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First launched in July 2022, UPP’s Climate Action Plan established a bold set of climate-related commitments to achieve net-zero portfolio emissions by 2040 or sooner, with an emphasis on decarbonizing the real economy.
The progress made in 2023 on the Climate Action Plan’s commitments are key to both managing the impacts of climate change on fund performance and capitalizing on opportunities to enhance our ability to create long-term value. The below summary provides highlights of our progress in the past year across the Climate Action Plan’s four pillars: Evaluate, Invest, Engage, and Advocate.
Evaluate
UPP’s recently published Climate Transition Investment Framework enables us to systematically evaluate the transition alignment and readiness of our current portfolio and new investment opportunities. Given the potential impacts of climate change on financial stability, this framework will support our ability to achieve the financial outcomes needed to pay pensions in the long term.
As part of our efforts to evaluate the impacts of climate change on fund performance, we continue to make progress on developing climate scenario analysis capabilities, which helps us to identify and assess potential economic and financial impacts of a changing climate in the future. In 2023, we participated in the Bank of Canada’s project to assess the systemic implications of climate transition risk to the Canadian financial system. The project provided a detailed analysis of both UPP’s and the overall financial system’s credit and market risk exposure in four distinct climate scenarios.
Invest
UPP’s Climate Transition Investment Framework also outlines clear investment objectives, including defining new investment thresholds for funds, co-investments, and direct investments to avoid exposure to unmitigated climate transition risk, and a climate solutions investment target to increase exposure to climate transition opportunities.
The ongoing transition to a low-carbon economy requires significant amounts of capital, which presents opportunities for investors. To capitalize on these opportunities, UPP will commit at least $1.2 billion to climate solutions by 2030, which we define as companies and technologies that can help mitigate the effects of climate change and adapt to a changing climate. Our target will include new commitments to private market funds, co-investments, and direct investments, as well as net-new climate solutions in public market or fixed income fund commitments.
In line with this target, UPP recently committed €150 million to Copenhagen Infrastructure Partners’ (CIP) latest flagship strategy, Copenhagen Infrastructure V (the Fund). The Fund – which is dedicated exclusively to greenfield renewable energy infrastructure investments – is on track to achieve its target size of €12 billion, which will make it one of the largest of its kind globally. Building upon the legacy of its predecessor flagship funds, it aims to invest across a range of technologies, including offshore wind, energy storage, and onshore wind and solar projects, in countries spanning North America, Western Europe, and the Asia Pacific.
Engage
Published in November, UPP’s Climate Stewardship Plan establishes specific goals for our climate stewardship activities, which aim to address the risks associated with climate change and encourage the transition to a resilient, net-zero world, in turn supporting better portfolio performance and long-term value for our members.
Under this plan, we are engaging in outcome-focused dialogue with priority companies on the actions needed to decarbonize their businesses and support economy-wide transition to net-zero. These efforts, along with enhanced proxy voting guidance, are key tools within our stewardship toolkit to encourage the net-zero transition and sufficient climate-related disclosure.
During the 2023 proxy season, we leveraged our in-house proxy voting capacity to encourage climate-related oversight and disclosure. We voted against directors at 30 companies where there was an absence of board climate oversight and contacted nearly a dozen Canadian companies to explain our decision to vote against directors for climate-related reasons. See our real-time proxy records and quarterly reports here.
Through our participation in Climate Engagement Canada (CEC) , we supported the design and implementation of a net-zero benchmark that assesses climate action and disclosures of the highest emitting Canadian companies. This critical tool will underpin our engagements with companies and boards going forward.
Advocate
Our Climate Stewardship Plan also refined our focus on advocacy topics that stand to make significant impacts on economy-wide climate transition and risk mitigation such as mandatory and standardized emissions disclosure and transition plans and supporting the transition in the real economy.
Our collaborative work with institutional investors in Canada and internationally this past year included publicly supporting new global standards published by the International Sustainability Standards Board , advocating for improved integration of climate considerations into benchmark proxy voting policies with the Institutional Investor Group on Climate Change , and contributing to the CDP’s campaigns on climate disclosure and science-based targets, which reach thousands of high-emitting companies globally. After joining the UN-convened Net-Zero Asset Owner Alliance last year, we also participated in the Alliance’s activities and are preparing to submit our first Climate Action Plan progress report to the NZAOA in 2024.
Further to our membership in the Alliance, UPP’s President and CEO Barbara Zvan was invited to speak at the UN Climate Ambition Summit alongside a small number of “early movers and doers” on net-zero organizations and countries that have demonstrated leadership, ambition, credibility, and progress on their climate transition commitments. In her remarks, she encouraged companies and governments to act with urgency on their own climate transition pledges and progress, and to engage with investors like UPP to help ensure we are working together to ensure we achieve our collective net-zero future.
UPP will continue to provide updates on our progress under our Climate Action Plan, which contains many important milestones along the path to net-zero by 2040 or sooner.
To learn more about the Climate Action Plan and UPP’s responsible investing approach, please visit:
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Kelly Conlon
Managing Director, Strategic Communications and External Relations
[email protected]
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