OMERS Commits to Net Zero by 2050

Today, OMERS announced a commitment to its Net Zero 2050 emissions goal, building on its Sustainable Investing program:

OMERS continues to advance its Sustainable Investing efforts by announcing today its commitment to achieve net-zero greenhouse gas emissions across its total portfolio by 2050.

Climate change is one of the most pressing issues of our time. As a responsible asset owner and manager, OMERS has a program in place to sustainably grow its assets over the long term.

Blake Hutcheson, Chief Executive Officer and President, OMERS commented: “Our near-term carbon reduction goals are tangible, actionable, and ensure our leadership team is accountable today. With our Net Zero 2050 goal, we believe we are charting the right course for our future. We are also confident that we can do this by working with governments and other conscientious Canadian and global businesses in the months and years ahead.”

As at June 30, 2021, OMERS had $114 billion in net assets globally, across public and private markets, and has the potential to make a significant contribution in the transition to a low-carbon economy. Efforts across asset classes are well underway to allow OMERS to achieve its near- and longer-term carbon reduction goals. OMERS currently holds more than $18 billion in green assets, based on the International Capital Market Association (ICMA) Green Bond Principles, including those engaged in renewable energy, energy efficiency and green-certified buildings.

Satish Rai, Chief Investment Officer, OMERS, commented: “As investors, we play an important role in working with our portfolio companies and making capital allocation decisions during the transition to a lower carbon economy. We believe that integrating ESG factors into our investment approach is a more holistic way of assessing both value drivers and risk to deliver long-term, stable returns to our members.”

OMERS has already pledged to reduce the carbon intensity of its total portfolio by 20% by 2025, in line with the Paris Agreement. Five-year successive interim reduction goals will follow in support of our longer-term commitment.

The path to Net-Zero will be informed by the annual calculation and public disclosure of OMERS total portfolio carbon footprint, in line with the recommendations of the Task Force on Climate-related Financial Disclosures (TCFD). Carbon footprinting allows OMERS to more deeply understand the Plan’s climate-related risks and opportunities, both immediately and in the future. 

About OMERS

Founded in 1962, OMERS is a jointly sponsored, defined benefit pension plan, with 1,000 participating employers ranging from large cities to local agencies, and over half a million active, deferred and retired members. Our members include union and non-union employees of municipalities, school boards, local boards, transit systems, electrical utilities, emergency services and children’s aid societies across Ontario. OMERS teams work in Toronto, London, New York, Amsterdam, Luxembourg, Singapore, Sydney and other major cities across North America and Europe – serving members and employers and originating and managing a diversified portfolio of high-quality investments in public markets, private equity, infrastructure and real estate. OMERS had net assets of $114 billion as at June 30, 2021.

I thank Neil Hrab of OMERS for sending me this press release earlier today.

OMERS also provides a PDF file going over its approach to climate change:

As stated in the press release above, OMERS has already pledged to reduce the carbon intensity of its total portfolio by 20% by 2025, in line with the Paris Agreement. . 

I covered that announcement back in April here and OMERS' CEO Blake Hutcheson shared these insights with me back then:

• Last year, OMERS undertook its first total portfolio carbon footprinting exercise based on the recommendations of the Task Force on Climate-related Financial Disclosures (TCFD). "We set out target reduction date at 2025 to make it tangible for all our employees."
  
• But even before they undertook their carbon footprinting exercise, OMERS was already spearheading change in its portfolio. Blake told me he spent 10 years as head of Oxford Properties and under his watch, they became a leader in sustainable investing. "We had a dedicated team that was set up 10 years ago focusing on sustainable investing and we quickly became leaders consistently ranking high on the Global Real Estate Sustainability Benchmark (GRESB) and 90% of our buildings have achieved an industry-leading green building certification for their region and asset class." (see Oxford's Sustainability Report here).
• Importantly, Blake added this: "It's a win, win, win. A win for our clients, a win for our investors and a win for our employees and it pays dividends over the long run."
• In Infrastructure, he mentioned Bruce Power which they own 50% of and it provides 35% of the energy to Ontario (clean energy). He also mentioned OMERS important investment in Leeward Renewable Energy (see my coverage here).
• I asked him about Private Equity where they have investments in 20 portfolio companies and he explained their sustainable investment policy applies to all their public and private investments. 
• He told me Michael Kelly who is OMERS Chief Legal & Corporate Affairs Officer also chairs the Sustainable Investing Committee which oversees OMERS approach to matters such as environmental, social and governance (ESG) integration in its investing activities. Katharine Preston who joined OMERS two years ago as Vice President, Sustainable Investing reports to Mr. Kelly. In her role, she assists OMERS with evolving its sustainable investing practices and liaises with OMERS investment, risk and communications teams on matters such as ESG integration, climate risk, and stakeholder communications and reporting (she's great, met her two years ago at a conference in Mont-Tremblant). 
• Blake also told me OMERS is part of the the Investor’s Leadership Network (ILN) which is taking the lead on sustainable investing. He spoke highly of Charles Emond, CDPQ's CEO who is the co-chair at the ILN CEO Council (along with Jean Raby) and said this is an important organization to bring about critical change to sustainable investing (see my recent conversation with Charles Emond  here).

On that last point, yesterday I learned Blake Hutcheson and CDPQ's Marc-André Blanchard were named the new co-Chairs of the ILN CEO Council:

The Investor Leadership Network (ILN), a leading network of investors taking action for people, planet, and prosperity, is announcing two new leaders of its CEO Council.

Blake Hutcheson, President and CEO of OMERS, and Marc-André Blanchard, Executive Vice-President and Head of CDPQ Global, have been appointed Co-Chairs of the ILN CEO Council, effective January 1, 2022. Mr. Hutcheson and Mr. Blanchard will succeed Charles Emond, President and CEO of CDPQ who will be exiting his role as Chair.

The ILN is a CEO-led group of global institutional investors dedicated to advancing sustainability and long-term growth, with a particular focus on diversity in investment, climate change, and sustainable infrastructure. Launched at the 2018 G7, ILN now has 14 members representing six countries and more than US$9 trillion in assets.

“The continued success of the ILN depends on dynamic leadership from our CEOs, and I couldn’t be more excited to welcome Blake and Marc-André as Co-Chairs of the CEO Council. Under Charles’s leadership over the past two years, the ILN has grown to be an influential voice on the world stage and made tremendous strides to advance investors’ best practices in Diversity, Climate Change, and Sustainable Infrastructure. The success of these three initiatives have helped fill crucial gaps in the investment space. Blake and Marc-André will continue to support and build on this work, and I look forward to leveraging our impact over the next two years in partnership,” said Amy Hepburn, CEO, ILN Secretariat.

“I am proud to take on this role working alongside Marc-André, Amy and all of ILN as we strive to make a meaningful impact – including through developing useful resources and initiatives that are evidence-based, measurable, and capable of driving big-picture change,” said Mr. Hutcheson. “When it comes to advancing sustainable investing practices, institutional investors have an important role to play as both influencers and partners.  OMERS support of ILN is consistent with our belief that well-run companies with sound ESG practices will perform better over time, something that is critical to us as a long-term investor acting on behalf of our 525,000 members,” he added.

“Since the inception of the ILN, we have shown that collaboration is key to advancing solutions to meet global challenges. Our network has prioritized concrete actions and delivered tangible results on its three areas of focus”, said Mr. Blanchard. “I am thrilled to join Blake as Co-Chair of the CEO Council. Together, we will continue down the path established by our predecessors. I am confident that, with our colleagues’ vision and Amy’s leadership, we will deepen our impact as we contribute to building a fairer and more sustainable world that can benefit all,” he added.

Earlier this year, the ILN welcomed a new member, held the second edition of its annual Sustainable Infrastructure Fellowship Program and launched a resource library to host a growing collection of thought leadership developed by investors for investors. Some of ILN’s key accomplishments to date include the development of a Blended Finance Blueprint, and investor resources on Climate Change Mitigation, TCFD Implementation, and Physical Risks from Climate Change. As part of its Inclusive Finance Initiative, ILN will introduce metrics and guidance for engaging with portfolio companies around their inclusion efforts in 2022.

About the Investor Leadership Network

The Investor Leadership Network was launched at the 2018 G7 to facilitate and accelerate collaboration by leading global investors on key issues related to sustainability and long-term growth. As the leading network of investors taking action for people, planet and prosperity, the CEO-led group is composed of 14 global institutional investors representative of all continents and assets classes, with over US$9 trillion in assets under management. Learn more about the Investor Leadership Network by visiting our website and following us on Twitter @ILNinfo

I am certain both Blake and Marc-André will succeed Charles Emond very nicely and make sure the ILN continues its important work in advancing sustainability and long-term growth, with a particular focus on diversity in investment, climate change, and sustainable infrastructure.

As far as the latest press release from OMERS committing to achieving net-zero by 2050, it follows others like OTPP and my hunch is they will all achieve net zero long before 2050 (a case of under-promising, over-delivering).

Notice the press release states interim goals will be set every five years and I expect by 2026 we will have a much better idea if OMERS and others will achieve net zero sooner rather than later.

Also, five-year successive interim reduction goals will follow in support of their longer-term commitment. 

Moreover, the press release states: "OMERS currently holds more than $18 billion in green assets, based on the International Capital Market Association (ICMA) Green Bond Principles, including those engaged in renewable energy, energy efficiency and green-certified buildings."

That $18 billion in green assets represents 16% of total assets and I expect that percentage will also grow significantly over the next decade. 

Don't forget, OMERS already owns Bruce Power, an important nuclear reactor plant, and many other assets specifically focused on renewable energy.

They will be growing these renewable energy investments, including energy efficient buildings as well as investing in emerging technologies that will play a critical role in the transition to a net zero economy.

For example, I've covered OMERS investment in Leeward Renewable Energy as well as its investment in Northvolt. There are countless other examples.

One thing OMERS will not be doing is divesting from oil & gas. It doesn't believe in divesting which is makes perfect sense to me.

 Lastly, I note what OMERS CIO Satish Rai states in the press release above: "We believe that integrating ESG factors into our investment approach is a more holistic way of assessing both value drivers and risk to deliver long-term, stable returns to our members.”

Integrating ESG factors across public and private markets is the only way forward for OMERS and other large institutional investors.

It's about playing offense and defense, something Blake Hutcheson knows all too well since he's a die-hard Toronto Maple Leafs fan. 

I shouldn't talk, I'm a die-hard Habs fan and they've completely disappointed me so far this year. 

Below, PRI data gathered from a broad and geographically diverse asset owner base reveal that asset owners increasingly incorporate ESG policy expectations into contractual documentation, with investment mandates proving to be an exception. Watch the clip and read more here.

Update: Someone sent me this after reading this comment:

Hope you are well. Would like to share a different perspective from 2 CIOs’ responses on climate change (one from U.S. and one from UK), a sizzling theme among Canadian institutions. The webinar took place on Nov. 16. Half way through I didn’t hear a word about ESG or climate change, so I posted a question. Please listen to 49 minutes in – their responses are different from what one would expect those from a Canadian fund. I’m not familiar with the UK fund, but State of Wisconsin Investment Board is a well-respected one. (Edwin Benson worked for CPPIB for a little while.)

Very interesting comments on climate targets at around minute 49 but take the time to watch the entire discussion.

I thank this person for sending me this and you can view this discussion here as I cannot embed it below. 

Clive Lipshitz shared this with me after listening to the webinar:

Thanks for sharing this update. The sentiments in the webinar at minute 49 are certainly an interesting juxtaposition to the observations in your original post re OMERS. Moreover, it’s worth focusing on the observation at minute 54 that “it’s not our money, it’s not the state’s money, it’s the beneficiaries’.” In fact, in most U.S. pension systems, benefits - once promised - are sacrosanct. This means that the taxpayer is on the hook to pay those benefits regardless of the funded status of the pension plan. Interestingly, it happens that Wisconsin is one of the few exceptions as it has a risk sharing system, so these comments are correct in that state. But this message cannot be extrapolated across the country. The taxpayer bears the ultimate cost of pension obligations and the taxpayer bears the ultimate long-term cost of the negative externalities mentioned at minute 52 in what is a tragedy of the commons. So it’s in the taxpayer’s interests for there to be transition to decarbonization using the approach articulated by OMERS.

I thank Clive for his wise insights and fully agree with him.