Canada Pension Plan Investment Board (CPP Investments) reported “solid” third-quarter results on Thursday as well as a commitment to net-zero emissions in its portfolio by 2050.
The fund, which includes base CPP and additional CPP accounts, returned 2.4% for the quarter ended Dec. 31, 2021 — a result attributed to “healthy gains” from real assets and equities. (Private and public equities comprise 30% and 28%, respectively, of the fund’s asset mix.)
Five-year and 10-year annualized net returns were 11.7% and 11.6%, respectively.
“Double-digit fund performance over the long term continues as we brace for uncertain markets from a position of strength,” said John Graham, president and CEO with CPP Investments, in a release. “Our broadly diversified portfolio with investments in infrastructure and real estate is reasonably positioned to weather inflationary pressures.”
Net assets for the fund were $550.4 billion at Dec. 31, 2021, compared to $541.5 billion at the end of the previous quarter.
The $8.9-billion increase consisted of $13 billion in net income less $4.1 billion in net CPP outflows. Benefit payments typically exceed contributions in the final months of the year, while the opposite is the case in the early part of the year, the board noted in the release.
The board also committed to net-zero greenhouse gas emissions in its portfolio and operations by 2050.
“Net zero” refers to the level at which total greenhouse gases from human activity equal the amount removed from the atmosphere (naturally or through carbon capture). Corporate commitments to net zero reflect the international Paris Agreement, and include the big banks.
“Committing our portfolio and operations to net zero by 2050 will help us manage the risks, capture the opportunities and deliver on our public purpose — to help generations of Canadians build financial security in retirement,” Graham said in a separate release on Thursday.
Deborah Orida, global head of real assets and chief sustainability officer with the board, said CPP Investments had incorporated ESG considerations, particularly climate change, into its investment decisions for more than a decade.
Now, “the performance of our portfolio and the generation of long-term investment returns relies upon our ability to adapt to a global economy that is moving toward net zero,” Orida said in the release.
To achieve its commitment to net zero, CPP Investments said it would exert its influence as an active investor as opposed to making divestments; increase its investments in green and transition assets, now at $67 billion, to at least $130 billion by 2030; and build on its decarbonization investment approach.
That approach, as explained on CPP Investments’ website, involves identifying, funding and supporting high-carbon-emitting companies that are committed to lowering their emissions. The desired result is attractive risk-adjusted returns for the fund.