Board Communique: November 23, 2022

Your plan is on the path toward net zero

In 2020, we made it a priority to address climate risk to the plan’s investment portfolio. We committed to explore investing in a manner compatible with the Paris Agreement. We also wanted to understand the impact of a sudden and major policy change on plan investments. We have worked on this priority over the last two years.

The goal: Net zero by 2050

We have set a goal to change our investment portfolio to net-zero greenhouse gas emissions by 2050. By 2030, we aim to cut the emissions intensity of our portfolio by 55 per cent from a 2020 baseline.

A net-zero portfolio means the investments in total do not contribute to global greenhouse gas emissions.

This aligns the plan investments with the Paris Agreement, which is an international treaty on climate change. Its purpose is to limit global warming less than 2 °C above pre-industrial levels.

To reach our goal, the plan’s investment manager, BCI, will:

Choose investments to ensure the portfolio emission intensity decreases over time.
Increase investments in clean energy solutions.
Engage with portfolio companies. The purpose is to hold companies to account to establish credible plans to thrive in the lower-carbon future.
Track the economy-wide decarbonization over time.

We believe that selective engagement with companies in the energy sector is better than divestment. Working with companies to transform their businesses will benefit our members, communities and portfolio companies. We will not use carbon offsets or blanket divestment to meet our net-zero goal.

We base our goal on the expectation that the rest of the world will continue to become low-carbon, and governments will deliver on their global commitments.

You can read more details about our approach on the Responsible investing page.

We support BCI’s 2022 Climate Action Plan that describes their approach for managing the implications of climate change across asset classes. It is available on BCI’s website.

The board’s duty to address risks and opportunities

Our fiduciary duty requires us to invest the fund in the best financial interests of beneficiaries.

Climate change presents unparalleled risks and opportunities. We need to address climate risk to ensure the fund remains resilient. We are responsible for ensuring it continues to meet the plan’s obligation to pay basic pensions to current and future retirees. That’s why we are preparing the plan for a low-carbon future and why we will invest in solutions.

In meeting our net-zero goal, we must also achieve investment return objectives. We will review our goal annually to ensure it remains prudent and aligned with the board’s fiduciary duty.

Our progress on addressing climate risk and opportunity

The board signed on to the UN’s Principles for Responsible Investment in 2007. Since then, we have added environmental, social and governance matters to our investing policy.

Some highlights of our progress:

We were one of the first large pension plans in Canada to voluntarily report climate-related financial disclosures. You can read these in our Annual Report for 2019, 2020 and 2021.
We use climate scenarios to understand how climate change affects the portfolio.
We measure the carbon footprint of all asset categories.
We support BCI in using climate change scenario analysis in its investment decisions and asset management processes.
We collaborate with global movements to address climate risks, such as Climate Action 100+.
We educate trustees about climate change concepts and associated investment risks and opportunities.

You can read more about our actions progress on the Responsible investing page.

Preparing the plan fund for a low-carbon future

This is the first step of a major effort to achieve net-zero plan investments by 2050. We believe the plan will benefit directly and indirectly if we reduce greenhouse gas emissions. We’re excited to share our progress with you in the coming years.

To learn about the path toward net zero, watch this message from the chair and vice-chair of the Municipal Pension Board of Trustees.