Statement on the Healthcare of Ontario Pension Plan's Climate Strategy
Correction:
This statement was updated on March 14, 2023 to reflect that HOOPP’s Climate Strategy references the Climate Bonds Initiative (CBI) taxonomy to define green investments.
SHIFT ACTION FOR PENSION WEALTH & PLANET HEALTH
For Immediate Release: March 13, 2023
Statement from Shift on the Healthcare of Ontario Pension Plan (HOOPP)’s New Climate Strategy
Toronto, ON | Traditional territories of the Huron-Wendat, Anishnaabeg, Haudenosaunee, Chippewa and Mississaugas of the Credit First Nation - The Healthcare of Ontario Pension Plan (HOOPP)’s new Climate Strategy puts HOOPP in a position to take a major step forward, but a close look at the details demonstrates that these targets are not yet aligned with achieving the goals of the Paris agreement.
HOOPP has been much further behind other funds when it comes to addressing climate-related risks in its portfolio, and the fund therefore has much further to go. HOOPP received a D in Shift’s recent report card due to the fund’s lack of a climate strategy or interim targets, low overall disclosure, undefined engagement expectations or process, lack of evidence of climate integration, and lack of fossil fuel exclusions. In HOOPP’s new Climate Strategy, released today, we are pleased to see considerable effort to address most of these elements.
Highlights of HOOPP’s Climate Strategy include:
An interim emissions reduction commitment. HOOPP has committed to reduce the emissions intensity of the portfolio by 2030, below a 2021 baseline, although the target is not expressed in standard terms: HOOPP used ‘emissions intensity expected by 2030’ rather than measuring a percentage reduction below baseline. It is also unclear what percentage of the portfolio is actually covered by this commitment. HOOPP’s 2021 TCFD stated that its portfolio footprint included real estate and public equities, leaving significant portions of the portfolio unaccounted for.
A commitment to $23 billion in “green investments” by 2030. HOOPP states that the definition of green investments references the Climate Bonds Initiative taxonomy (Climate Strategy, p.8). This target should be restated in terms of the percentage of assets under management (AUM) that HOOPP commits to have invested in green investments by 2030. ($23 billion equates to 20% of HOOPP’s AUM as of December 31, 2021.)
A risky target to have just 50% of AUM in its infrastructure and private equity portfolios covered by credible transition plans by 2030. This target in particular shows how far behind HOOPP has lagged on climate. We have just seven years remaining to at least halve greenhouse gas emissions in order to remain on track with the goals of the Paris agreement -- goals that HOOPP claims to be working toward -- yet by 2030 HOOPP expects only half the AUM of parts of its portfolio to even have credible transition plans. In essence, this means that by 2030, half of the assets in which HOOPP “typically ha[s] a larger ownership stake or tend[s] to hold for longer periods of time” (p.7) - i.e. the very assets that HOOPP should be very concerned about transitioning - still will not have transition plans.
An exclusionary screen in place by 2025 on “new direct investments in private thermal coal and oil exploration and production companies.” HOOPP is beginning to recognize the consensus expert opinion that no new fossil fuel investments are needed in order to align with a 1.5°C pathway. HOOPP should put this exclusionary screen in place immediately, rather than two years from now, and strengthen the exclusion to include gas.
A demonstration that HOOPP is strengthening its internal capacity to understand the climate crisis and communicate about it to stakeholders. The Climate Strategy includes explanations of the Paris Agreement and the importance of net-zero by 2050, as well as an acknowledgment that the World Health Organization considers climate change to be the greatest threat to human health.
Acknowledgement that HOOPP’s governance must be kept up to date on climate science. The Climate Strategy states that the Board is “in the process of” securing an external climate change advisor to support its governance oversight.
HOOPP emphasizes that it will rely on engagement rather than “simply selling a high-emitting investment to another investor, who may not be concerned about carbon emissions” (Climate Strategy, p.7). Engagement is a crucial tool in any investor’s toolkit, but HOOPP has no demonstrated track record of climate engagement, and does not even reveal its proxy voting record. If engaging with companies to lower their emissions, HOOPP must provide evidence that its engagement has Paris-aligned, timebound expectations, that its engagement is resulting in companies aligning their business models to halve absolute emissions by 2030, and that companies that fail to meet expectations face consequences up to and including divestment. When it comes to fossil fuel companies in particular, continuing to hold investments in companies with no profitable future in a 1.5°C world exposes HOOPP to unacceptable financial risks. HOOPP should exercise sell-side discipline to protect its beneficiaries’ retirement savings from exposure to such risky assets.
If HOOPP strengthens the commitments made in its Climate Strategy and addresses some of the gaps in definition and disclosure, then the fund will be well-positioned to live up to its claim of “doing what's good for our pension plan and good for our planet.”
QUOTES FROM HOOPP BENEFICIARIES
“I’m relieved to see my pension is finally moving in the right direction to address the very real financial risks that the climate crisis poses to its portfolio,” says Swelen Andari, a HOOPP member who works in the mental health field. “There is much further to go, but HOOPP finally has a climate plan.”
“HOOPP is finally acknowledging the interconnections between fossil fuels, the climate crisis, and human health,” said Andrew Han, a hospital pharmacist and HOOPP member. “A plan to exclude some fossil fuel investments by 2025 is a good thing, even if it’s coming too late. HOOPP should exclude all fossil fuel investments, including gas, in order to protect my pension and our climate.”
BACKGROUND INFORMATION
About HOOPP:
HOOPP is the pension manager for Ontario’s healthcare sector, with $114.4 billion Assets Under Management (AUM) as of December 31, 2021, over 435,000 members, and more than 630 participating employers including hospitals, family health teams, foundations, community health centres and other organizations and service providers.
HOOPP and its approach to climate-related risk:
In March 2022, HOOPP announced that it had committed to net-zero by 2050.
HOOPP’s 2021 Annual Report included the fund’s first disclosure of amounts invested in climate solutions (p.34), with a $1 billion allocation to climate change equities.
HOOPP’s 2021 Real Estate Sustainability Report outlined an ambitious goal to reduce the absolute scope 1 and 2 emissions of the fund’s real estate portfolio by 50% by 2030, below 2019 levels.
HOOPP provides no details on whether or not it has timelines or milestones for engaging with owned companies to ensure they have credible decarbonization plans. HOOPP plans to undertake collaborative engagement with Canadian companies through its membership in Climate Engagement Canada.
HOOPP claims on its Climate Change webpage that “By urging and encouraging corporations to develop credible decarbonization plans, and by voting in support of climate-related proposals, HOOPP seeks to influence corporate behaviour.” Beyond mentioning that the fund is a member of Climate Engagement Canada, no examples of such engagement are provided on HOOPP’s website, in its 2021 Annual Report, or in its Climate Strategy.
HOOPP’s proxy voting guidelines (effective January 1, 2022) contain no language on science-based targets or decarbonization plans, or even specific guidance on how HOOPP will vote on climate-related shareholder resolutions.
HOOPP does not disclose its proxy voting record, making it impossible for beneficiaries or other stakeholders to see if HOOPP is engaging owned companies on climate.
Regulatory filings to December 31, 2022 show HOOPP holds nearly $2 billion worth of shares in publicly-traded fossil fuel companies including companies that produce, refine and extract fossil fuels, as well as integrated utilities.
HOOPP has disclosed no information on the fossil fuel related holdings in its private equities portfolio.
While HOOPP’s 2021 TCFD disclosures mention conducting scenario analysis to determine how its portfolio would perform under different global heating scenarios, no results of this analysis were disclosed.
One member of HOOPP’s Board of Trustees is concurrently a director of a fossil fuel company: Nick Zelenczuk, the Chair of HOOPP’s Audit & Finance Committee, is also a Board Director at Teine Energy since 2012. Teine Energy is a private company focused on acquiring and developing oil and gas assets in western Canada.
HOOPP’s 2021 annual report does not provide any indication that HOOPP’s executive compensation is tied to achievement of climate-related targets.
HOOPP has no reconciliation or Indigenous rights policy, and no policy stating that owned companies are expected to uphold the UN Declaration on the Rights of Indigenous Peoples and to obtain and maintain the free, prior and informed consent of Indigenous peoples.
Contact information for interview requests:
Laura McGrath, Pension Engagement Manager, Shift Action for Pension Wealth & Planet Health
laura@shiftaction.ca
647-862-7877
Adam Scott, Director, Shift Action for Pension Wealth & Planet Health
adamscott@shiftaction.ca
416-347-3858
Shift Action for Pension Wealth and Planet Health is a charitable initiative that works to protect pensions and the climate by bringing together beneficiaries and their pension funds to engage on the climate crisis.
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