Canadian pension giant abandons net zero target

CPP Investments, the C$714bn pension giant managing the retirement savings of more than 22m Canadians, withdrew its net zero commitment earlier this week. The decision was met with strong criticism from environmental campaigners.

The fund, which had only set its net zero target three years ago, made no mention of the change in its Annual Report and Accounts, released this week. Instead, it stated only that “achieving net zero by 2050 remains a widely adopted goal and critical ambition for many companies, countries and international organisations”, without confirming whether it still upholds this ambition.

However, in the Q&A section of its website, CPP explicitly states that it no longer maintains a net zero by 2050 commitment. It cites “recent legal developments in Canada”, including increased pressure to adopt standardised emissions metrics and interim targets, and claims these do not reflect the complexity of a global investment portfolio.

The reversal was first reported by Canadian climate campaign group Shift, which said the change was made on Wednesday. 

Commenting on the news, a spokesperson for CPP Investment stressed that the fund had not changed its approach to climate investment: "it's more about coherence and consistency" they said, adding: What hasn’t changed are the actions we take to integrate sustainability into our 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.

"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.

"As the world continues its pursuit of a net-zero economy by the middle of the century, we are here to perform a much-needed, productive, patient and engaged capital provider function, based on investment insights. Our responsibility to 22 million Canadians is a strong commitment to identify, evaluate, monitor and act on the factors that will drive the world’s path and aspiration to net zero around the middle of the century" CPP Investments said.

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Shift strongly criticised the decision, highlighting that it had been taken without consulting pension fund members or the wider public.

“This isn’t just a step backwards. It’s a failure of responsibility. CPPIB is legally required to manage our retirement savings in our best long-term interest, not to fund fossil fuel expansion that jeopardises both our planet and our financial future,” said Shift.

The announcement comes only a month after former UN climate envoy Mark Carney won the Canadian election, suggesting a potential shift in public opinion towards a more progressive stance on climate policy.

The rollback appears to be influenced by increasing regulatory demands. The Canadian Office of the Superintendent of Financial Institutions (OSFI) is introducing more stringent reporting requirements for federally regulated financial institutions, including CPP Investments.

Despite the move, CPP Investments said its commitment to sustainability integration remains unchanged. However, it warned that “forcing alignment with rigid milestones could lead to investment decisions that are misaligned with our investment strategy”.

Task Force on Climate-related Financial Disclosures (TCFD) reporting is already mandatory for large institutional investors in the UK, Brazil, the European Union, Hong Kong, Japan, Singapore, and Switzerland.

In its Annual Report and Accounts, CPP Investments stated that under the most extreme scenario for physical climate risk – a “hot house world” – up to 4% of the fund’s market value could be at risk.

This article has been amended on 22.05. to include a response from CPP Investments