One of Canada's largest defined benefit plans continues to prioritize its climate action plan as it manages its way through economic cycles
OMERS, the defined benefit pension plan for broader municipal sector employees in the province of Ontario, generated $5.6 billion in investment income for 2023, and continues to work towards the goals of its Climate Action Plan (CAP) to achieve a 50 percent reduction in carbon emissions in its portfolio and operations by 2030.
The plan generated a 2023 investment return of 4.6 percent ($5.6 billion) net of expenses. Over the past 10 years, OMERS has averaged an annual investment return of 7.3 percent, net of expenses, adding $66.4 billion to the plan. Net assets at December 31, 2023, were $128.6 billion, up from $124.2 billion in 2022, and the plan reported a smoothed funded status of 97 percent, up from 95 percent last year.
OMERS reports that returns in 2023 reflected a major divergence between the performance of public and private assets. Public equities and fixed income had a strong year and fixed income assets benefitted from higher interest rates. Returns from private asset strategies were held back by the increased cost of debt, increased operating costs, and anticipated slower economic growth
“Our focus at OMERS remains on our ability to see through economic cycles,” says Blake Hutcheson, OMERS president and chief executive officer. “I am extremely pleased that in the past three years, coming out of the pandemic, our extraordinary global team has earned an average annual net return of eight percent, a track record that stands up by any objective measure. These returns enable us to keep the pension promise, paying pensions on time and as planned, as we have done consistently since our creation as a plan in 1962.”
“As we look ahead to 2024, higher interest rates are creating opportunities for us to deploy capital into fixed income to improve future returns, consistent with our new, more diversified strategic asset mix. We are confident in our ability to generate long-term returns that will build up the Plan’s assets given the high quality of our investment portfolio and the strategies that underpin it. I am very pleased with the way we are positioned for the future.”
At the end of 2023, OMER’s green investments, including those engaged in renewable energy, energy efficiency, and green-certified buildings, totaled $21 billion, up from $19 billion at the end of 2022.
