TCFD Disclosures

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Governance

Describe the board’s oversight of climate-related risks and opportunities.

Climate change is a key priority and is overseen by the HOOPP Board of Trustees (Board) as a whole, with each of the Governance, Asset-Liability Management and Audit and Finance Committees playing a key role in HOOPP’s climate change governance. Each of these committees reports to the Board and makes recommendations regarding its areas of oversight. The Board reviews and approves the risk framework and investment policies, including the Statement of Policies and Procedures which references climate change as one of the many factors considered in the management of the Fund. Climate change is a standing item of discussion at regular quarterly Board meetings. The Board has also held multiple special sessions related to the topic and will continue to do so.

Describe management’s role in assessing and managing climate-related risks and opportunities.

In 2022, we launched a climate change steering committee chaired by the Chief Executive Officer (CEO) , focusing on HOOPP’s organizational climate change strategy. This committee included the Chief Investment Officer (CIO), Chief Risk Officer (CRO), Chief Operating Officer (COO), and General Counsel. Additionally, all investment proposals that are brought to the Investment Risk Committee (IRC) include relevant climate change factors. The IRC, chaired by the CEO, reviews and approves key investment decisions. The IRC Sustainable Investing Sub-Committee, which includes the CIO and CRO, oversees the development of ESG-related policies, strategies, and frameworks.

Strategy

Describe the climate-related risks and opportunities the organization has identified over the short, medium, and long term.

Climate change presents risks and opportunities for the Fund, through physical and transition impacts. Physical impacts can include value impairment due to the effects of more frequent and severe extreme weather events. Transition impacts can result from changes in policies and regulations, technological innovation, and consumer behaviour. In the near-term, rapid policy changes to curb emissions are one of the potential impacts and could lead to increased costs for carbon-intense companies and opportunities for carbon-efficient alternatives. Longer term, the onset of chronic effects could significantly alter multiple aspects of the global landscape, such as the spread of vector-borne diseases, agricultural yields, and human migration patterns. The depth and breadth of these long-term consequences depend on the actions we take in the present.

Describe the impact of climate-related risks and opportunities on the organization’s business, strategy, and financial planning.

Transitioning to, and achieving, a net-zero global economy will require vast amounts of capital, presenting opportunities for investors like HOOPP to prudently invest in the solutions that can help alleviate the climate crisis while generating risk-adjusted returns.

Areas that can enable and benefit from the transition to a net-zero economy include clean energy production, low carbon transport, agriculture, building energy efficiency, and water and waste management. Reducing emissions in these areas is key to making meaningful progress towards global net zero and to avoid the worst impacts of climate change. It is expected that there will be investment opportunities related to the decarbonization of these areas, and where opportunities meet our strict investment criteria, we may participate and deploy capital across asset classes.

Describe the resilience of the organization’s strategy, taking into consideration different climate-related scenarios, including a 2°C or lower scenario.

We conduct top-down climate scenario analysis to assess the resilience of our long-term asset allocation and funding ratio. We use multiple scenarios including orderly transition, disorderly transition, and failed transition scenarios. In both the orderly and disorderly transition scenarios, the Paris Agreement is achieved and average global warming is kept well below 2 degrees Celsius by the end of the century. However, the pathways of these two scenarios differ. The orderly scenario sees disruption in the near term as immediate climate action comes into effect. The disorderly scenario results in a greater disruption and potential market dislocation later on the pathway to align the global trajectory with the Paris Agreement. The failed transition scenario leads to a 4-degree Celsius increase in global temperature. In this scenario, the physical impacts of climate change continue to increase in severity. This scenario results in the most negative economic impacts over the long term.

Climate scenario analysis is a useful exercise to illustrate potential directional impacts to the portfolio. However, standards and best practices for climate scenario analysis are still in development globally. The results rely heavily on the underlying assumptions, which vary by scenario developer and the methodologies to translate climate pathways into economic impacts continue to evolve. As such, we continue to monitor the leading scenario analysis practices and tools.

Risk management

Describe the organization’s processes for identifying, assessing, and managing climate-related risks.

Our Investment Management Division, including our Sustainable Investing team, can be considered our ‘first line of defence.’ Our Risk division acts as an additional line of oversight, or ‘second line of defence.’ Investment teams assess climate-related impacts as part of due diligence on new potential investments. This can include doing physical risk assessments, evaluating opportunities to transition assets, and conducting stranded asset analysis. For externally managed funds, we review and evaluate the external manager’s approach to assessing and managing climate risk in their investment process.

We integrate climate risk analysis throughout the investment life cycle, including incorporating climate risk into our portfolio stewardship activities. When voting our proxies for public companies, we consider withdrawing support for the relevant board director if a company does not disclose its governance of climate change risks and opportunities in line with the TCFD framework. We support climate-related proposals, including those that would lead to improved disclosure of relevant sustainability information to shareholders. We also engage companies to provide the information we need as an investor to assess climate risk, and on climate action to increase the resilience of their business models.

Describe how processes for identifying, assessing, and managing climate-related risks are integrated into the organization’s overall risk management.

Climate risk is identified in our investment risk frameworks, alongside other key risks to the Fund. These risk frameworks are regularly reviewed by the Board. The Risk division ensures our risk management and compliance systems, practices and monitoring continue to evolve to meet our future needs. We continue to collaborate with peers on climate analysis best practices and evaluate tools that enable assessment of physical and transition risks. We are participating in a project with the Bank of Canada and the Office of the Superintendent of Financial Institutions to conduct top-down climate transition scenario analysis. We have also assessed multiple tools that model physical and transition impacts at the asset level to complement the bespoke analysis currently undertaken.

Metrics and targets

Disclose the metrics and targets used to assess and manage relevant climate-related risks and opportunities where such information is material.

In 2022, HOOPP committed to achieving a net-zero portfolio by 2050. This net-zero goal builds on the target set for our Real Estate portfolio in 2021, which aims to reduce carbon emissions in our direct investments by 50% on an absolute basis. Additionally, for our Real Estate portfolio, we measure our buildings’ climate resiliency and renewable energy usage as part of Real Estate Sustainability Pillar Scorecard. The most recent metrics can be found in our Real Estate Sustainability Report.

We continue to measure and monitor the portfolio carbon footprint and the percentage of the portfolio covered by the footprint measure, aiming to increase this coverage over time. Portfolio carbon footprint metrics are not a complete measure of climate risk, and so we also continue to review alternative measures of climate risk.

Disclose Scope 1, Scope 2, and, if appropriate, Scope 3 greenhouse (GHG) emissions, and the related risks.

Our 2022 footprint includes four asset classes: public equities, real estate, private equity, and infrastructure. This is an expansion in coverage from the 2021 footprint metric, which included public equity and real estate.

	2021	2022
Carbon footprint (tCO₂e/million dollars invested)	40.4	39.2

We use the enterprise value method recommended by the Partnership for Carbon Accounting Financials (see formula below). Our footprint metric includes the Scope 1 and Scope 2 emissions of the assets in the in-scope portfolio, with limited Scope 3 included for some real estate properties. Shares in public companies, internally and externally managed private assets, futures and total return swaps on equity indices are included. Equity options are not included. We have included long positions only; short positions are not included and have not been netted. Public portfolio values are as of Dec. 31, 2022 and private portfolio values are as of Dec. 31, 2021 due to timing on data availability.

Emissions data is a combination of reported and estimated data. The data quality score for the 2022 footprint is 2.7 based on the PCAF data quality scoring methodology, where 1 is the highest quality, most certain level and 5 is the lowest quality, least certain level.

A portfolio carbon footprint is a backward-looking measure and, as such, does not factor in forward-looking plans to reduce emissions. Data can be dated and unavailable to investors, requiring estimation of emissions or exclusion from the portfolio footprint measure. A portfolio carbon footprint is not a comprehensive measure of climate risk or opportunity and can fluctuate due to changes in market pricing, rather than changes in carbon emissions or holding size.

Describe the targets used by the organization to manage climate-related risks and opportunities and performance against targets.

In 2022, HOOPP set the goal to achieve a net-zero portfolio by 2050. We designed a set of interim targets that work in tandem and help us align our shorter- to mid-term actions with the long-term pathway to net zero. Our interim targets for 2025 and 2030 include percentage of portfolios covered by reported emissions data, capital made available for green investments, percentage of portfolios covered by credible transition plans, and portfolio emissions intensity in CO2e per $1M invested. Together, these targets are designed to put us on the pathway to net zero in a manner that contributes to real world decarbonization. Please refer to Our climate strategy: good for the Plan and the planet for more information on our net-zero portfolio targets.

On an annual basis, climate-related objectives are included in the Investment Management divisional performance scorecard, which factor into compensation. Our Board reviews and approves the annual scorecard objectives.

This document provides a simplified overview of HOOPP's benefits based on the terms of the HOOPP Plan Text at the time of publication. From time to time, HOOPP may amend the HOOPP Plan Text. In cases where the information provided in this document differs from that contained in the HOOPP Plan Text, the HOOPP Plan Text will govern. More details, including the full HOOPP Plan Text and a complete description of the Plan and its benefits, can be found on hoopp.com.