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VERT: Ontario Teachers’ takes a pan-fund approach to climate investing

Tackling climate change is one of the biggest challenges of our time. The International Energy Agency estimates that global investment in clean energy initiatives will need to triple to around US$4 trillion each year—and soon—if the world is to reach net zero emissions by 2050. Clean energy investment won’t only slow climate change; it’s an economic imperative as well, improving competitiveness, boosting global economic growth, and creating millions of jobs. But scaling clean energy and helping carbon-intensive businesses reduce their emissions requires tremendous efforts—from businesses, governments, and individuals. It requires new technologies, and new ways of thinking and operating. This underscores why funding the energy transition presents both opportunities and challenges for investors.

Earlier investments aimed at mitigating climate change focused on developing and scaling renewables. That work continues. But more sweeping change is needed. This includes decarbonizing industrial processes across sectors; electrifying more aspects of human activity; developing renewable fuel alternatives to power our economy; investing in low-impact, next-generation agriculture; and transitioning our society to a circular economy that minimizes waste and maximizes recyclability. For investors, that means adopting less conventional approaches to assessing and executing on climate investments.

Recognizing the unique nature of this opportunity, Ontario Teachers’ created a team—the Virtual Energy and Renewables Team, or VERT—devoted to understanding the energy transition and how we can best support and invest in it. VERT represents a new avenue for the fund—embracing a thematic approach to investing that complements our existing asset-class-based approach. The VERT team is represented by members from each of Ontario Teachers’ asset-class groups, drawing on expertise from each in order to bring a holistic approach to the fund’s climate-related investments.

VERT’s role is to identify, assess, execute, and manage investment opportunities providing sustainable alternatives that drive towards our net zero ambition. VERT does this through extensive and coordinated research and knowledge-sharing, business development, relationship-building, and targeting and triaging investment opportunities for OTPP as one team.

While the universe of climate investment opportunities is large, VERT has identified five focus areas, including:

VERT is focusing on:

  • Sustainable fuels: next-generation fuel alternatives made through organic and/or decarbonized means that support sustainability and climate impact;
  • Electrification: extending from investments in electrical infrastructure (such as transmission lines or solar power) to enabling products and services to improve energy efficiency, reduce emissions and support the rollout of the energy transition;
  • Industry 4.0: transitioning industry to sustainable, circular, decarbonized models through use of new energy, production, and waste-management systems;
  • Sustainable resources: reimagining our relationship with the natural world and resource-based industries; and
  • Enabling solutions: the services, equipment, software, and other supporting industries that help drive all of this forward.

VERT’s work has informed several of our recent investments on everything from biofuels to foodtech. One example is our recent investment in the ACES Delta platform, a major green hydrogen production and storage hub currently under construction in Utah. Other examples include our investments in Fulcrum BioEnergy, which produces sustainable aviation fuel through the consumption of garbage, and Green Collar, an Australian-based carbon-credit platform.

VERT’s work supports OTPP’s long-term investment focus and bolsters our ability to actively work alongside our portfolio companies to shape a better future. VERT is part of a larger suite of OTPP initiatives to support decarbonization. These include setting aggressive interim net zero targets, issuing green bonds and looking for opportunities to decarbonize other areas such as industrial processes.