Climate Commitments

UTAM is committed to divesting from investments in fossil fuel companies in the Endowment portfolio. This process began in October 2021 with two related divestment commitments announced by U of T President Meric Gertler: 

• The Endowment portfolio will be fully divested from all direct investments in fossil fuel companies within one year of the divestment announcement. 
• For those investments made indirectly – typically through pooled and commingled vehicles managed by third-party fund managers – UTAM will divest the Endowment from its investments in fossil fuel companies by no later than 2030. We will also report regularly to stakeholders on our progress towards this goal. 

Eliminating direct exposure: UTAM achieved the first commitment – divesting from all direct investments in fossil fuel companies – in 2022, within the target timeline.

Reducing indirect exposure: We also implemented notable changes in the Endowment, which together have reduced indirect exposure from 2.0% of the Endowment’s net asset value at December 31, 2021 to 1.4% of the Endowment’s net asset value at December 31, 2023.

Identifying low-carbon strategies: We continue working to identify new low-carbon strategies that exclude investments in fossil fuel companies. We also consider fossil fuel-free strategies managed by our existing managers and work with those managers to launch new strategies that will further reduce the Endowment’s exposure to carbon and fossil fuel companies. 

Adopting Reference Portfolio indexes free of fossil fuels: To better align our efforts with the University’s divestment initiative, we are transitioning the Reference Portfolio’s asset class benchmarks to indexes that exclude fossil fuels. This process began effective October 1, 2022, when we transitioned the fixed income benchmarks to newly launched indexes that exclude fossil fuels. As of the same date, the Reference Portfolio’s equity benchmark began transitioning to the MSCI All-Country World ex Fossil Fuels Index; we expect this process to be completed by October 1, 2024. 

Aligning EFIP with U of T climate objectives: Although President Gertler’s divestment initiative is focused on the Endowment, UTAM also implemented changes to EFIP in 2022 to align its investment strategy with the University’s climate objectives. As of December 31, 2023, EFIP did not have any direct exposure to fossil fuel companies and all material indirect exposure to fossil fuel companies had been eliminated.

When President Gertler unveiled the University’s divestment initiative, he also announced that UTAM would allocate at least 10% of the Endowment portfolio to sustainable and low-carbon investments by 2025. We’ve made progress toward this commitment as well. At December 31, 2023, 6.8% of the Endowment was invested in such strategies. We continue to identify and investigate new sustainable and low-carbon strategies for their potential fit in the Endowment portfolio. We’re comfortable that this commitment will be achieved ahead of the 2025 target date.

A key component of the University of Toronto’s 2021 climate announcement is the commitment to net zero emissions in the Endowment portfolio by 2050. This commitment coincided with UTAM joining the Net-Zero Asset Owner Alliance. The Alliance has established a framework for setting interim targets on various decarbonization initiatives to guide members in achieving net zero emissions in their portfolios by 2050. In accordance with the Alliance’s Target Setting Protocol, in 2022 UTAM established interim targets with respect to emissions, engagement and transition financing. 

Emissions targets

This target, measured in tonnes of CO₂ equivalent per million dollars invested (tCO₂e/$M), includes the impact of carbon contributions from equities (including equity-like assets) and corporate bonds. 

UTAM’s new carbon footprint target builds on the successful achievement of our previous carbon footprint goal. In 2019, we committed to reducing the carbon footprint of the equity and equity-like sub-portfolio of the Endowment by 40% compared to 2017 levels by 2030. We met this target – almost a decade ahead of schedule. 

We share with the Alliance the belief that engagement is a critical tool to drive the transition to net zero in the real economy. Engagement has been an important component of UTAM’s responsible investing framework for many years and it will continue to be significant going forward. Therefore, consistent with the Alliance’s Target Setting Protocol, in 2022 we committed to meet these engagement targets by 2025: 

• To engage – through collaborative initiatives, as well as via our investment managers and EOS, our engagement service provider – with 20 public companies, focusing on those that are the world’s largest corporate GHG emitters and those that contribute to the most owned emissions in the Endowment portfolio. 
• To continue engaging with incumbent and prospective investment managers, and to participate in manager engagements led by the Alliance. 
• To contribute to industry-wide engagements. 

The Alliance’s Target Setting Protocol includes a pillar addressing financing transition. This focuses on assessing climate solution investments, as well as enhancing the supply side of climate solutions and supporting the growth in climate solution investments within Alliance members’ investment portfolios. 

Our targets in relation to this pillar are qualitative. Having joined the Alliance’s Financing Transition Track, we support its objectives and stay well informed about this rapidly evolving initiative. Going forward, we’ll continue to assess climate solution investments for the Endowment portfolio. 

At the end of 2023, the carbon footprint of the Sub-Portfolio was 32.4 tCO₂e/$M (based on total emissions of 96,760.1 tCO₂e). UTAM once again engaged PricewaterhouseCoopers LLP to undertake a limited assurance review of the calculation of the 2023 carbon footprint. The review examined the calculation and reported outcomes based on the 2023 carbon footprint results. 

The 2023 carbon footprint calculation and results, accompanied by PwC’s independent opinion, are available in the Reports section of our website.