The board overseeing Canada’s national pension plan has abandoned its climate goal to invest in a way that supports global targets to achieve net-zero emissions by 2050 — the hypothetical threshold where human activity stops adding more carbon pollution into the atmosphere.
The Canada Pension Plan Investment Board (CPPIB) quietly disclosed its decision to abandon its net-zero commitments in its latest annual report and in a list of frequently asked questions on its website.
“Forcing alignment with rigid milestones could lead to investment decisions that are misaligned with our investment strategy,” notes its FAQ response.
“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.”
In early 2022, CPPIB committed to making its operations and portfolio of investments fully net-zero by mid-century.
Since then, changes to Canada's Competition Act require companies to substantiate environmental claims they make.
John Graham, chief executive of CPP Investments, said those changes have introduced new considerations around how net-zero commitments are interpreted. And that's caused the CPPIB to change “how we talk about it, but nothing's changed on what we're actually doing,” he said.
"We think it is really important to incorporate climate and incorporate sustainability into the portfolio when we take a long-term perspective and as a long-horizon investor," Graham said.
For Adam Scott, executive director of financial watchdog charity Shift Action for Pension Wealth and Planet Health, CPPIB’s decision represents an abdication of responsible long-term financial planning in the face of a changing climate.
“Climate change is one of the largest systemic financial risks faced across the planet,” said Scott.
“This is a very serious breach of CPP’s obligation to manage our money responsibility.”
The development comes less than a month after the Royal Bank of Canada (TSX:RY), the country’s largest bank, dropped its sustainable finance commitments.
Several major Canadian banks, including BMO, TD Bank and CIBC, have also backtracked on climate commitments this year, announcing they were leaving a Net-Zero Banking Alliance backed by the United Nations.
Investment fund says recent strong growth linked to long-term strategy
In press release earlier this month, the investment board highlighted that it ranked second among 25 global pension funds for highest returns over the past decade. Between 2015 and 2024, the fund averaged a 9.19 per cent return, only behind the Swedish pension fund AP7.
“This strong performance reflects the resilience of our diversified portfolio and the discipline of our long-term investment strategy,” stated the fund.
The investment board of Canada’s national pension fund is made up of financial professionals managing roughly $714 billion in retirement savings. Independent of government and set up under an act of Parliament in 1997, the fund currently has about 22 million contributors and beneficiaries.
“We take our responsibility to Canadians very seriously and operate with a clear mandate — to maximize returns without undue risk of loss,” the CPPIB notes on a webpage describing its role.
The investment board highlights a 2022 report from the Office of the Chief Actuary that found Canada’s pension plan is projected to be financially sustainable until at least the year 2100.
That report, however, caveats its findings, noting “there is a lot of uncertainty on the direction and magnitude of these potential impacts, and the risk is evolving constantly.”
Abandoning net-zero targets could erase trillions of dollars from world economy
Any Canadian currently under 40 years won’t get paid out under the CPP until at least 2050 — the point countries around the world, including Canada, have committed to achieving net-zero emissions.
If that goal is not met, scientists have warned the world will see substantial global warming beyond two degrees Celsius, leading to widespread suffering and significant economic and environmental harm.
Global reinsurance company Swiss Re calculated in 2021 that the world would see a four per cent drop in GDP if global warming remained below 2 C. But that figure spikes to 18 per cent under 3.2 C of warming. Canada, the U.S. and U.K. were all forecasted to lose 10 per cent of their GDP under the unmitigated warming scenario.
Deloitte, one of the world’s ‘Big Four’ accounting firms, found in 2022 that climate change could cost the world’s economy US$178 trillion by 2070 if net-zero commitments were abandoned.
“By contrast, the global economy could gain US$43 trillion over the next five decades by rapidly accelerating the transition to net-zero,” the firm found.
Pension funds well positioned to bankroll green infrastructure
Many experts agree that to avoid that future, the global economy would need to embark on a major transition away from fossil fuels and toward renewable energies.
The transition is expected to create millions of new jobs and spur massive economic growth. But it would also require major investment.
In 2021, the International Energy Agency calculated that to reach net zero emissions by 2050, annual clean energy investment worldwide would need to more than triple by 2030 to around $4 trillion.
“For solar power, it is equivalent to installing the world’s current largest solar park roughly every day,” noted the IEA.
Forced to minimize long-term losses and maximize gains, global pension funds are often in the best position to make strategic investment decisions prioritizing clean over conventional energy.
Despite CPPIB abandoning its net-zero policy, seven of Canada’s largest pension funds remain committed to the target.
Earlier this year, Shift’s annual ranking of the green performance of major Canadian pension funds placed Caisse de dépôt et placement du Québec, Investment Management Corporation of Ontario, and Ontario’s University Pension Plan in the top three spots after improving across a number of climate metrics.
Canada Pension Fund previously censured for declining green record
In its latest financial statement Wednesday, the CPPIB reports that the carbon emissions from its investments have essentially held steady over the past year.
But that calculation does not include Scope 3 greenhouse gas emissions — including those produced when fossil fuels produced by a company the CPPIB is invested in are burned by a consumer.
Shift's 2025 report card on the green performance of Canada's pension funds had already dropped the CPPIB score to second worst in the county.
The report pointed to a number of factors, including CPPIB's continued refusal to set interim emissions reduction targets, persistent greenwashing from executives and its continued financing of high-risk fossil fuel projects.
Climate change could drop CPPIB investment returns by 40% within 15 years: analysis
The Shift report also cited recent research from the Dutch-headquartered risk management company Ortec Finance that found CPPIB's dire projections still underestimate the impact of climate change on the country’s pension funds.
The November 2024 study found Canadian pension funds were especially vulnerable to stranded assets should industry move to quickly sell off carbon-intensive projects.
Ortec’s report lays out a scenario where a quickly warming planet is on track to hit 3.7 degrees Celsius of warming beyond pre-industrial levels by 2100.
Under that level of warming, Canadian pension funds could see their investment returns decline by 40 per cent by the late 2030s — “largely as a result of severe physical climate impacts,” the Shift report says.
Scott says CPPIB’s latest abandonment of its net-zero goal shows it was “never really committed” in the first place.
“These professionals that we've paid to do this don't seem to understand the business that they're in and what's required to do their jobs,” he said. “They have a generational obligation.”
“I would call it investment management malpractice.”
— With files from the Canadian Press
