December 17, 2024
Today, OMERS released a purpose-built classification system to assess the exposure of its investments to climate risk and opportunities.
There is no single taxonomy available that can be applied to an investment portfolio that is highly diversified globally and by sector. As a result, OMERS has developed its own, and is using it as a key tool to support the execution of its Climate Action Plan (CAP). The taxonomy groups together business activities based on where they fall on the climate transition spectrum, allowing OMERS to classify portfolio assets accordingly into one of five categories: green, enabling, low climate impact, grey and hard-to-abate. It is informed by industry standards, while allowing OMERS to evaluate factors specific to an investment portfolio.
“We’ve reported on our green investments for the past few years, but that doesn’t mean that the rest of the portfolio is not climate friendly. The taxonomy allows us to categorize all our assets through a climate lens,” said Michael Kelly, OMERS Chief Sustainability Officer.
Introduced in 2023, the CAP outlines OMERS approach for achieving its commitment to net zero by 2050, along with the related goals that support this ambition. At the end of 2023, OMERS portfolio carbon emissions decreased 52% from its 2019 baseline, and the Plan had $21 billion in green investments, with a goal to reach $30 billion by 2030.
“Our mission is to provide pensions for more than 628,000 members over the long term. We can only do that if our approach to the way we invest and the things in which we invest are designed and managed to be sustainable,” said Ralph Berg, OMERS Chief Investment Officer. “An important role we can play is in finding opportunities for investments that we believe will generate strong returns, while also contributing directly and indirectly to the low carbon transition.”
OMERS climate action progress also includes advocating for standardized sustainability reporting requirements, including the new ISSB standards. During the 2024 proxy voting season, OMERS participated in 917 shareholder meetings and voted on 186 sustainability-related proposals. The Plan continues to partner with portfolio companies, with the goal that the top 20 carbon emitters in the portfolio will have credible net zero plans by 2030. A $3 billion transition sleeve has been created for investment in companies with strong potential to contribute to real-world decarbonization. OMERS has also made a commitment to reaching net zero in its own operations by 2050, and linked compensation for key executives to reaching its sustainability goals.
In 2023, results of a Bank of Canada analysis suggested that OMERS portfolio is the most climate resilient amongst the pension plans reviewed. OMERS was also ranked in the top 10 in Global SWF’s 2024 report on governance, sustainability and resilience.
“Recognition by outside experts helps give us confidence that we are moving in the right direction. However, it is a non-linear path and there is a huge amount to do, at the organizational, industry, and systems levels,” said Katharine Preston, OMERS Vice President, Sustainable Investing. “Our objective is to continue to make measurable improvements, to ensure we continue to deliver a sustainable, affordable and meaningful plan for our members for generations to come.”
You can read OMERS Climate Taxonomy and the full Climate Action Plan here.