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Investing in the path to net zero

cpp104 Net Zero Hero 0609

Investing in the path to net zero

As the world moves toward net zero, we aim to manage the investment risks and invest to capture and support value-creating opportunities that will arise as society works to remove greenhouse gas (GHG) emissions from the whole economy.

We believe that the performance of our portfolio will be influenced by how well it adapts alongside the global economy on the path to net zero. As such, we believe stewarding the portfolio to net zero is in the best interests of the contributors and beneficiaries of the Canada Pension Plan and meeting our mandate. We commit our portfolio and operations to being net zero of GHG emissions across all scopes by 2050.

This proactive choice is a continuation of CPP Investments’ long and successful track record of integrating environmental, social and governance considerations, including climate change, into our investment activities to drive enduring financial performance.

Our investment strategy is designed to fulfill our mandate of maximizing returns without undue risk of loss, taking into account the factors that may affect the funding of the Canada Pension Plan and its ability to meet its financial obligations. We anticipate that the whole economy transition will create both investment opportunities and risks. We believe that incorporating factors like climate change and the transition to net zero into our decision-making will help us create sustainable value.

We have made the decision to commit our portfolio and operations to net zero by 2050 after rigorous analysis of the best data and information available today and with a deeply pragmatic mindset. Fulfilling our net-zero commitment will be done in accordance with our Climate Change Principles. These principles highlight that supporting the whole economy transition requires a sophisticated, long-term approach.

Our Chief Sustainability Officer will work closely with our President & CEO and Chief Investment Officer to ensure we maintain a global, cross-enterprise approach to sustainability and deliver on our commitment to net zero.

What is net zero?

 

Net zero refers to reducing human-caused greenhouse gas emissions from the global economy to as close to zero as possible. Any remaining greenhouse gas emissions should then be balanced by removing an equivalent amount of emissions, using technology- or nature-based solutions.

Investing in the path to net zero

We commit our portfolio and operations to being net zero of GHG emissions across all scopes by 2050.

The actions we are taking to reach net zero by 2050

We are holding ourselves accountable to our net-zero commitment by taking the following actions. We will evolve and expand our plans over time.

  • We will continue to invest and exert our influence in the whole economy transition as active investors, rather than through blanket divestment.
  • We will achieve carbon neutrality for our internal operations by the end of FY23.1
  • We expect our $67 billion investment in green and transition assets will increase to at least $130 billion by 2030.2
  • We will build on our new decarbonization investment approach that seeks attractive returns from enabling emissions reduction and business transformation in high-emitting sectors. See Investing to enable an economy-wide evolution to a low-carbon future.

As we embark on this journey, we will adhere to our longstanding practice of openness and transparency, including in the consistency and regularity of information-sharing with our stakeholders. We will seek to enhance the scope of our disclosure as relevant data and metrics become available and our thinking evolves. We will also continue to produce analysis and research where we believe we can contribute to the global conversation on advancing the measurement and management of climate risk as well as investing in attractive opportunities that emerge along the path to net zero.

Our commitment is made on the basis and with the expectation that the global community will continue to advance towards the goal of achieving net-zero GHG emissions by 2050. These advancements include the acceleration and fulfilment of commitments made by governments, technological progress, fulfilment of corporate targets, changes in consumer and corporate behaviours, and development of global reporting standards and carbon markets, all of which will be necessary to help enable us to meet our commitment. We are committed to staying ahead of developments that will impact our portfolio’s path to net zero.

How will we report our progress toward net zero?

 

Stakeholders are able to clearly gauge the progress of the Fund’s holdings towards net zero in our annual Report on Sustainable Investing, where we report several emissions metrics including our carbon footprint. In terms of the Fund’s carbon footprint, we do not expect a linear decline in emissions, especially as we invest to help certain companies and industries transition. However, our objective for 2050 is clear.

The path ahead

Navigating the risks and opportunities presented by the whole economy transition required by climate change will be a defining challenge of the 21st century. It will require courage and extraordinary skill on the part of policy makers, regulators, executives, boards, investors and individual citizens. As an investor, we join this effort not just as a capital provider but as a capital partner, one that brings experience and expertise as well as financial resources to the table.

We are committed to doing our part in the best interests of helping to keep the Canada Pension Plan secure and solvent for generations to come.

Learn more about how we invest in the path to net zero.

1. Across Scope 1 and 2 GHG emissions and business travel emissions, which are Scope 3.
2. Figures as at December 31, 2021. We arrived at our definition of green and transition assets by considering different frameworks and taxonomies, including the E.U. Taxonomy. We consider an asset to be green when at least 95% of its revenue can be classified as being derived from green activities, as classified by the International Capital Markets Association. We consider an asset to be transition if it has announced its commitment to net zero with a credible target and plan and is making meaningful contributions to global emissions reduction.

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