 2022 to ensure that two-thirds of the portfolio’s carbon emissions are covered by credible, science-based net-zero plans and targets (including scope 3 when material) by 2025, and 90% are covered by such plans by 2030.
OTPP did not provide an update on this target in 2024.
Decarbonizing High Carbon Transition Assets
OTPP committed in 2022 to invest $5 billion in “high carbon transition assets” (HCTAs), 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. HCTAs will not be covered by OTPP’s interim emissions reduction targets, but will be accounted for under the fund’s commitment to net-zero by 2050.
OTPP did not report on any allocation to HCTAs in either 2023 or 2024, simply saying that it seeks “to invest in transition assets to advance and measure real world decarbonization, and mitigate the impacts of climate change and the loss of natural capital.”
2024 UPDATES
None.
OVERVIEW
OTPP was unusually quiet on the climate front in 2024 and seems to have toned down its communication of climate change’s unique and existential nature compared to previous years. The fund narrowly hangs onto an A in this category based on its history of statements recognizing the urgency of the climate crisis, embracing its role as an investor to influence the trajectory of decarbonization, and acknowledging its interest in overall economic and environmental health. Amidst a time of geopolitical turbulence and climate disasters, OTPP should not back down on its communication: the pension manager needs to provide a comprehensive update to its climate strategy in 2025 and re-prioritize bold climate leadership and rapid decarbonization.
DETAILS
Quotes from prior years
OTPP’s Chief Investment Officer, 2021 Annual Responsible Investing and Climate Change Report:
“The commitment we made earlier this year to achieve net-zero greenhouse gas emissions by 2050 aligns our organization with the Paris Agreement. It also demonstrates the scale of the impact we want to have. Our plan isn’t only about bringing Ontario Teachers’ to net zero; it’s about helping the world around us get to net zero, too. As a leading global investor, we have an important role to play - we need to use our capital and influence to accelerate the transition to a net zero world.”
OTPP’s CEO, 2022 Annual Report:
“As an active and engaged investor, we have an opportunity to play a role in addressing some of the biggest environmental and social challenges of today to deliver value over the long term. In that regard, we are making significant efforts to help tackle climate change and aid the transition to a low-carbon economy. We have a multifaceted strategy that involves investing in green and transition assets, helping our portfolio companies decarbonize, issuing green bonds to support their funding and more.”
Quotes from 2024
Urgency
Sample language from OTPP’s CEO, April 2024 AGM:
“We believe that climate change is going to be one of the most pressing issues of our time.”
Sample language from OTPP’s 2023 annual report:
“Climate change is one of the most pressing global issues, with far-reaching impacts.”
Sample language from OTPP’s 2024 Sustainable Investing Guidelines:
“Climate-related risks, consisting of physical and transition risks, may manifest over varying time horizons, and are likely to intensify over time…
Climate change will remain a central area of focus… As a pension plan, we have a long horizon extending beyond 70 years. Climate change impacts will differ depending on whether we are looking over the next year, 3-5 years, 5-10 years and beyond. This is particularly true of physical climate change risk, with physical risks increasing as the horizon elongates. Transition risk is more complex as the near-term and medium-term impacts will be dependent on, among other things, policy, technology, consumer preferences, and capital flows.”
OTPP’s role in decarbonizing the real economy
Sample language from OTPP’s 2023 annual report:
“The road to net zero is an urgent but long one. Hard-to-abate sectors will continue to play a necessary role in our global economy until lower-emitting alternatives are more reliably available at scale and at an attractive cost. We intend to take an active role through our multifaceted climate strategy that focuses on investing in areas supportive of accelerating the transition. This strategy is rooted in driving significant real-world impact, reflecting on our commitment to reduce the environmental impact of our portfolio and capitalize on opportunities supporting the broader transition to a low-carbon future.”
Acknowledging OTPP’s interest in overall environmental and economic health
Sample language from OTPP’s 2023 annual report:
“With broad exposure to macroeconomic and systemic market and credit risks, we have a natural and vested interest in the overall well-being of the environment in which we invest. As an asset owner, our influence can help support regulatory and policy developments that reduce risk, clarify uncertainty and promote sustainability in investments.”
2024 UPDATES
Updated proxy voting guidelines in January 2024 to include an expectation for companies’ audit committees to have climate literacy as a core competency.
Demonstrated a mixed climate-related proxy voting record, despite relatively strong guidelines.
Initiated Paris Aligned Reduction Target engagements with 24 portfolio companies, with eight establishing Paris-aligned targets and making progress towards decarbonizing their operations.
Brought together airport companies at a sustainability forum.
Brought together sustainability executives and practitioners from power transmission and distribution businesses to discuss climate targets and adaptation.
OVERVIEW
OTPP sets clear expectations for its portfolio companies and is reporting progress toward achieving these targets, albeit at a high level and without details about individual assets. The pension manager is providing tools and expertise to its portfolio companies to set and achieve emissions reduction targets, but there is little evidence of OTPP engaging in a robust way with public companies. OTPP further strengthened its proxy voting guidelines in January 2024 to include an expectation for companies’ audit committees to have climate literacy as a core competency, but the guidelines contain big loopholes resulting in a mediocre climate-related proxy voting record. OTPP appears to be doing little in terms of engagement or advocacy to secure climate-related policies that are critical to limiting global temperature increases to safe levels. OTPP must revamp its climate strategy in 2025 to demonstrate more urgency and engage with companies, governments and stakeholders to accelerate decarbonization of its portfolio and the real economy.
DETAILS
Expectations and escalation
OTPP sets out strong climate-related expectations for companies. For public companies, OTPP’s expectations include “implementation of credible net-zero transition plans that include a commitment to achieve net zero on or before 2050, near-term and science-based emissions reduction targets, and details on how they will achieve their targets,” as well as board accountability for climate change oversight. This expectation is backed by OTPP’s commitment to have two-thirds of its portfolio emissions, including scope 3 where material, covered by credible, science-based net-zero plans and targets by 2025, and 90% covered by 2030.
OTPP’s climate-related engagement efforts appear to be focused on its privately-owned portfolio companies, particularly those in which it has significant stakes (minority or control) and/or board representation. For these companies, OTPP has created a “decarbonization playbook” to guide them to establish a “Paris Aligned Reduction Target” (PART), develop a credible plan to achieve net-zero by 2050 and identify value creation opportunities that come through decarbonization. The PART and decarbonization playbook include expectations for board and management oversight of climate change, carbon footprinting, decarbonization levers, target-setting, and guidance on what to include in a credible net-zero plan. OTPP offers a two-year “grace period” for target setting for any new investment in a company that has not already defined emissions reduction targets, and expects companies to include scope 3 emissions when material.
Portfolio companies
OTPP reported in 2024 that in 2023 it “initiated decarbonization efforts with 24 private companies across infrastructure, natural resources, equities and real estate” and “initiated engagement with over 80% of the eligible emissions under PART.” OTPP says that eight companies established Paris-aligned targets and are “well underway with decarbonizing their operations.” OTPP does not disclose which of its portfolio companies set decarbonization targets and which did not, but indicates that its focus in 2024 and 2025 was/is to increase the number of portfolio companies with Paris-aligned targets.
OTPP offers the example of Logoplaste, its portfolio company that “produces more than 12 billion reusable containers annually… helping divert waste from landfills.” OTPP says Logoplaste “increased their renewable energy use by 80% and is committed to working towards achieving net zero by 2050 and have submitted their science-based targets. In its 2024 Green Bond Impact Report, OTPP lists three privately-owned renewable energy and electricity transmission companies as examples of assets that were able to access capital to support decarbonization as a result of OTPP’s green bond issuance.
OTPP also highlights its engagement efforts at Brussels Airport, which committed to achieve net-zero scope 1 and 2 emissions by 2030 by deploying a new central heating plant powered by renewable energy and electrifying the company vehicle fleet and airport service vehicles. But OTPP says nothing about the scope 3 emissions of Brussels Airport, a major oversight considering that scope 3 emissions, particularly those from airplanes taking off and landing, are material for the airport sector. OTPP also reported that it held a “sustainability forum” for its airport portfolio in September 2023 to discuss and share best practices on decarbonization efforts.
Similarly, OTPP highlights the emissions reductions achieved by portfolio company Puget Sound Energy (PSE), a gas and electric utility in Washington State. OTPP mentioned PSE’s sale of “certain higher-emissions assets” and “successful decarbonization initiatives at select utility assets.” OTPP also brought together sustainability executives and practitioners from its power transmission and distribution companies to discuss target-setting and adaptation. But OTPP said nothing about PSE’s scope 3 emissions– particularly those that occur when the gas flowing through its pipeline network is burned– which would be considered material for a company in the utility sector.
OTPP appears to be making progress on target-setting and scope 1 and 2 emissions reductions at its portfolio companies. But as in previous years, OTPP is silent on its significant fossil fuel assets. Despite repeated requests from plan members for more information, OTPP provided no update in 2024 on the progress of its decarbonization playbook for its privately-owned oil and gas producers, gas distribution pipelines, or oil and gas royalty leaseholders.
Proxy Voting Guidelines
OTPP updated its proxy voting guidelines in January 2024 and again in January 2025.
OTPP already had relatively strong expectations for companies to measure, disclose and report climate-related metrics and performance, conduct scenario analysis and set emissions reduction targets. OTPP’s guidelines are also notable for setting a soft expectation for companies to disclose their political activities, expenditures and trade associations, although the guidelines leave big loopholes that permit companies to continue lobbying against stringent climate policies.
OTPP strengthened its proxy voting guidelines in January 2024 to establish heightened expectations for Audit Committees to have climate literacy as a core competency, understand where climate-related knowledge gaps exist, evaluate climate-related impacts when reviewing budgets, performance and M&A activity, and adapt their responsibilities for risk management, internal controls and assurance to account for climate considerations. OTPP even included recommendations for sources of information on the role of audit committees in considering climate risks.
OTPP’s January 2024 updates were promoted with a press release, but the January 2025 update to OTPP’s proxy voting guidelines was released quietly and did not include any notable changes on the pension manager’s approach to climate risks.
Despite the improvement on audit committees in 2024, OTPP’s proxy voting guidelines continue to contain loopholes that allow OTPP to vote against climate-related shareholder proposals by using language such as “typically support”. Similarly, the guidelines in effect permit corporate boards to carry on with inadequate oversight of climate-related risks by saying OTPP will “consider” not supporting individual directors, chairs or committees when it determines that a board is not effectively overseeing climate-related risks.
These loopholes are reflected in OTPP’s mediocre proxy voting record on climate-related shareholder proposals. According to a February 2024 analysis by Investors for Paris Compliance of key climate-related shareholder proposals in 2023 that are aligned with Climate Engagement Canada and Climate Action 100+ principles, OTPP voted for just eight proposals, against seven and abstained from one. The analysis ranked OTPP 19th out of 35 institutional investors in its degree of support. OTPP itself reported that in 2023 it supported 78% of climate-related “shareholder proposals seeking reporting and/or reducing greenhouse gas emissions” and “voted against four directors on four boards for climate change oversight failure.” Voting against just four directors is a surprisingly low number for an investor with relatively strong proxy voting guidelines and a $25 billion public equity portfolio. Investors for Paris Compliance rated OTPP’s proxy voting guidelines as “best practice” for clarity and transparency, but “needs improvement” on escalation.
External managers
OTPP’s 2022 Responsible Investment Guidelines state that it has an ongoing dialogue and sharing of leading practices with external managers and general partners, which undergo an ESG policy and practice review. OTPP’s 2022 Responsible Investing and Climate Strategy Report also noted it has targeted partnerships with funds that have “climate-driven mandates” and added two new such managers in 2022.
But OTPP did not provide additional detail on its climate-related engagement of external managers and partners in 2024. OTPP’s updated Sustainable Investing Guidelines, dated October 2024, simply state that it “may engage external advisors and counsel to assist in conducting sustainability-related due diligence” and “appl(ies) an approach of ongoing dialogue and sharing of leading practices, to encourage (its) external managers to continually improve their sustainable investing approach.”
Collaborative engagement
There was no evidence that OTPP was involved with any collaborative engagements on climate change in 2024. OTPP is an “investor participant” in Climate Action 100+, which nominally indicates that OTPP is “responsible for direct engagements with focus companies, individually and/or collaboratively.”
OTPP is also a member of the Investor Leadership Network, but does not appear to have been active with the group’s engagement or advocacy activities in 2024.
Policy engagement
OTPP reported in 2024 that it “joined other investors in support of market infrastructure to enable consistent, comparable climate-related disclosures at a global level” in 2023. In June 2024, OTPP signed onto a joint letter with other Canadian pension funds to support and strengthen the Canadian Sustainability Standards Board’s draft sustainability disclosure standards.
Beyond these examples, OTPP appears to be doing little in terms of engagement or advocacy to secure climate-related policies that are critical to limiting global temperature increases to safe levels. As one of the largest and most influential pension plans in the country, OTPP’s relative absence from the policy engagement space is particularly notable in comparison to funds such as UPP and BCI, which have shown leadership in this regard. Not only have OTPP members asked their pension fund to use its influence and leadership to advance stringent climate-related policies, but Paris-aligned policies are necessary for OTPP to achieve its aim to drive real-world decarbonization and protect OTPP’s portfolio from escalating systemic climate risks.
2024 UPDATES
No comprehensive updates to OTPP’s climate strategy since September 2022.
Improved coverage of portfolio carbon footprint over previous year from 75% to 80%.
No reported update to scenario analysis or climate stress testing since 2018.
Removed climate risk expertise as a specific competency from its board skills matrix.
Re-appointed fossil-entangled director to OTPP board and ignored plan member concerns and questions about potential conflicts of interest.
Provided vague updates on staff and executive compensation being connected to climate targets.
Developed an impact investing framework to pursue positive social and environmental outcomes.
OVERVIEW
OTPP’s actions in previous years to integrate climate into its investment approach were enough for the pension manager to maintain a B+ score in this category in 2024. But while OTPP has good emissions data, better transparency than some of its peers and sophisticated tools to integrate climate across the organization, the Ontario pension manager seems to have stalled on providing a comprehensive update to its climate strategy and reporting how the worsening impacts of climate change might affect its portfolio. A reboot is needed in 2025 if OTPP is to continue to be a climate leader among Canadian funds.
DETAILS
Accountable Paris-aligned membership
OTPP is not a member of any accountable and credible Paris-aligned investor body.
Transparency and disclosure of holdings
OTPP has a series of webpages with information about its portfolio, broken down by asset class and portfolio. OTPP issues press releases regarding major investments or sales of assets and provides a list of privately owned companies (without valuation) on its website. OTPP also publishes an annual list of all investments in which the pension manager holds a position of $200 million or more. And OTPP regularly published special reports about its investments in climate solutions in 2024, including reports on sustainable agriculture and digital infrastructure that recognized the need to make these assets more resilient to the impacts of climate change.
But OTPP does not disclose a comprehensive list of its investments and their valuations, unlike its Canadian peers such as the Canada Pension Plan Investment Board (CPPIB), Caisse de dépôt et placement du Québec (CDPQ) and British Columbia Investment Management Corporation (BCI).
Transparency and disclosure of climate risk
Disclosure of fossil fuel assets
OTPP appears to be obfuscating its exposure to fossil fuel assets. For example, OTPP reports that 8% of its $58.5 billion private equity portfolio is invested in “sustainability and energy transition”, making it impossible to determine how exposed the fund is to fossil fuels, or how it classifies its “sustainability”, “energy transition” and fossil fuel assets. Similarly, OTPP reports that 46% of its $39.2 billion infrastructure portfolio is invested in “energy infrastructure”, conflating the plan’s electricity transmission and renewable energy assets with its gas pipelines. After making a commitment to invest $5 billion in “High Carbon Transition Assets” in September 2022, OTPP hasn’t disclosed its progress toward this commitment nearly two-and-a-half years later.
When plan members asked for OTPP’s exposure to fossil fuels in 2024, their questions went unanswered, while OTPP did not publish a transcript or recording of the Q&A session of its 2024 AGM.
Climate disclosures and emissions data
OTPP hasn’t released an update to its climate strategy since September 2022. In 2024, OTPP aligned its sustainability reporting with its annual report for the first time. OTPP’s 2023 Annual Report, released in March 2024, contained climate-related updates, but they were relatively brief and lacked detail compared to previous OTPP sustainable investing reports and climate strategy updates. To return to its position as a climate leader, OTPP is due for a comprehensive and ambitious climate strategy update in 2025.
OTPP has relatively strong portfolio emissions reporting. Its portfolio carbon footprint covers 80% of AUM, an improvement from 75% in the previous year. OTPP uses PCAF standards and includes public equities, private equity, venture capital, infrastructure, real estate, natural resources and corporate fixed income. It does not include emissions associated with sovereign debt, saying that its reporting “would not be directly comparable to the emissions from (its) current portfolio carbon footprint.” OTPP also reports the quality of its portfolio emissions reporting, with 56% of emissions and 64% of holdings reported directly by companies. OTPP could improve by reporting the emissions associated with its sovereign debt and quantifying and disclosing the scope 3 emissions of its portfolio, rather than just for its operations. Both the Investment Management Corporation of Ontario (IMCO) and the University Pension Plan (UPP) in Ontario report portfolio scope 3 emissions and sovereign bond emissions data, keeping both separate from scope 1 and 2 financed emissions reporting.
Climate scenario analysis
For the second year in a row, OTPP did not provide any updates on how it’s using scenario analysis to stress test its portfolio against different emissions pathways and global heating outcomes. In fact, OTPP hasn’t reported that it’s conducted an updated climate scenario analysis since 2018. This is concerning, as OTPP concedes that “(it views) the bigger risk to the resilience of (its) strategy as a scenario in which the world takes a divergent pathway – one that is not moving towards net zero.”
Board climate expertise and/or fossil fuel entanglement
Climate expertise
In 2024, OTPP took a step backwards on reporting climate expertise on its board of directors. In 2023, OTPP was the only Canadian pension fund that specifically identified board members with climate-related experience, qualifications or expertise. It identified four directors who had expertise in climate risk oversight.
But in 2024, OTPP lumped climate in with a broader “corporate responsibility/climate/ESG” skills category and reported that ten of eleven directors have this skill set. OTPP did not differentiate between these three distinct concepts or explain how directors have this expertise. Included in this conflated ESG skills matrix is OTPP board member Deborah Stein, who concurrently sits on the boards of three different fossil fuel companies (see below). This offers little confidence that OTPP directors actually have the required climate expertise that the annual report claims.
In its Sustainable Investing Guidelines, OTPP says that its CIOs “regularly discuss sustainable investing and climate change at Board Investment Committee meetings.”
Board fossil fuel entanglement
One member of OTPP’s 11-person Board is concurrently a director at three fossil fuel companies. Deborah Stein, who was appointed to OTPP’s board in 2023 and started her second term on January 1, 2025, simultaneously serves as a director of NuVista Energy, Trican Well Service and Washington Gas. Ms. Stein also served as director of Parkland Corporation since 2016, before deciding not to stand for re-election to the Parkland board in March 2024. Ms. Stein was formerly CFO of AltaGas and previously worked at TC Energy.
In 2023 and 2024, hundreds of working and retired Ontario teachers wrote to OTPP and the Ontario Teachers’ Federation asking for an explanation of Ms. Stein’s appointment and how she manages potential conflicts between her fiduciary duty to OTPP members and legal obligations to the shareholders of three fossil fuel companies. OTPP ignored the repeated questions and concerns raised by plan members without explanation.
Executive compensation and climate
OTPP has indicated for the last few years that climate-related objectives are part of the annual scorecard used to measure performance and calculate compensation for all OTPP employees, albeit without much clarity. In its 2023 Annual Report, OTPP again said that climate change is factored into the principles that underlie its compensation program. But OTPP only provided vague details in relation to its CEO’s compensation, noting steady progress towards 2025 net-zero targets and a portfolio carbon footprint decrease. It remains unclear if and how OTPP executives and staff are incentivized to achieve climate targets and reduce portfolio emissions.
Impact investing
OTPP reported in 2024 that it’s developing a framework for impact investing to intentionally pursue positive impact through businesses that are “advancing environmental action” or “leveling the playing field” (positive environmental and/or social outcomes). This is unique among the pension funds analyzed in this report. OTPP said that “2024 will be a year of learning and internal capability-building as (it works) to implement (its) impact investing strategy.”
2024 UPDATES
Teachers who attended OTPP’s 2024 AGM reported that the fund’s CEO falsely maintained that fossil gas is a “transition fuel” for the second year in a row.
OVERVIEW
Despite its expectation for portfolio companies to set credible net-zero targets within two years of its investment, OTPP has no exclusions on fossil fuels. OTPP appears to be exiting some fossil fuel assets, screening for new fossil fuel investments and limiting its exposure to oil and gas producers, but does not say so publicly.
For a comparison of OTPP’s lack of fossil fuel exclusions with respect to other Canadian pension managers, see this report’s Table 3: Fossil Fuel Exclusions.
DETAILS
The International Energy Agency (IEA) states clearly that a global net-zero by 2050 pathway requires no new investment in coal, oil or gas development and a rapid phase-out of existing production. But OTPP has neither placed an exclusion on new investments in oil, gas, coal or related fossil fuel infrastructure, nor has it released credible plans to phase out its existing fossil fuel assets in line with net-zero by 2050 emissions pathways.
That being said, OTPP has an “exclusion framework” and additional processes to identify companies that may be restricted from investment. According to its 2024 Sustainable Investing Guidelines, OTPP:
“believes that engaging with portfolio companies is more likely to influence positive change than divesting from investments. However, Ontario Teachers’ may choose to not invest in certain businesses due to certain risks. Under our exclusion framework, we consider international treaties and conventions, we may also consider the degree to which there may be societal or environmental harm, and the company or sector’s willingness or ability to address the harm.
In addition to our exclusion framework, Ontario Teachers’ has an ongoing process to identify and assess companies associated with severe controversies. Investment in companies posing potential reputational, and therefore financial, risks as a result of these controversies, may be restricted following an assessment of the risk and our ability to engage and influence positive change.”
OTPP does not appear to have made new acquisitions of fossil fuels in over four years, and quietly exited its stake in oil and gas producer Aspenleaf Energy in 2024. OTPP’s exposure to fossil fuels in its public equity portfolio is also consistently low, suggesting the fund mostly holds shares in oil, gas and coal companies through its holdings in index funds. Since 2022, OTPP said that it expects portfolio companies in which it has significant stakes (minority or control) to set credible net-zero targets, including scope 3 emissions where material, within two years of OTPP’s investment. It is not clear if OTPP is holding its privately-owned fossil fuel companies, including oil and gas producers, gas distribution pipelines, or oil and gas royalty leaseholders, to account for this expectation, or what the consequences are for companies that fail to meet this expectation.
OTPP already appears to have a de facto exclusion on new fossil fuel investments and a relatively low exposure to oil, gas and coal. OTPP could easily join the growing number of Canadian pension managers with fossil fuel exclusions, including CDPQ, HOOPP, IMCO, OMERS and UPP, by making this de facto exclusion explicit.
OTPP-owned companies investing in gas expansion
Despite OTPP’s net-zero commitment and some signs of restrictions on fossil fuel investments, Aethon Energy, a private investment firm and owner-operator of upstream oil and gas assets in which OTPP holds stakes of at least $400 million, spent US$260 million to purchase fracked gas assets in Louisiana and negotiated a 20-year agreement to export fracked gas from a proposed LNG terminal in Louisiana in 2024. It is unclear if OTPP funds helped finance the deals.
Gas is not a transition fuel
Similarly concerning, teachers who attended OTPP’s AGM in April 2024 reported that OTPP’s CEO asserted that fossil gas is a “transition fuel” in response to a question from a plan member.
Gas is a leading cause of the climate crisis, not a transition fuel. It is well-established that gas must be rapidly phased out, along with other fossil fuels, to limit global heating to relatively safe levels. A 2024 peer-reviewed study finds that liquefied natural gas in particular is more polluting than coal, so the climate benefits of replacing coal with gas are dubious. As cleaner and cheaper renewable energy and battery storage technologies disrupt global energy markets, alongside electrification technologies like heat pumps, demand for gas is already declining in Europe, and is expected to peak globally within the next five years by the IEA World Energy Outlook, under all policy scenarios. Reliance on imported gas is seen as a growing risk to energy security in many countries.
ESTIMATED INVESTMENTS IN FOSSIL FUELS
$7.4 billion – $9 billion
Based on extrapolation from OTPP’s reporting, described below, Shift estimates OTPP has an estimated $7.4 billion to $9 billion in fossil fuel investments as of December 31, 2023.
OTPP’s private investments in fossil fuels include:
At least $200 million in Aethon III LLC (Aethon Energy).
At least $200 million in Aethon United LP (Aethon Energy).
A 5.8% stake worth at least $200 million in the state-owned Abu Dhabi National Oil Company Gas Pipeline Assets LLC.
An undisclosed stake valued at less than $200 million in Canbriam Energy.
An undisclosed stake valued at less than $200 million in GRP Energy Capital.
An undisclosed stake valued at less than $200 million in Hawkwood Energy.
A 100% ownership stake in HRG Royalty, including at least $200 million in each of HRG Royalty II LLC and HRG Royalty LLC.
A 37.5% stake in SGN (Scotia Gas Networks).
A joint 69.4% stake in Società Gasdotti Italia S.p.A (SGI).
Regulatory filings to September 30, 2024 show OTPP holding shares in publicly-traded fossil fuel companies in Canada, including Canadian Natural Resources, Cenovus Energy, Enbridge, Suncor and TC Energy, and other countries, including Chevron, ConocoPhillips, Dominion Energy, ExxonMobil, Kinder Morgan, Marathon Oil and Valero Energy.
While OTPP ignored repeated requests in 2024 to disclose a list of its total investments in fossil fuels, OTPP’s CEO told members at the pension fund’s AGM in April 2023 that its “direct oil and gas assets represent around 3% of [its] portfolio”, or $7.4 billion (calculated using OTPP’s AUM as of December 31, 2023). This figure forms the lower end of Shift’s estimate of fossil fuels in OTPP’s portfolio.
In April 2024, OTPP did not disclose an oil and gas figure at its AGM, despite repeated requests from plan members. It is not possible to calculate a more precise figure for OTPP’s fossil fuel investments based on the pension fund’s public disclosures. In its 2023 Annual Report, OTPP reports that it has $250 million invested in “Energy” in its public equity portfolio, $4.68 billion invested in “Sustainability and Energy Transition” in its private equity portfolio and $4.086 billion in “Oil and gas” in its inflation sensitive portfolio. The sum of these figures, approximately $9 billion, forms the higher end of Shift’s estimate of fossil fuels in OTPP’s portfolio. Not included in this calculation is $18.03 billion in “Energy Infrastructure” in OTPP’s infrastructure portfolio. This portfolio is largely comprised of electricity transmission and distribution assets, but also contains significant natural gas infrastructure assets. For example, OTPP lists pipelines and gas distribution networks, including Galaxy Pipelines, SGN and SGI, as part of this portfolio. This means that the upper range of Shift’s estimate of OTPP’s fossil fuel assets ($9 billion) is an underestimate.
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.
Join a credible and accountable Paris-aligned investor body, such as the Net-Zero Asset Owner Alliance or the Paris Aligned Asset Owners.
Develop and release a comprehensive and ambitious update to OTPP’s 2022 Climate Change Strategy in 2025.
Paris-aligned target
Place a strict limit on the role of carbon offsets in both its own net-zero commitment and the net-zero targets of portfolio companies.
Interim targets
Pair interim targets to reduce emissions intensity with targets to reduce absolute emissions.
Disclose scope 3 emissions measurement and establish scope 3 emissions reduction targets.
Disclose investments in high-risk, high-carbon assets, including progress on “High Carbon Transition Assets” allocation.
Communication of climate urgency
Strongly communicate the existential, systemic, urgent nature of the climate crisis and re-prioritize OTPP’s focus on bold climate leadership and rapid decarbonization.
Climate engagement
Make public a climate engagement and escalation process specifically for fossil fuel companies, including a timeline for phase-out for companies without a credible, profitable decarbonization pathway.
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 affirm that OTPP will vote for climate-related shareholder proposals that align with OTPP’s climate risk expectations and will vote against directors failing to adequately oversee climate risks.
Disclose which portfolio companies have set Paris Aligned Reduction Targets and developed credible transition plans under OTPP’s “decarbonization playbook”.
Establish timebound, results-based targets for engaging with external fund managers and general partners on Paris-alignment.
Require that all new or renewed general partnerships and external fund manager contracts adhere to a Paris-aligned investment strategy.
Build on public advocacy for mandatory standardized climate risk disclosure and submissions in support of climate regulations to become a vocal proponent of stringent, ambitious, Paris-aligned climate and energy policies that provide certainty for companies and investors.
Climate integration
Disclose all holdings, including those valued at less than $200 million.
Conduct 1.5°C and 2°C scenario analysis and disclose results.
Separate “Corporate responsibility/ ESG/ climate risk” board competencies to explicitly differentiate climate and show which directors have climate competency.
Avoid climate-related conflicts of interest and refrain from re-appointing directors with simultaneous corporate directorships with fossil fuel companies to the Board.
Establish minimum time that must elapse in between holding a fossil fuel directorship and joining the Board.
Enhance and disclose how climate targets and emissions reductions are factored into executive and staff compensation.
Publish a comprehensive climate strategy update in 2025.
Make asset class reporting more transparent. Answer plan member questions about exposure to fossil fuels.
Report on new impact investing strategy.
Incorporate stringent international standards for protecting biodiversity into investment and asset management activities by the end of 2025.
Fossil fuel exclusions
Put in place an exclusion on investments in coal, oil, gas and related infrastructure.
Divest from fossil fuel producers.
Stop spreading misinformation that “gas is a transition fuel”.
Develop a time-bound climate engagement and escalation process specifically for fossil fuel assets, including a timeline for managed phase-out of assets without a credible, profitable decarbonization pathway.
Communicate to plan members when OTPP exits from private fossil fuel assets.
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