Advocates are slamming Canada’s largest pension fund for abandoning its net-zero commitment three years after it announced the target, while Canada Pension Plan Investment Board (CPPIB) said the move doesn’t change its approach to sustainability.
CPPIB, which manages $714.4 billion on behalf of roughly 22 million Canadians, first announced in 2022 a commitment to achieve net-zero greenhouse gas emissions by 2050.
On Wednesday, it scrapped that target, which applied to its portfolio and operations, citing legal developments as one of the drivers behind the decision.
“Legal developments are but one variable we considered,” Michel Leduc, senior managing director, public affairs and communications with CPP Investments, said in an emailed statement to Investment Executive. “In reality, we have not changed our approach to climate in how we invest — it’s more about coherence and consistency.
“There is increasing pressure to adopt interim targets, many of which don’t reflect the complexity of global investment portfolios like ours or differentiate between the control that an operating company has over its assets and the limited influence that investors have over the strategy of their investees.”
Asked which legal developments CPPIB was referring to, another spokesperson said “rules are evolving in many jurisdictions in which we operate.”
In response to CPPIB’s claim that its approach to climate hasn’t changed, Alex Walker, climate finance program director with environmental advocacy organization Environmental Defence, questioned the need to scrap its net-zero target.
“CPPIB abandoning its target is an abdication of responsibility and accountability,” Walker said in an interview. “Net-zero targets have a role. They’re very important and they help investors, they help consumers understand how a company is taking climate change seriously.”
Leduc, however, said that sustainability will remain integrated in the pension fund’s investment strategy.
“We continue to expect investment due diligence processes to identify material sustainability factors, including those related to climate change, and integrate the findings into investment decisions and ongoing asset management,” he said.
Still, Walker said the pension fund is “quitting far ahead of when they would even need to” meet its now-abandoned 2050 target.
“The point of a pension is to invest for the future, but if they’re failing to address climate change, what kind of future are they contributing to?” they said.
Shareholder activism group Shift Action for Pension Wealth and Planet Health also criticized the move.
“In backing out of a promise to invest in line with its net-zero by 2050 commitment, CPPIB’s management has failed to undertake its most fundamental purpose — to responsibly manage the long-term collective savings of working and retired Canadians,” the group said in a statement.
Shift added that the move negatively impacts working Canadians currently under the age of 40, who won’t be eligible to receive their CPP benefits until after 2050.
“What kind of a world are Canadians expected to retire into? How would CPPIB be able to sustain benefits in a world of climate breakdown?” the group said.
Richard Brooks, climate finance director of environmental advocacy organization Stand.earth, called CPPIB’s decision to abandon its net-zero target “shameful” and “the height of irresponsibility.”
“As communities experience an affordability crisis amidst fires and floods, it’s horrendous and appalling that Canada’s Pension Plan is abandoning its guiding climate action light,” Brooks said in an emailed statement to Investment Executive. “CPP is meant to be a perpetual entity — here for every worker in Canada, forever.”
Canadian securities regulators and financial institutions have also pulled back their sustainability commitments in recent weeks, citing both the need to remain competitive and regulatory changes, namely amendments to Canada’s Competition Act to prevent greenwashing.
This story has been updated.