Strategy & Practice Management
PSP Investments launches inaugural Climate Strategy with targets to guide climate action and emissions reduction
The Public Sector Pension Investment Board (PSP Investments) has announced the launch of its first Climate Strategy, setting out an enhanced ambition to guide emissions reduction across its investment portfolio.
The objective of the Climate Strategy is to support the global transition to net-zero emissions by 2050 by proactively managing climate risks, unlocking investment and carbon reduction opportunities associated with climate-aligned assets, strengthening carbon disclosure, and enhancing collaboration with a wide range of stakeholders, PSP Investments said in a press release.
"At PSP Investments, we have considered ESG factors, including climate, in our decision-making for many years. This puts us in a good position to launch our climate strategy today", said Neil Cunningham, President and CEO at PSP Investments. "PSP Investments is committed to using its capital and influence to support the transition to global net-zero emissions by 2050. We understand the important role that the financial sector can play in addressing climate change whether it be our investment choices, providing capital to support the transition to global net-zero or encouraging the reduction of GHG emissions among the companies in which we invest."
The focus areas, as laid out in the PSP Climate Strategy Roadmap, include increasing investments in assets that support climate mitigation and adaptation, and reducing our exposure to carbon-intensive investments that don't have transition plans. PSP Investments also commits to engage with portfolio companies to encourage carbon footprint reductions, the adoption of science-based transition plans and the uptake of disclosure practices aligned with the Task Force on Climate-Related Financial Disclosures (TCFD).
As part of its new Climate Strategy, PSP Investments has also released its bespoke Green Asset Taxonomy which it uses to quantify GHG emissions exposure across its investment portfolio to set a baseline and to monitor the progress of emissions reduction over time.
PSP Investments will aim to:
- Increase investments in Green Assets to C$70 billion by 2026 from a C$40.3 billion baseline in 2021.
- Increase investments in Transition Assets to C$7.5 billion by 2026 from a C$5.1 billion baseline in 2021 and ensure that assets representing 50% of PSP Investments' carbon footprint will have commitments to implement mature, science-based transition plans by 2026.
- Reduce holdings in Carbon Intensive Assets that lack transition plans by 50% by 2026 from a $7.8 billion baseline in 2021.
- Promote the adoption of science-based transition plans.
- Enhance GHG data coverage across the portfolio by aiming to obtain GHG data for 80% of its in-scope portfolio by 2026.
PSP Investments will have an equally important role to play in growing the market for sustainable finance. Following its inaugural C$1.0 billion Green Bond Issuance in February 2022, PSP Investments will aim to steer at least 10% of its long-term debt financing toward sustainable bonds by 2026.
"The most recent research on climate change is clear and we must all step up to increase our ambition", continued Neil Cunningham, President and CEO at PSP Investments. "We embrace the need to take action on climate risk while also positioning our portfolio to deliver the investment results required by our mandate. Research shows that corporations that are actively managed and plan for climate change can secure a higher return on investment as compared with companies that do not. By executing its climate strategy, I believe that PSP Investments can support the transition to global net-zero emissions by investing for a better tomorrow."
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