Tackling climate change at the Caisse

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Eco friendly sustainable growth concept. 3d rendering of chart and arrow shape sign on fresh spring meadow with blue sky in background. © malp / 123RF Stock PhotosOne of the Caisse de dépôt et placement du Québec’s investment priorities is addressing climate change, said Stephen Kibsey, the plan’s vice-president of emerging risks, speaking at the CFA Society Toronto’s annual spring pension conference on March 28.

Specifically, the Caisse has a plan to reduce its portfolio’s total carbon intensity across all asset classes by 25 per cent by 2025. The strategy also includes factoring climate change into all activities, aiming to increase its low-carbon assets and showing strong leadership within the industry and with portfolio companies.

As well as looking at risks, the Caisse is finding opportunities to put more green investments in place, said Kibsey. “We already had a base of green investments across different asset classes, so rather than just going and starting a new portfolio that was called green, we aggregated the assets that we had across different asset classes into what you can maybe call a green envelope.”

When the Caisse was developing this envelope, it was important to have a taxonomy to decide what’s considered green. To do this, it looked to the Climate Bond Initiative. “The idea is to use those criteria on any type of investment that we’re going to make, not necessarily just on bonds, but if it could be in infrastructure, as well as green buildings and real estate, etc.,” said Kibsey. “So we’re able to transfer those criteria into other asset classes so we can determine whether something is green or not.”

Having buy-in from the top was one of the key elements of the Caisse’s success, said Kibsey, who also highlighted the importance of understanding the science behind climate change. “I think everyone should take the time to try to learn the science. I know we’re all finance people. But take a look at the science because as you understand the science, your beliefs become much more rigorous. . . . And then that will help you to really understand and make a decision as to what’s material to you when you’re looking at climate change.”

Another key to the Caisse’s efforts was putting in strong communication channels by finding representatives from each asset class. “These ball carriers were people that were aligned with us, understanding climate change and carbon calculations. And they could help out, in each of their asset classes, the other people that needed information about it.”

Also on March 28, the Caisse released its second stewardship investing report. Highlights include: it exceeded its target with the addition of $10 billion in low-carbon assets in 2018, prompting it to raise the target for 2020; and the 10 per cent reduction in carbon emissions for each dollar invested in 2018 is on track to reach the 25 per cent reduction target for 2025.

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