Shift towards Inflation-Resistant and Climate-Friendly Assets: Insights from Barbara Zvan of UPP
University of Ottawa Pension Plan (UPP) Embraces Climate-Conscious Investing
The University of Ottawa Pension Plan (UPP), a Canadian pension plan serving over 40,000 members across five Ontario universities and 14 sector organizations, has been making strides in climate-conscious investing since its launch in 2021.
UPP's selection process for external managers prioritizes climate as a core criterion. However, specific details about the evolution of UPP's portfolio since its inception, its strategy in terms of income and inflation protection, or how it has integrated climate risk considerations, are not readily available in the public domain.
Nonetheless, it is generally known that recently launched pension plans like UPP often focus on building diversified portfolios aimed at stable income streams and inflation hedging. This typically involves a mix of fixed income, real assets such as infrastructure or real estate, and possibly inflation-linked bonds. Integration of climate risk is increasingly common, usually through the incorporation of environmental, social, and governance (ESG) criteria, scenario analysis for climate impact, and divestment or reduced exposure to high-carbon sectors.
UPP's portfolio is divided into three categories: return-enhancing (equities and private markets), inflation-sensitive (infrastructure and real estate), and interest rate-sensitive (fixed income). The pension plan has made significant progress in reducing emissions, particularly in listed equities, and has halved its portfolio's GHG emissions intensity since 2021.
UPP sees infrastructure as offering steady, long-term cash flows while providing inflation protection. The pension plan has made co-investments in infrastructure with Arjun Infrastructure Partners and Copenhagen Infrastructure Partners. It has also allocated private credit to Arrow Global Group and private equity to Kohlberg & Company in private markets.
In public markets, UPP has invested with managers such as Impactive Capital, Whitebox, Ashmere, and Episteme Capital Partners. UPP's focus on income generation and income protection is evident in its strategy, as it has prioritized assets that offer inflation protection and has increased its interest rate sensitivity to reflect the higher-rate environment.
UPP has pledged C$1.2bn for climate solutions by 2030, with more than half already committed. The pension plan uses a full transition alignment framework to define what counts as a 'climate solution'. It is also worth noting that UPP ranks comparatively high on Shift's Annual Scorecard, measuring climate commitments of Canadian pension funds.
Barbara Zvan, who brings nearly 25 years of experience from Ontario Teachers' Pension Plan, has led UPP as president and CEO since its inception. The pension plan is fully funded as of 2024 and has reported an annual net return of 10.3%.
However, UPP relies heavily on managers for data, insights, and execution in climate-related decisions. This underscores the importance of continuous collaboration and transparency between pension plans and their investment partners in driving sustainable and responsible investing practices.
- The University of Ottawa Pension Plan (UPP) has integrated climate risk considerations into its investment strategy, such as the incorporation of environmental, social, and governance (ESG) criteria, scenario analysis for climate impact, and divestment or reduced exposure to high-carbon sectors.
- UPP, under the leadership of Barbara Zvan, has pledged C$1.2bn for climate solutions by 2030, with a focus on assets and strategies that provide inflation protection and sustainable, long-term cash flows, such as infrastructure investments with Arjun Infrastructure Partners and Copenhagen Infrastructure Partners.
