Climate change is no longer a distant risk. Every day, we experience the human, environmental and economic impacts. As a long-term investor, we decided to take action and make a constructive contribution to addressing this issue by adopting an investment strategy to address climate change.
Investing in light of climate change
The growing consensus on the risks associated with climate change was formalized in the 2015 Paris Agreement, which was signed by 195 countries. In the coming years, the means that authorities and companies will adopt to accelerate the transition toward a low-carbon economy will change the context of the markets.
Certain industries will find it challenging to adapt to this new context. For others, such as renewable energy, technology, infrastructure and electric transportation, attractive investment opportunities will emerge.
This trend will sharpen as international efforts to fight climate change intensify.
Our investment strategy to address climate change
Our strategy is the culmination of our willingness to be a leader among major global institutional investors in reducing greenhouse gas (GHG) emissions.
Adopted in 2017 following a thorough process, the strategy is based on:
- Scientific observations;
- The views of CDPQ’s financial community peers;
- An extensive analysis of best practices employed by our peers;
- Our discussions with stakeholders.
To address climate change, our investment strategy will help us contribute to the transition toward a low-carbon economy and seize the resulting profitable opportunities.
We created our strategy based on clear principles: The targets and methods adopted should be achievable, measurable and designed so that we can regularly report on our efforts.
A comprehensive view
We firmly believe that our economies cannot achieve a sustainable transition by targeting only one sector; instead, we must take into account the climate as a factor in all activity sectors, and therefore in all our major asset classes.
Furthermore, we are the first institutional investor in North America to set a GHG intensity reduction target covering all its asset classes.
A strategy with four pillars
1. Factoring the climate into every investment decision
We have factored the climate into all our investment processes, affording it the same treatment as financial risk.
FACTORING CLIMATE CHANGE INTO EVERY INVESTMENT DECISION
Since 2017, we factor the climate into each investment decision.
This represents a change in culture for our teams, especially those responsible for investments. Now they must weigh different opportunities and determine which ones will:
- Contribute to achieving the climate objectives set.
- Generate good returns for our clients.
- Better manage our risks.
Carbon targets and variable compensation
We introduced a formula to integrate our carbon targets into employee variable compensation. Now, employee variable compensation rises and falls in tandem with achieving our carbon intensity reduction objectives.falsePleine largeurfalse
2. Increase our low-carbon investments by 80% between 2017 and 2020
As at December 31, 2019, our portfolio of low-carbon assets was $34 billion up 95% from 2017.
After deploying our strategy in 2017, we quickly surpassed our forecast for investments in low-carbon assets.
Since 2018, we have raised our target to $32 billion, or more than 80% by 2020.
(in billions of dollars)
3. Reduce our carbon intensity by 25% per dollar invested between 2017 and 2025
Our portfolio’s carbon intensity was lowered 21% since 2017. This puts us on track to achieve our 2025 objective.
CDPQ commits to reducing its portfolio’s carbon footprint by 25% per dollar invested by 2025.
To achieve this target, we are focusing on:
- Reducing our higher carbon-intense assets.
- Acquiring low-carbon assets.
- Improving the practices of our portfolio companies.
PORTFOLIO CARBON INTENSITY REDUCTION TARGET
Carbon intensity budgets by portfolio
To achieve our carbon intensity reduction target and continue generating the expected returns, we allocate carbon budgets to each of our portfolios.
The carbon budget sets an annual ceiling for GHG emission allowed for each portfolio. This limit is set based on CDPQ’s overall intensity reduction target determined for 2025.
Our portfolio managers incorporate these carbon budgets into their annual strategic planning.falsePleine largeurfalse
4. Exercise stronger climate leadership within the industry and our portfolio companies
We firmly believe that climate change should not be seen as a constraint; it’s an opportunity to do things differently.
The transition toward a low-carbon economy will not happen over night. It will require the involvement of all stakeholders: citizens, governments, organizations, companies and investors.
As such, we have decided to exercise strong public leadership. We want to contribute to the financial sector’s evolution and greater involvement in addressing climate issues.
Contribution to global efforts on climate change
We participate in many events and initiatives where experiences and best practices on climate matters are shared.
We seek to influence in the following ways:
- A commitment to our portfolio companies
As a shareholder, we:
- Discuss climate risk with executive management and encourage them to adopt a plan to reduce their GHG emissions.
- Support shareholder initiatives and proposals to enhance transparency on climate risk matters and carbon emissions.
- Improve portfolio companies and assets’ GHG emissions performance
We work with companies on transitioning toward a low-carbon economy, particularly through investments that improve their industrial processes and energy efficiency.
- Participation in initiatives on transparency
We believe that information sharing and collaboration are necessary to develop credible standards that will positively influence markets. This is why we are involved in several international climate-commitment initiatives and support many organizations and declarations, including:
Adopting carbon pricing
CDPQ supports the global adoption of carbon pricing mechanisms as a way to more transparently integrate all costs related to using a given energy source.falsePleine largeurfalse
Achieving our carbon-neutral objective
To support our climate change commitment, we have resolved to become carbon neutral by offsetting the carbon emissions arising from our energy consumption and from employee business travel.
Our main business office in Montréal is certified LEED-EB Gold and BOMA BEST Platinum.
More specifically, we are working to:
- Fund projects to offset our GHG emissions.
- Initiate energy efficiency measures in our buildings.
- Adopt eco-friendly resource management practices.