Canada Pension Plan Investment Board (CPP Investments) has released an expanded disclosure that enhances transparency around the carbon intensity and climate transition governance of its portfolio.

Like many institutional investors, CPP has faced pressure to reduce the carbon emissions of its investments and consider factors such as transition risk – how a business would be impacted by the shift to a lower-carbon economy.

The information from the disclosure can help CPP understand if the leadership of its portfolio businesses are demonstrating “proactive engagement in seeking to identify, quantify and prepare to mitigate transition risk that may be accruing in the business model,” Richard Manley, CPP’s chief sustainability officer, said in an interview with Sustainable Biz Canada.

He believes CPP is the first pension fund manager in Canada to provide a degree of visibility into the percentage of its portfolio with elevated carbon intensity and how many of those company boards have shown proactive oversight with transition risk.

CPP manages the Canada Pension Plan Fund, which has over 22 million contributors and beneficiaries. As of June 30, the Toronto-based fund totalled $863.6 billion, making it one of the country’s largest.

How the enhanced disclosure breaks down

CPP has reported its portfolio’s carbon footprint since 2018. But the information did not provide insight into the distribution of carbon intensity within its portfolio or “what’s in the tails of the distribution,” Manley said. CPP sought to better understand the green end and the carbon-intensive side of its investments.

To cover the gap, the enhanced reporting provides additional data in two key categories.

The first is carbon intensity, measuring a portfolio company’s Scope 1 (direct) and Scope 2 (purchased electricity, steam, heat, cooling) greenhouse gas emissions relative to its total enterprise value.

Measured in tonnes of carbon dioxide per $1 million of enterprise value including cash (shortened to tCO2e/$M EVIC), the portfolio holdings are separated above and below a threshold of 40 tCO2e/$M EVIC. At above 40 tonnes, Manley said, it marks where relatively high carbon intensity sits within the portfolio.

The second disclosure is transition governance: the steps a company’s management and board have taken to “understand and prepare for transition-related risks and opportunities,” and evidence of its alignment with at least one of three indicators of transition-related governance or planning.

Those indicators are Science Based Targets initiative-approved targets, level four or five of the Transition Pathway Initiative and participation in CPP's Decarbonization Investment Approach.

“These companies have gone through the process of understanding the source and quantum of their emissions, and the technological and economic feasibility of abatement,” Manley said about companies that show evidence of being aligned one of the indicators.

As of March 31, 86.7 per cent of CPP’s $787-billion portfolio (excluding government-issued securities) fell below the 40 tCO2e/$M EVIC threshold. Over 65 per cent of its portfolio was unconfirmed for evidence of transition governance.

How the disclosure could be used

The expanded disclosure was developed to provide CPP's external stakeholders with greater visibility into its portfolio, Manley explained. For example, if a holding is above the 40-tonnes threshold, it indicates being in a sector where it is likely difficult to abate carbon emissions, he said.

The framework is separate from CPP's investment decision-making. Assessment of financially material climate-related risks and opportunities, the fund manager said, remains the responsibility of its investment teams.

CPP’s investment teams and partners are expected to consider sustainability factors that could affect the risks and opportunities of the asset, Manley said. If the conclusion is that carbon intensity is translating into transition risk, he continued, there is an expectation to verify the claim and study the feasibility of decarbonizing the asset.

Unlike some of its Canadian pension fund peers, CPP does not have a net-zero ambition or climate investment targets. CPP’s priorities are to invest for a whole economy transition and “evolve our strategy as transition pathways emerge and global standards for decarbonization materialize,” Manley said.

CPP reported a 52 per cent decline in its investment portfolio’s carbon footprint since fiscal year 2020. As of March 31, the carbon footprint of its non-government holding portfolio valued at $787 billion was measured at 20.4 million tonnes of CO2, a 10 per cent decline from 2025. From its government-issued securities portfolio of $214 billion, 28 million tonnes of CO2 were calculated.

CPP plans to incorporate the expanded disclosure into its future annual reports, Manley said.