The Canada Pension Plan Investment Board has abandoned its net-zero carbon emission target, becoming the latest major business to backtrack on environmental commitments citing legal uncertainty.
CPPIB said Wednesday that “recent legal developments in Canada” have changed how net-zero commitments are interpreted, including requiring adoption of standardized metrics and interim emission-reduction targets.
Such requirements do not fit with the complicated nature of CPPIB‘s investment portfolio, it said in the “approach to sustainability” section of its website, though it did not specify the legal developments mentioned.
“Forcing alignment with rigid milestones could lead to investment decisions that are misaligned with our investment strategy. To avoid that risk – and to remain focused on delivering results, not managing legal uncertainty – we have made a considered decision to no longer maintain a net-zero by 2050 commitment,” the pension plan said.
CPPIB manages $714.4-billion in assets on behalf of Canadians for the public retirement plan. It instituted its net-zero goal in 2022, saying it would invest heavily in decarbonizing high-emitting sectors and double its green holdings within eight years.
The pension plan stressed Wednesday that it was not letting up on efforts to decarbonize, touting a 41-per-cent decline in the carbon footprint of its extensive investment portfolio since 2020.
Wind turbines at the Saint-Nazaire offshore wind farm, off the coast of the Guerande peninsula in western France in 2022.STEPHANE MAHE
In late April, Royal Bank of Canada, the country’s largest financial institution, decided to withdraw its sustainable finance targets to avoid legal risks presented by Ottawa’s anti-greenwashing legislation.
Several natural resource companies have also expunged public environmental communications in response to the law. CPPIB did not mention the legislation, known as Bill C-59, by name.
Under amendments to the federal Competition Act that went into force last year, companies are at legal risk for making green assertions that do not stand up to scrutiny. Corporate communications must be backed up by international standards. Individuals and companies could face sizable fines if found liable.
There is considerable debate over whether the legislation is successfully guarding against false or misleading assertions about environmental performance, or creating legal chill resulting in companies deleting legitimate information.
Patrick DeRochie, senior manager for Shift Action for Pension Wealth and Planet Health, a climate advocacy group, said CPPIB has veered from most large Canadian pension plans, which have maintained their net-zero goals to stay in line with the Paris agreement targets to limit emissions.
“It’s extremely disappointing to see the CPPIB abandoning their commitments because they have a very explicit mandate to invest in the best interests of Canadians,” Mr. DeRochie said in an interview. That includes young people, whose retirement benefits could be put at risk by the future effects of climate change, he said.
However, Michel Leduc, global head of public affairs and communications at CPPIB, rejected the notion that the pension plan is abandoning its efforts to deal with climate change and the risks it poses.
Despite the fund’s reference to Canadian legal developments on its website in explaining the net-zero target being dropped, Mr. Leduc said in an interview that the anti-greenwashing legislation was just one factor behind the decision. CPPIB operates in jurisdictions around the world, many with evolving rules, he said.
The pension plan is focused on maintaining a consistent, long-term approach that takes into account the complexities of its global portfolio, including patient investment and eschewing divestment as a strategy, Mr. Leduc said.
“Our responsibility to 22 million Canadians is a very strong commitment to identify, evaluate and act on those factors that will drive the world’s path and aspirations to net zero around the middle of the century,” he said.
“And we’ve been very clear about those factors from the very beginning – those factors that will drive the whole-economy transition.”