With global climate talks beginning in just a few days, Canada’s major institutional investors want to send the message that they are no longer laggards when it comes to using their financial might to persuade companies to make needed cuts to carbon emissions.
A big part of the COP26 summit in Glasgow, Scotland, will involve hammering out the responsibilities of banks, insurers, asset managers and financial service providers as countries try to achieve net-zero carbon emissions by 2050. It’s a complicated process involving trillions of dollars, competing interests and a lot of public skepticism over their seriousness.
But Guy Cormier, chief executive officer of Desjardins Group, says Canadian financial players have picked up their game in terms of improving disclosure of their own climate impact, as well as calling for more action on emissions reduction among companies they invest in.
For example, Mr. Cormier points to the Caisse de dépôt et placement du Québec’s recent announcement that it was divesting its oil-production holdings and setting up a $10-billion fund to help portfolio companies make the transition to low-carbon operations. Montreal-based Desjardins, meanwhile, is toughening its own climate targets as a member of Business Ambition for 1.5 C, a global coalition of businesses and UN agencies seeking to limit global warming.
Desjardins and the Caisse are among 36 institutions managing $5.5-trillion of assets that called on Monday for accelerating the transition to a net-zero Canadian economy. They were brought together by the Responsible Investment Association, or RIA, whose members include asset managers and owners, advisers and financial service providers.
“The Canadian financial industry, over the last years, has been criticized for maybe dragging its feet on the green transition. Now what I feel is that you have a financial industry, at least for the last 12 or 18 months, that is more and more committed, more and more involved, and more and more ready to take action,” Mr. Cormier said in an interview.
Not all members’ investment philosophies are the same. Unlike the Caisse, Desjardins has no plans to divest its fossil fuel holdings as part of its own goal to get in-house and financed emissions to net zero by 2040. Instead, it provides expertise to its clients to help reduce their emissions, he said.
“We don’t want to leave the table. We don’t want to disinvest to disinvest. We already have contracts that have been signed in the last few years with some of these entities and companies,” he said.
Fossil fuels make up just 0.7 per cent of Desjardins’ investments. It has slowly reduced its interests and is building up holdings in renewable energy sources, while it also seeks opportunities in low-carbon transport and real estate.
British Columbia Investment Management Corp., CIBC Asset Management, NEI Investments, TD Asset Management Inc., Investment Management Corp. of Ontario and Mackenzie Investments are among other RIA members that signed the climate statement.
The signatories want companies in which they invest to develop solid plans for dealing with the climate risks they face. Their commitment should be reflected in their individual lobbying activities and through their industry associations. The investors will sketch out strategies to make their expectations heard by companies in their portfolios.
Together, they pledge to spell out how they will get to net zero by 2050 or sooner. This will include annual reporting of emissions through the template developed by the Task Force on Climate-Related Financial Disclosures. Members will do their best to tally greenhouse gases emitted by their portfolio companies as part of their own totals.
“Different investors will have different ways of dealing. Some will divest holdings, and some may escalate their engagements. That will be up to the investors,” said Dustyn Lanz, the RIA’s CEO.
In mid-October, the RIA joined other investor networks to launch Climate Engagement Canada, whose members will use their positions as shareholders to push for improved climate-related performance at 40 of the country’s largest CO2 emitting companies.
There has been a flurry of climate-related announcements among institutional investors as COP26 has drawn near. Mr. Lanz said he does not believe the momentum will die down after the summit. “My expectation is that climate action in the Canadian context is actually going to be escalating among the investor community. Climate Engagement Canada is a good example of that,” he said.
The investor statement includes a commitment to incorporate Indigenous perspectives into climate action. Part of that is to ensure that the transition to a low-carbon economy does not put some communities in economic jeopardy, the group said.
Mark Sevestre, founding member of the National Aboriginal Trust Officers Association, said Indigenous interests are often left out of decisions about environmental action, even though their communities are often most affected by the consequences of climate change.
Meanwhile, First Nations, Métis and Inuit people are important investors themselves, said Mr. Sevestre, who is also a senior adviser with the Reconciliation and Responsible Investment Initiative.
“We are exercising our shareholder voices within companies to ensure they are doing a proper job with Indigenous communities, with inclusion and partnership, and consultation. That’s why having our voice reflected in this statement is incredibly important,” he said.
Jeffrey Jones writes about sustainable finance and the ESG sector for The Globe and Mail. E-mail him at email@example.com.
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