Daily ESG Briefing: Canadian pension heavyweight OTPP commits to Net Zero

The latest developments in sustainable finance

The Ontario Teachers’ Pension Plan Board has committed to reach net-zero emissions by 2050. The C$204.7bn fund, which manages around 80% of its assets in-house, said that it planned to increase climate-friendly investments and work with portfolio companies to manage and report their emissions. It will report on its progress annually. 

Norges Bank Investment Management has said that CEO pay should be “driven by long-term value creation” and “align with shareholder interests”, in a submission to the Australian Prudential Regulation Authority on the topic. As a result, NBIM, which has A$24.4bn (€15.5bn) invested in Australian equities, recommended that a substantial part of CEO remuneration should be in ‘locked-in’ shares. Locking the shares in for between five and 10 years, “beyond resignation or retirement”, would be “a transparent way of aligning the interests of the CEO with those of shareholders and the wider society”, it said. Its feedback comes in response to plans to update remuneration requirements in Australia.

The World Bank has responded to claims in a report last week by CARE International that it “over-reported” its investment in projects that support developing countries to deal with the physical fall out from climate change by $832m, including part of a $328m Earthquake Housing Reconstruction Project in Nepal. The report claims that the project in Nepal relates to a geohazard unrelated to the effects of climate change. The World Bank told RI that the funding qualified for a high climate adaptation co-benefit under the Joint MDB Methodology for Tracking Climate Finance, and that the housing was designed to be “resilient to both seismic and climate-related hazards.”

BNP Paribas, Credit Suisse and ING have announced that they will stop financing Ecuadorian crude oil because of concerns over its impact on the Amazon rainforest. The three lenders, along with Natixis, UBS and Rabobank, were accused by NGOs of being complicit in environmental and social disasters due to their heavy financing of Ecuadorian oil exports to the US. According to Reuters, Rabobank said it stopped financing the trade in August 2020 while UBS said that it was committed to environmental standards, and that it refused transactions where the oil came from indigenous lands.

Legal and General Investment Management Real Assets has published a strategy to reach net-zero emissions by 2050 across its UK real estate portfolio. As part of the strategy, the firm aims to remove fossil fuels from all its properties and will ensure that by 2030, all homes built by its housing businesses will be capable of operating at net zero carbon emissions, as well as a target reduction of 60% in its scope 1 and 2 emissions.

The Australian Government has joined the International Coalition for Climate Resilient Investment – a finance sector-led initiative involving 75 public and private organisations representing $10tn in assets. It aims to develop consistent frameworks to accurately price physical climate risks in investment decisions.

The issuance of UK sustainability bonds more than doubled in 2020, hitting £10bn, according to Refinitiv. The UK now ranks 6th in Europe for the share of sustainable bonds globally. Social bonds accounted for 36% of the sustainability bond market in 2020 – up from 5% the previous year.