CPPIB cites legal risks and portfolio complexity in pulling back from climate commitment
The Canada Pension Plan Investment Board (CPPIB) has decided to withdraw its net-zero carbon emissions commitment, citing legal uncertainty and the complexity of its investment portfolio, according to The Globe and Mail.
CPPIB updated the “approach to sustainability” section of its website on Wednesday, stating that “recent legal developments in Canada” have affected how net-zero goals are being interpreted.
These developments include expectations for adopting standardized metrics and interim emissions targets.
CPPIB did not specify which legal changes influenced its decision.
The pension fund explained that these expectations are incompatible with its portfolio, which spans various sectors and regions.
The board stated that forcing alignment with rigid milestones could lead to investment decisions that don’t align with its overall 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.”
CPPIB manages $714.4bn in assets on behalf of Canadian contributors to the public retirement plan.
It adopted the net-zero goal in 2022, pledging to significantly increase investments in decarbonization and double its green asset holdings within eight years.
While abandoning the formal target, the fund maintained that its decarbonization efforts continue. It reported a 41 percent reduction in the carbon footprint of its investment portfolio since 2020.
The change follows Royal Bank of Canada’s move in late April to drop its sustainable finance targets, citing legal risks posed by Ottawa’s anti-greenwashing legislation.
This legislation—Bill C-59—amended the federal Competition Act last year.
It now holds companies legally accountable for environmental claims that lack robust substantiation and requires compliance with international standards. Individuals and firms could face substantial fines for violations.
Several natural resource firms have also removed environmental statements from public communications due to the law, although CPPIB did not name Bill C-59 in its statement.
The law’s impact has sparked debate, with some questioning whether it effectively combats misleading environmental claims or instead deters companies from sharing legitimate climate-related information due to legal risk.
Patrick DeRochie, senior manager at Shift Action for Pension Wealth and Planet Health, said CPPIB’s move diverges from other major Canadian pension funds that continue to support net-zero targets aligned with the Paris Agreement.
“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,” said DeRochie.
He added that this includes younger generations whose retirement security could be jeopardized by future climate impacts.
Michel Leduc, CPPIB’s global head of public affairs and communications, rejected suggestions that the fund is stepping away from climate-related risks.
Although the website cited Canadian legal developments as a reason for abandoning the net-zero target, Leduc said in an interview that anti-greenwashing rules were only one of several factors involved.
He noted that CPPIB operates across multiple jurisdictions with differing and evolving regulations.
Leduc emphasized that CPPIB’s long-term strategy avoids short-term divestment tactics and aims to address the complex realities of a global portfolio.
He said their responsibility to 22 million Canadians includes a strong commitment to understanding the factors shaping the global path to net zero by mid-century.
“And we’ve been very clear about those factors from the very beginning – those factors that will drive the whole-economy transition.”
