Appendix 1

Our sustainability indicators and commitments

We disclose the results of our actions related to ESG factors through various documents: the Sustainable Investing Report (SIR), the Sustainable Development Report (SDR) and the Annual Report (AR). We are also governed by a number of sustainability laws, regulations and policies that establish a framework that enables us to carry out our investment activities with rigour, efficiency and transparency. The following tables contain the available indicators and reference documents.

Our indicators

Indicator Target or action 2023 disclosure 2023 source 2022 disclosure
1 Value in $B of low-carbon assets $54 B in low-carbon assets by 2025 $53 B

(including $15 B in Québec)		 SIR Section E

SDR Action 4		 $47 B

(including $12 B in Québec)
2 Value in $B of Paris Agreement aligned assets Support for assets with a strategy aligned with the Paris Agreement $135 B

($53 B CBI, $50 B SBTi and $32 B in the process of being aligned)		 SIR Section E $84 B

($47 B CBI and $37 B SBTi)
3 Portfolio’s carbon intensity in tCO2e/M$ invested and as a percentage 60% reduction by 2030 from 79.4 tCO2e/M$ invested in 2017 32.2 tCO2e/M$

59% reduction from 2017		 SIR Section E

SDR Action 4		 37 tCO2e/M$

53% reduction from 2017
4 Value in $B of transition assets Support companies in heavy emitting sectors in their decarbonization strategy $5 B SIR Section E N/A
5 Fossil fuel targets in line with the science Exit from oil production by the end of 2022


Exit from thermal coal production		 Exit from oil production under active management completed


Exit from thermal coal mining under active management completed		 SIR Section E Exit from oil production under active management essentially completed

Exit from thermal coal mining
6 Increase our share of sustainability-themed donations and sponsorships 14% of donations and sponsorships granted to be sustainability-themed by 2025 13% SDR Action 5 13%
7 Reduce the carbon footprint of our three business offices in Québec 35% reduction in emissions from our three business offices in Québec by 2025 compared to 2017 (2.75 kg CO2e/ft2) 41% reduction compared to 2017
(1.63 kg CO2e/ft2)		 SDR Action 7 N/A
8 Increase the eco-friendly management of renovation projects in our three business offices in Québec 90% of materials reclaimed in renovation projects in our three business offices in Québec by 2025 97% SDR Action 8 N/A
9 Zero waste target in our three business offices in Québec Average waste reclamation rate of 65% in our three business offices in Québec by 2025 55% SDR Action 9 N/A
10 Share of women on the Board of Directors 40% share of women on the Board of Directors 46% SIR Section S 46%
11 Share of women on the Executive Committee 40% share of women on the Executive Committee by 2025 44% SIR Section S 39%
12 Share of women at CDPQ 47% share of women in the organization by 2025 46% SIR Section S 45%
13 Share of women in investment positions 34% share of women in investment positions at CDPQ by 2025 30% SIR Section S 27%
14 Employees in Québec who identify as a member of one of the following three groups: visible minorities, ethnic minorities or Indigenous peoples 26% of employees in Québec who identify as a member of one of the following three groups: visible minorities, ethnic minorities and Indigenous peoples by 2025 26% SIR Section S 24%
15 Employees in Québec in investment positions who identify as a member of one of the following three groups: visible minorities, ethnic minorities or Indigenous peoples Strategy in place to attract, retain and develop employees 21% SIR Section S N/A
16 Existence of information on coaching employees and current mentoring programs Mentoring program 185 people were mentored internally (of which 54% were women and 30% were colleagues representing ethnocultural diversity) by 133 mentors SIR Section S 170 people were mentored internally (of which 51% were women and 21% were colleagues representing ethnocultural diversity)
17 Employees with disabilities Annual Action Plan for Persons with Disabilities 4% of our employees in Québec SIR Section S N/A
18 Number of workplace accidents Support for overall occupational health and safety 2 minor incidents Global Health and Safety team No accidents
19 Percentage of public companies in active management in our portfolio with at least 30% women on their Boards of Directors Ambition to achieve 100% 57% SIR Section S 52%
20 Share of women in CDPQ’s nominee director positions 30% share of women in CDPQ’s nominee director positions by 2023 30% SIR Section S 29%
21 Number of pre-investment notices on tax practices Pre-investment tax practice analysis of transactions 199 pre-investment opinions on tax practices, of which 5 were unfavourable SIR Section S 136 pre-investment opinions on tax practices, of which 7 were unfavourable
22 Number of investment files analyzed to ensure compliance with a minimum tax rate Analysis of our assets under active management to ensure compliance with a minimum consolidated tax rate of 15% Over 2,900 investment files and 400 in-depth analyses SIR Section S More than 1,800 investment files
23 Presence of verifications and internal audits of diversity indicators EDGE Certification, a globally recognized corporate certification standard for gender equality in the workplace Implementation of our action plan RID Section L EDGE+ Certification renewed
24 Support for Québec companies owned by women Growing the number of Québec women entrepreneurs involved in Cheffes de file 120 Québec women entrepreneurs SDR Action 2 109 Québec women entrepreneurs
25 Number of Québec companies supported in their implementation of sustainable business practices Support for our portfolio companies in Québec on various ESG matters 10 Québec companies SIR Section G

SDR Action 1		 9 Québec companies
26 Number of engagements held with portfolio companies and external managers on ESG factors Engagements with our portfolio companies and external managers on various ESG issues 308 discussions SIR Section G 303 discussions
27 Number of portfolio companies and external managers we engaged on ESG factors Engagements with our portfolio companies and external managers on various ESG issues 129 companies

81 external managers

528 companies through EOS at Federated Hermes		 SIR Section G 175 companies

63 external managers
28 Number of votes on proposals Participation in votes on proposals 37,536 votes SIR Section G 54,337 votes
29 Number of shareholder meetings at which we voted Votes at the shareholder meetings of our portfolio companies 3,635 meetings SIR Section G 5,537 meetings
30 Rate of support for proposals on climate or social issues Policy governing the exercise of our voting rights in force 62% support for proposals related to environmental issues

49% support for proposals related to social issues		 SIR Section G N/A
31 Technology risk assessments of our portfolio companies Technology risk assessments incorporated into all our investment decisions, and monitoring of our total portfolio 278 technology risk analyses SIR Section G 325 technology risk analyses
32 Assessments of the sustainability of our interactions Proportion of our new transactions that have undergone a sustainability assessment in Québec for CDPQ and its subsidiaries 72% SDR Action 3 55%
33 Increase the share of our responsible acquisitions 65% of contracts signed as a result of a call for tenders (public or by invitation) with a supplier engaged in a valid sustainable development approach by 2025 79% SDR Action 6 64%

Our commitments

COMMITMENT TARGET OR ACTION REFERENCE DOCUMENT
1 GHG reduction target aligned with the objectives of the Paris Agreement limiting warming to 1.5 °C $54 B in low-carbon assets by 2025

60% reduction in the portfolio’s carbon intensity by 2030

$10 B transition envelope to decarbonize the heaviest-emitting sectors

Complete our exit from oil production

Net-zero portfolio by 2050		 Climate strategy
2 Commitment to diversity, inclusion and the absence of discrimination Policy on workplace equity, diversity and inclusion in place


Annual action plan for persons with disabilities


Statement on equal access to employment		 Policy – Workplace Equity, Diversity and Inclusion

2023 Action Plan for Persons with Disabilities

CDPQ Statement on Equal Access to Employment
3 Presence of channels through which employees can raise issues Fraud and corruption prevention and detection policy

Hotline for employees to report a breach of ethics or a law being broken		 Code of Ethics

Policy – Fraud and Corruption Prevention and Detection

Policy Against Harassment and Other Types of Misconduct
4 Public commitment to respect personal data and a general policy on personal data Information management and security policy in place Information and Technology Asset Security Policy
5 Presence of a commitment on international taxation Commitment to exercise leadership in international taxation International Taxation Commitment
6 Existence of a policy against corruption and bribery and analysis of the related risks Fraud and corruption prevention and detection policy in place Policy – Fraud and Corruption Prevention and Detection
7 Commitment related to corporate professional ethics directives Code of ethics for officers and employees in place

Code of ethics and for directors in place		 Code of Ethics

Code of Ethics for the Board of Directors
8 Measures implemented to promote ethical behaviour in the organization Mandatory training upon hiring and annually on subjects covered by the Code of Ethics

Commitment made annually and upon hiring to comply with the organization’s ethical standards and to make a declaration of interests		 AR Compliance section


Code of Ethics
9 Communication of human rights expectations Statement released on equal access to employment CDPQ statement on equal access to employment
10 Executive compensation system linked to achieving ESG targets Variable compensation conditional to achieving climate targets since 2018 AR

SIR Appendix 4
11 Presence of a lobbying policy for our portfolio companies Policy Governing the Exercise of Voting Rights of Public Companies, which includes lobbying Policy Governing the Exercise of Voting Rights of Public Companies
12 Presence of clear policies on the engagement made with our portfolio companies on ESG issues Policy on Sustainable Investing that includes a framework for engagement with our portfolio companies Policy – Sustainable Investing
Appendix 2

Calculation of the intensity of CDPQ’s portfolio

Calculation for our investments in companies

Total CDPQ portfolio intensity
emissions attributed to CDPQ (tCO2e)
CDPQ portfolio within the calculation perimeter (millions of CAD)
Emissions attributed
to CDPQ
Emissions of
the asset (tCO2e)
X
LT capital supplied by CDPQ (millions of CAD)
Total LT capital of the asset (millions of CAD)
LT capital

Long-term capital used by a company to finance its production assets (fair market value of equity + long-term debt).

Emissions

Emissions of direct (Scope 1) and indirect (Scope 2) GHG converted into equivalent tons of CO2 (tCO2e), as defined by the GHG Protocol.

Calculation perimeter

Includes a net value1 of investments of $422 billion as at December 31, 2023, or 100% of corporate securities, including those of non-consolidated subsidiaries, in the form of shares, corporate and Crown corporation debt, securities held through market indexes or exchange traded funds (ETFs), externally managed investments, and securities lending and borrowing (Chart 14).

Excludes a net value1 of investments of $91 billion, as at December 31, 2023, in government bonds, cash, warrants, certificates of deposit, derivative financial instruments, and securities purchased under reverse repurchase agreements.

The investments considered in the footprint calculation are held in the following specialized portfolios: Equity Markets, Fixed Income, Private Equity, Infrastructure, Real Estate, and certain investments in shares held in Asset Allocation (Figure 15).

Transition envelope

Investments in the transition envelope are excluded from the calculation of the intensity of the total portfolio. The carbon intensity of these assets is calculated using the same methodology as that used for the portfolio, but it is separately monitored and disclosed, as well as externally verified. These assets are aligned with our objective to be net zero by 2050, and their decarbonization plans are certified by independent experts.

Government bonds

To meet the requirements of the NZAOA, we have calculated the carbon intensity of our sovereign bond portfolio according to the Partnership for Carbon Accounting Financials (PCAF) standard for the first time. The data used to calculate it is not comparable with those used for the portfolio intensity, so it is handled separately (more details in Appendix 4).

Chart 14
Absolute portfolio footprint (in MtCO2) within the calculation perimeter (in $B)*
This chart shows the change in the absolute portfolio footprint within the calculation perimeter from 2017 to 2023. We note that: • The calculation perimeter went from $268 billion in 2017 to $422 billion in 2023 • The absolute portfolio footprint went from 21 millions of CO2-equivalent tons in 2017 to 13.6 millions of CO2-equivalent tons in 2023. This chart shows the change in the absolute portfolio footprint within the calculation perimeter from 2017 to 2023. We note that: • The calculation perimeter went from $268 billion in 2017 to $422 billion in 2023 • The absolute portfolio footprint went from 21 millions of CO2-equivalent tons in 2017 to 13.6 millions of CO2-equivalent tons in 2023.
This chart shows the change in the absolute portfolio footprint within the calculation perimeter from 2017 to 2023. We note that: • The calculation perimeter went from $268 billion in 2017 to $422 billion in 2023 • The absolute portfolio footprint went from 21 millions of CO2-equivalent tons in 2017 to 13.6 millions of CO2-equivalent tons in 2023. This chart shows the change in the absolute portfolio footprint within the calculation perimeter from 2017 to 2023. We note that: • The calculation perimeter went from $268 billion in 2017 to $422 billion in 2023 • The absolute portfolio footprint went from 21 millions of CO2-equivalent tons in 2017 to 13.6 millions of CO2-equivalent tons in 2023.

1. CDPQ gross asset value, net of short positions (net negative positions are excluded).

Figure 15
CDPQ calculates its carbon footprint on the vast majority of its portfolio
This figure made up of side-by-side boxes details the elements included in the carbon footprint calculation, the excluded elements and the elements calculated separately. We note that: • Infrastructure, Real Estate, Private Equity and part of Equity Markets and Fixed Income are included in the footprint calculation • Other Investments, including cash, warrants, derivative financial instruments and securities purchased under resale agreements are excluded from the footprint calculation • Government bonds are calculated separately, as is the footprint for investments in the transition envelope This figure made up of side-by-side boxes details the elements included in the carbon footprint calculation, the excluded elements and the elements calculated separately. We note that: • Infrastructure, Real Estate, Private Equity and part of Equity Markets and Fixed Income are included in the footprint calculation • Other Investments, including cash, warrants, derivative financial instruments and securities purchased under resale agreements are excluded from the footprint calculation • Government bonds are calculated separately, as is the footprint for investments in the transition envelope
This figure made up of side-by-side boxes details the elements included in the carbon footprint calculation, the excluded elements and the elements calculated separately. We note that: • Infrastructure, Real Estate, Private Equity and part of Equity Markets and Fixed Income are included in the footprint calculation • Other Investments, including cash, warrants, derivative financial instruments and securities purchased under resale agreements are excluded from the footprint calculation • Government bonds are calculated separately, as is the footprint for investments in the transition envelope This figure made up of side-by-side boxes details the elements included in the carbon footprint calculation, the excluded elements and the elements calculated separately. We note that: • Infrastructure, Real Estate, Private Equity and part of Equity Markets and Fixed Income are included in the footprint calculation • Other Investments, including cash, warrants, derivative financial instruments and securities purchased under resale agreements are excluded from the footprint calculation • Government bonds are calculated separately, as is the footprint for investments in the transition envelope

Sources of data

A) Direct interests

CDPQ primarily uses the Trucost database to collect the emissions data on individual emitters. Combined with LT capital data from the Compustat and Bloomberg databases, this forms the foundation of our calculations of individual issuer intensity and average sector intensity.2

Our approach is as follows:

CDPQ methodology
In order of priority:
1 Direct intensity calculated for the issuer
2 Direct intensity calculated for the parent of the issuer
3 Average sector intensity
Ivanhoé Cambridge methodology
In order of priority:
1 Direct intensity calculated for the property by Ivanhoé Cambridge3
2 Average intensity of Ivanhoé Cambridge’s portfolio

Please note that in certain instances CDPQ uses judgment to override the intensity assigned through the typical methodology if more accurate or relevant data are available. For example, this may be the intensity disclosed by the issuer, the intensity of comparable issuers with the same GHG profile, the average intensity of a sector that more accurately represents the issuer or the intensity estimated using another reliable source.

2. CDPQ uses the most recently available emissions data from Trucost. For data quality purposes, CDPQ sets an internal threshold to determine when the most recent emissions data in the Trucost database are considered too outdated to use in our calculations of individual issuer intensity and average sector intensity. Where available, CDPQ uses LT capital data as at December 31, 2023. Where LT capital data is not available as at December 31, 2023, CDPQ uses the most recently available data.

3. Ivanhoé Cambridge includes in its intensity calculation Scope 3, Category 13 emissions from the GHG Protocol related to the Scope 1 and 2 activities of its tenants.

B) Indirect interests

Where data are available, the intensity of funds is calculated using the same methodology as that applicable to direct holdings. Where data are not available, CDPQ uses the intensity of the fund disclosed by the manager or the average intensity of the sector or asset class appropriate to the nature of the fund.

Table 16
Evaluation of the quality of the data used to calculate CDPQ’s global footprint
Methodology developed by CDPQ and inspired by the Partnership for Carbon Accounting Financials (PCAF)
DATA
QUALITY		 DEFINITION DATA
TYPE		 SHARE OF
THE ABSOLUTE
FOOTPRINT (%)
(Scopes 1 and 2 emissions)3		 SHARE OF
EXPOSURE (%)
(Scope 3 emissions)
1
  • Highest quality data
  • Disclosed by the company itself (audited or not)
  • Data type:
    • Trucost (S&P Global)
    • Obtained directly by CDPQ from companies (through engagement, their sustainability report, etc.)
 Disclosed 66% 24%
2
  • Very good data quality
  • Calculated and disclosed by the company itself, but incomplete
  • Does not cover all the company’s operations and/or not aggregated in one place
  • Data type:
    • Partial, compiled and adjusted by Trucost based on the real economy
    • If considered too incomplete based on specific criteria, Trucost uses an estimate (Quality 4)
 Disclosed 11% 0%
3
  • Good quality data
  • Deduced from reliable estimates, but without direct disclosure of the company’s footprint
  • Data type:
    • CDPQ estimate based on production data provided by the company (through engagement)
    • CDPQ or Trucost estimate based on comparable companies in terms of revenues, geography and activities
 Disclosed/estimated 4% 0%
4
  • Acceptable data quality
  • Data type:
    • Trucost estimate using specific models
    • Trucost calculates a sector proxy based on the company’s revenues
 Estimaded 16% 10%
5
  • Lower quality data
  • Obtained from more global and/or relative estimates
  • Data type:
    • Estimate based on a sector proxy calculated by CDPQ based on the company’s enterprise value (EV)
    • Average of funds
 Estimaded 3% 0%
N/A
  • Unavailable data
 66%
Appendix 3

Independent practitioner’s assurance report

To the Management of the Caisse de dépôt et placement du Québec

Scope

We have been engaged by Caisse de dépôt et placement du Québec (“CDPQ”) to perform a ‘limited assurance engagement’, as defined by Canadian Standards on Assurance Engagements, hereafter referred to as the engagement, to report on the carbon intensity of CDPQ’s portfolio excluding the transition envelope, the carbon intensity of the transition envelope and the associated data quality table (collectively, the “Subject Matter”) for the year ended December 31, 2023, detailed in the accompanying schedule and contained in CDPQ’s 2023 Sustainable Investing Report (the “Report”).

Other than as described in the preceding paragraph, which sets out the scope of our engagement, we did not perform assurance procedures on the remaining information included in the Report, and accordingly, we do not express a conclusion on this information.

Criteria applied by CDPQ

In preparing the Subject Matter, CDPQ applied internally developed criteria described in Appendix 2 and Appendix 4 of the Report (the “Criteria”). The Criteria were specifically designed for the preparation of the Report. As a result, the Subject Matter may not be suitable for another purpose.

CDPQ’s responsibilities

CDPQ’s management is responsible for selecting the Criteria, and for presenting the Subject Matter in accordance with that Criteria, in all material respects. This responsibility includes establishing and maintaining internal controls, maintaining adequate records and making estimates that are relevant to the preparation of the Subject Matter, such that it is free from material misstatement, whether due to fraud or error.

EY’s responsibilities

Our responsibility is to express a conclusion on the presentation of the Subject Matter based on the evidence we have obtained.

We conducted our engagement in accordance with the Canadian Standard on Assurance Engagements (“CSAE”), Assurance Engagements on Greenhouse Gas Statements (“CSAE 3410”). This standard requires that we plan and perform our engagement to obtain limited assurance about whether, in all material respects, the Subject Matter is presented in accordance with the Criteria, and to issue a report. The nature, timing, and extent of the procedures selected depend on our judgment, including an assessment of the risk of material misstatement, whether due to fraud or error.

We believe that the evidence obtained is sufficient and appropriate to provide a basis for our limited assurance conclusion.

Our independence and quality management

We have complied with the relevant rules of professional conduct / code of ethics applicable to the practice of public accounting and related to assurance engagements, issued by various professional accounting bodies, which are founded on fundamental principles of integrity, objectivity, professional competence and due care, confidentiality and professional behaviour.

Our firm applies Canadian Standard on Quality Management 1, Quality Management for Firms that Perform Audits or Reviews of Financial Statements, or Other Assurance or Related Services Engagements, which requires us to design, implement and operate a system of quality management including policies or procedures regarding compliance with ethical requirements, professional standards and applicable legal and regulatory requirements.

Description of procedures performed

Procedures performed in a limited assurance engagement vary in nature and timing from and are less in extent than for a reasonable assurance engagement. Consequently, the level of assurance obtained in a limited assurance engagement is substantially lower than the assurance that would have been obtained had a reasonable assurance engagement been performed. Our procedures were designed to obtain a limited level of assurance on which to base our conclusion and do not provide all the evidence that would be required to provide a reasonable level of assurance.

Although we considered the effectiveness of management’s internal controls when determining the nature and extent of our procedures, our assurance engagement was not designed to provide assurance on internal controls. Our procedures did not include testing controls or performing procedures relating to checking aggregation or calculation of data within IT systems.

A limited assurance engagement consists of making enquiries, primarily of persons responsible for preparing the Subject Matter and related information and applying analytical and other appropriate procedures.

Our procedures included:

  • Conducting interviews with relevant personnel to obtain an understanding of the processes for collecting, collating and reporting the Subject Matter and the related internal controls;
  • Where relevant, observing and inspecting systems and processes for data aggregation and reporting of the Subject Matter in accordance with the Criteria;
  • Assessing the accuracy of data, through analytical procedures and reperformance of calculations, where applicable; and
  • Reviewing presentation and disclosure of the Subject Matter in the Report.

We also performed such other procedures as we considered necessary in the circumstances.

Inherent limitations

The Greenhouse Gas (“GHG”) quantification process is subject to scientific uncertainty, which arises because of incomplete scientific knowledge about the measurement of GHGs. Additionally, GHG procedures are subject to estimation (or measurement) uncertainty resulting from the measurement and calculation processes used to quantify emissions within the bounds of existing scientific knowledge.

Non-financial information, such as the Subject Matter, is subject to more inherent limitations than financial information, given the more qualitative characteristics of the Subject Matter and the methods used for determining such information. The absence of a significant body of established practice on which to draw allows for the selection of different but acceptable evaluation techniques which can result in materially different evaluations and can impact comparability between entities over time.

Conclusion

Based on our procedures and the evidence obtained, nothing has come to our attention that causes us to believe that the Subject Matter for the year ended December 31, 2023, is not prepared, in all material respects, in accordance with the Criteria.

March 21, 2024
Montréal, Canada

1FCPA auditor, public accountancy permit no. A114960

Schedule

Our limited assurance engagement was performed on the following Subject Matter for the year ended December 31, 2023:

Performance Indicator Criteria Reported Value
Carbon Intensity of CDPQ’s portfolio excluding the transition envelope Internally developed1 32.2 tCO2e/$M
Carbon Intensity of CDPQ’s transition envelope Internally developed2 1,782 tCO2e/$M
Data quality table Internally developed1 Data Quality 1: 66%
Data Quality 2: 11%
Data Quality 3: 4%
Data Quality 4: 16%
Data Quality 5 : 3%

1. Significant contextual information necessary to understand how the data has been compiled has been disclosed in Appendix 2 of the Report.

2. Significant contextual information necessary to understand how the data has been compiled has been disclosed in Appendix 2 and Appendix 4 of the Report.

Appendix 4

Disclosure according to the Task Force on Climate-related Financial Disclosures (TCFD)

We follow the TCFD’s recommendations on financial disclosures related to climate issues and present our progress annually.

APPLICATION OF THE RECOMMENDATIONS BY CDPQ

  • Since 2017, our Policy – Sustainable Investing requires that we include climate change considerations in our investment analysis and approval process, as well as in integrating risks related to ESG factors. The Sustainability team develops this policy, which is then approved by the Executive Committee, followed by the Board of Directors.
  • In addition, to ensure oversight of our sustainable investing governance, the Executive Committee reports semi-annually to the Board of Directors, based on sectoral strategic plans, risk mapping and the Climate Strategy.
  • In 2018, the Human Resources Committee of the Board of Directors took a strong step by linking the incentive compensation of all employees, including the members of the Executive Committee, to the achievement of climate targets. We are one of the first global institutional investors to adopt such a measure.

  • The climate attributes (risks and opportunities) of investments are subject to the same governance as our other investment criteria. They are incorporated into the due diligence review of investments and into our portfolio monitoring. These issues are addressed in specific sections of the investment approval and reporting documents. Particular attention is paid to the physical risk incurred through real assets (infrastructure and buildings) as well as to transition risk.
  • Working in collaboration with the entire organization, the Sustainability team closely monitors the annual climate targets of our specialized portfolios. These analyses are submitted to the various committees on which CDPQ executives sit, including the Investment-Risk Committee (IRC).
  • In 2021, a transition risk analysis of the portfolio was carried out by the Sustainability team in collaboration with Risk Management for presentation to the IRC. This analytical framework is now used in the due diligence review of certain new investments. Overall exposure to this risk is also monitored.
  • Close attention is paid to data quality. Since 2021, a carbon certificate has been added to these extra-financial data, which now benefit from controls similar to those applicable to financial data, including external verification.

Physical risks
  • In 2020, we began an innovative partnership with two Canadian peers and The Climate Service to co-develop Climanomics, a tool used to better understand, measure and report on physical climate risks in financial terms. We continued to use this tool after this supplier was acquired by S&P Global in 2022.
  • Today, our teams analyze the different types of physical climate risks over the short, medium and long term. The risks are taken into consideration for each new investment in real assets (infrastructure and real estate) as well as for some of our portfolio assets (for more details, see section 5. Management of physical risks).
Transition risks
  • Since 2021, for each new investment opportunity, we analyze the company’s business model and its exposure to transition risks, based on the materiality of the risk and the liquidity of the security, as well as the following factors:
    • Regulatory or political action (carbon pricing, subsidies)
    • Technological innovations
    • Market risks (changes in demand for certain products)
    • Lawsuits
    • Reputational risks
  • These analyses are extended to the entire portfolio and cover different time horizons (for more details, see section 6. Management of transition risks).
Climate-related opportunities
  • There are many climate opportunities (for more details, see section 9. Seize opportunities). To ensure that they are taken into consideration, investment teams incorporate them into their annual strategic planning exercise. Internal discussion groups involving various portfolio managers are organized on the transition and related technologies. In this way, we continuously look for investment opportunities, both direct and through external partnerships.

  • In 2017, CDPQ was one of the first major global institutional investors to adopt a climate strategy covering its entire portfolio. At that time, we set ambitious targets for acquiring low-carbon assets and reducing the carbon intensity of our portfolio.
  • In 2018, the Human Resources Committee of the Board of Directors took a strong step by linking the incentive compensation of all employees, including the members of the Executive Committee, to the achievement of climate targets. We are one of the first global institutional investors to adopt such a measure.
  • To that end, many teams were mobilized, including:
    • Digital Technology (accessibility and analysis of climate data)
    • Finance and Operations (data quality and reporting, green bond issuance)
    • Talent and Performance (training, calculation of variable compensation)
    • Risk Management (risk management, portfolio construction)
    • Communications and Brand (internal communications)
    • All investment teams
  • In 2019, we also decided to make an important commitment: to achieve a net-zero portfolio by 2050 by focusing on decarbonizing the real economy.
  • In 2021, having far exceeded our intermediate targets set in 2017, we unveiled a new strategy based on four essential and complementary pillars to meet the major challenges inherent in the transition:
    • Hold $54 billion in low-carbon assets by 2025
    • Decrease the portfolio’s carbon intensity by 60% by 2030 compared to 2017
    • Create a $10-billion transition envelope to decarbonize the highest emitting sectors
    • Complete our exit from oil production by the end of 2022
  • In addition, we have refined our climate risk identification and management tools (for more details, see sections 5. Management of physical risks and 6. Management of transition risks).
  • The climate issue is now an integral part of CDPQ’s business model (Figure 17):
    • The investment teams review their strategy each year to capture more low-carbon and transition opportunities as a way to optimize risk management, decarbonization and portfolio construction
    • The Sustainability team supports the investment teams in their climate ambitions, continuously reviewing their practices and refining their risk management tools
    • Climate risks are integrated into the due diligence performed on each new investment and in portfolio monitoring, like all other risks
    • Specific guidelines have been introduced to manage investments in fossil fuels and their value chains
    • The support groups (Digital Technology, Finance, Legal Affairs, Compliance and Secretariat, Talent and Performance, Risk Management, Communications and Brand, etc.) meet regularly to ensure that the operational risks related to the Climate Strategy are controlled and managed like all other risks
Figure 17
Factoring climate change into our investment process
This figure shows how climate change is factored into the three key steps of our investment process: pre-investment, post-investment and continuous portfolio management.This figure shows how climate change is factored into the three key steps of our investment process: pre-investment, post-investment and continuous portfolio management.
This figure shows how climate change is factored into the three key steps of our investment process: pre-investment, post-investment and continuous portfolio management.This figure shows how climate change is factored into the three key steps of our investment process: pre-investment, post-investment and continuous portfolio management.
  • Lastly, CDPQ actively participates in various investor groups involved in the fight against climate change (for more details, see the Leadership section) to keep abreast of new developments:
    • We serve on the Board of the NZAOA, which we co-founded in 2019 to support the decarbonization of the real economy, and we take part in several of its working groups
    • We also co-founded in 2018 and have since co-chaired the ILN, a group of 13 global institutional investors that aims to address climate change, among other things
    • We also participate in the work of Climate Action 100+, a group of investors whose main goal is to raise companies’ awareness on climate-related issues

Pre-investment
  • We analyze the physical risks for each new investment in real assets (infrastructure and real estate) as well as for some of our portfolio assets.
  • These analyses use the Climanomics tool (for more details, see section 3. Identification of risks and opportunities) to detect and assess such risks under various climate scenarios and over different time horizons.
  • The issues detected are then analyzed using tools tailored to the specific context of the investment under consideration, which may include discussions with the target company.
  • The potential costs generated by physical risks are integrated into the financial analyses of the investment. In some cases, these analyses may lead to a decision not to invest.
Post-investment
  • An approach similar to pre-investment is taken with respect to our portfolio assets. Once the issues have been identified, we enter into dialogue with the management of the targeted company so that it accounts for these risks and takes appropriate measures. In many cases, this means enhancing the climate resilience of assets, but also interacting with external stakeholders. This is because the physical risks may not only affect the asset but also certain critical inputs to our investment that are managed by third parties (e.g. access roads, key suppliers, public infrastructure).
  • More detailed analyses of physical climate risks were performed in 2023, specifically for our Infrastructure portfolio. In all, 1,550 geolocation points were selected, covering 32 files and representing around 90% of the portfolio’s asset value. The analysis considers seven sectors: electricity, telecommunications, transportation, renewable energy, ports, airports and highways. The next step is to contact the Boards of Directors of the companies identified as priorities so that they can take action on the issues identified.
  • The ILN published a guide in 2021 to encourage portfolio managers to incorporate physical risks into investment decisions and adopt best practices.
Physical and macroeconomic risks
  • In 2023, we undertook work to articulate the impact of an acute climate event (defined as a natural disaster with a non-negligible probability of occurring) on our exposure to a vulnerable country. Using data from around the world, the Risk Management, Sustainability and Economic and Financial Analysis teams produced macroeconomic shock scenarios on inflation, growth, interest rates and currencies in order to stress test the valuations of portfolio assets in this country. The results highlighted both the vulnerability and resilience of asset valuations based on their specificity following a macroeconomic shock resulting from a climate event, and deepened our understanding of how a climate shock moves through a country’s economy. This was the first analysis of its kind conducted at CDPQ.

Analysis of transition risks
  • We have developed qualitative tools to improve the way transition risks are factored into our analyses. These scalable tools are aimed at guiding decision-making according to regulatory, technological and socio-economic developments around the world. They will also enable our teams to ask the right questions when analyzing investment opportunities.
  • In 2021, CDPQ conducted a complete review of its investment portfolio across all sectors and asset classes. The transition risks were analyzed based on a framework tailored to corporate business models, by developing scenarios based on realistic assumptions concerning the impacts of the energy transition. Going forward, reviews of our portfolio will be carried out from time to time depending on our new investments and their exposure to transition risks.
  • We assess these risks according to four focus areas:
    1. Sectors in which the transition will have a negative impact on product demand
    2. Sectors in which products will need to be adapted during the transition
    3. Emitting industrial sectors with established demand for their products but for which decarbonization is complex
    4. New needs arising from the emergence of industries of strategic value for the future
  • Three time horizons are considered:
    1. Short term (<5 years): relatively low and specific risks in certain jurisdictions and companies, analyzed on a case-by-case basis
    2. Medium term (5–12 years): risks of a technological, regulatory or market-related nature or pertaining to carbon pricing, potentially affecting the competitiveness of highly carbon-intensive companies
    3. Long term (>12 years): risks associated with high carbon intensity sectors for which lower carbon substitutes or disruptive technologies exist
  • The level of exposure was rated on a 6-step scale, ranging from very favourable to critical.
    1. Very favourable
    2. Favourable
    3. Neutral/low sensitivity
    4. To be monitored
    5. Problematic
    6. Critical
  • In the short term, our exposure to transition risk is low, with 4% of the portfolio considered as to be monitored, while 96% of the overall portfolio is low sensitivity or favourable to the transition (as at December 31, 2023). In the medium and long term, the percentage of assets with negative exposure to transition risk increases. However, over such horizons, we expect that our portfolio companies will have initiated risk mitigation measures, and that we will have been able to reposition the portfolio to limit our exposure.
  • We also completed our exit from oil production, including extraction and refining, as well as from thermal coal mining and thermal coal power generation (outside the transition envelope), which contributes to progress in decarbonizing the portfolio and reducing transition risk.
  • In 2023, we voluntarily took part in a transition risk assessment exercise conducted by the Bank of Canada and the Office of the Superintendent of Financial Institutions. The results confirmed that our portfolio is well positioned with regard to this type of risk.
  • It should be noted, however, that the methodologies underlying this work remain very approximate. We continue to monitor the market for any improvements to these tools.
Management of transition risks
  • We manage transition risk on three fronts:
    1. Our investments in low-carbon assets that reduce the economy’s dependence on fossil fuels
    2. Our investments in assets that actively reduce emissions
    3. Our exit from the oil and thermal coal production sectors
  • We have set ambitious low-carbon investment targets, aiming to reach $54 billion by 2025, which is more than three times the amount of such assets we held in 2017. We nearly reached this target as at December 31, 2023, with $53 billion in low-carbon assets in our portfolio.
  • As at December 31, 2023, $50 billion of our assets under management corresponded to companies with a decarbonization objective aligned with the Paris Agreement and certified by SBTi, and $32 billion were working towards this. Obtaining this certification can take up to two years. When this is added to our low-carbon assets ($53 billion), we have $135 billion in assets aligned with the Paris Agreement.
  • Our engagement and shareholder voting activities with public companies, particularly in association with Climate Action 100+, are aimed at demanding the implementation of concrete plans and the adoption of decarbonization targets aligned with the Paris Agreement.
  • We made our first investments in the energy transition in 2015. Our deployment of capital was conditional to these companies transitioning from highly carbon-intensive energy consumption to more sustainable solutions, such as renewable energy. With our support, they have made their mark as some of the first companies in their regions to develop ambitious SBTi-certified decarbonization plans. These are concrete examples of our deployment of constructive capital in transition assets. We have since invested in several companies that have transition plans aligned with the Paris Agreement and are taking action. External consultants are given mandates to certify the decarbonization trajectories of these companies. We now hold $5 billion in transition assets.
  • We have also completed our exit from oil production, including extraction and refining, as well as from thermal coal extraction and power production, thereby contributing to progress in the portfolio’s decarbonization and reducing its transition risk.
  • These combined actions have enabled us to continue our efforts to decarbonize the portfolio. In 2023, we reduced our carbon intensity by 59% compared to 2017. This means that we are now positioned to achieve our new target of a 60% reduction by 2030, which is aligned with our ambition of having a net-zero portfolio by 2050.

  • As a member of the NZAOA, we are determined to work together on defining best practices, influencing our portfolio companies and further driving the financing of existing climate solutions in order to meet our target of decarbonizing the real economy. We are also committed to achieving a net-zero portfolio by 2050 (for more details, see the Leadership section).
  • In 2021, we reviewed our climate targets and published a new strategy, including a target to reduce the carbon intensity of our portfolio by 60% by 2030 compared to 2017.
  • In 2023, we began work to better assess companies’ expected emissions and transition risk management trajectories. This tool is currently being validated. We plan to deploy it internally in 2024.

  • Through our shareholder vote, we support shareholder proposals aimed at promoting better disclosure of climate-related risks and opportunities, in accordance with TCFD recommendations.
  • Moreover, we speak with our portfolio companies’ executives to better understand their climate change strategies and encourage them to adopt best practices. In some cases, CDPQ pools its efforts with peers to maximize its influence on companies.
  • As part of various initiatives, including Climate Action 100+, we work with other investors to influence the practices of the highest emitters and raise awareness among investors and companies on best practices for addressing climate issues.
  • In 2022, we voted against the re-election of certain Board members of 10 companies to underscore their lack of ambition on decarbonization. These individuals are responsible for sustainability and climate-related issues on their Boards. We continued our collaboration in 2023 and voted against the re-election of nine new Board members (for more details, see the Climate engagement case study).
  • In 2023, we became signatories to a collaborative engagement campaign that seeks to reduce methane emissions. We have sent letters to five of our portfolio companies to encourage them to join this initiative and develop best practices in emission reduction (for more details, see the Commitment to reduce methane emissions case study).

  • CDPQ has developed various tools to seize the many climate-related investment opportunities:
    • An ambitious low-carbon investment target ($54 billion by 2025) that is aligned with CBI’s taxonomy (for more details, see the Our low-carbon assets section).
    • A $10-billion transition envelope to decarbonize high emitters. The envelope targets critical transition sectors such as power generation, materials, transportation and agriculture, and will reduce GHGs in the real economy (for more details, see the Our transition assets section).
    • The Sustainable Land Management mandate, formed within the Infrastructure portfolio, which plans to deploy up to $2 billion by 2026 to acquire forest and agricultural land on several continents. Our investments in this sector are for the long term, in compliance with rigorous ESG criteria and the highest standards of sustainable development. This mandate helps diversify our low-carbon investments (for more details, see the Our biodiversity initiatives section).

  • As part of our investment process, we analyze the role that each component of the energy value chain plays in the transition.
  • In order to achieve our carbon intensity reduction target, we have had carbon budgets in place for each portfolio since 2017. All our portfolio managers are required to incorporate them into their investment decisions, on equal footing with their performance objectives. Their variable compensation depends on it.
  • Since 2020 and as a member of the NZAOA, we are committed to complying with the conditions set out in the Alliance Thermal Coal Position:
    • No investments in or financing of new power generation projects that use thermal coal
    • Withdrawal from projects or companies that are not aligned with a decarbonizing trajectory of 1.5 °C:
      • By 2030 in industrialized countries
      • By 2040 in emerging countries
  • In 2021, we also joined the Powering Past Coal Alliance (PPCA), an organization consisting of national and subnational governments, businesses and organizations working to advance the transition from coal to renewable energies.
  • Oil production, including extraction and refining, as well as thermal coal mining and power generation, now figure among our investment exclusions. This applies to both new operational or expansion projects and companies in this sector. Investments in or financing of new oil pipelines are also excluded. This covers both public and private companies, as well as projects involving these activities.

  • Our main indicators are the carbon intensity (in tCO2e/M$) of a company or portfolio, under the methodology recognized by the NZAOA, as well as the volume of low-carbon investments (in $B) under the CBI criteria.
  • In 2018, CDPQ implemented an IT system that connects its internal databases to those of external climate data suppliers in order to estimate, in real time, the carbon intensity of our various portfolios and measure changes. Particular attention has been paid to the quality of the data and their governance, in order to mitigate the operational risks associated with this disclosure.
  • CDPQ also took part in the work led by the NZAOA to explore solutions to enhance the methodology for forward-looking climate metrics. In 2023, we developed a tool that better assesses companies’ climate trajectories, based on existing external work. This tool is currently being validated for internal deployment in 2024.
  • Since 2017, CDPQ has been using the carbon intensity metric for a company or portfolio, in accordance with the methodology recognized by the NZAOA. We consider this metric to be credible, rigorous, easy to understand, derived from a transparent methodology, and useful for decision-making, as it allows us to compare companies and measure our progress, regardless of portfolio size. This includes the vast majority of our emissions, i.e. Scope 3, Category 15, as defined by the Greenhouse Gas Protocol. To calculate our intensity, we only use the Scopes 1 and 2 emissions of our portfolio companies. For now, data on their Scope 3 emissions are either unavailable or not sufficiently reliable to be included in our calculations (for more details, see Appendix 2, Table 16).
  • In 2022, CDPQ conducted a detailed analysis of the Scope 3 GHG emissions data of our portfolio companies. The data represent supply chain emissions and are tied to use of the company’s products. Our analysis showed inconsistent data quality and a low rate of disclosure by our companies and data suppliers (for more details, see Appendix 2, Table 16). This limits our ability to calculate this data at the portfolio level. Despite the fact that it is more difficult for our portfolio companies to control, and more complex to calculate Scope 3 emissions, we continue to encourage their disclosure. When the data are of good quality, they can be used in a risk assessment, more specifically in files associated with fossil fuels.
  • The businesses selected for the transition envelope are evaluated by our teams and reviewed by independent external experts in order to validate the rigour of their respective decarbonization plans and ensure alignment with the Paris Agreement. The selected companies must meet specific criteria defined by CBI or SBTi, have a proven robust decarbonization strategy, possess an implementation plan, and disclose their progress. The financial exposure and carbon emissions of the companies held in the transition envelope are rigorously monitored to ensure that they meet the required criteria and follow their transition paths.
  • In 2022, we benchmarked the methodology we use to calculate the intensity of our corporate portfolio and the transition envelope against the calculation standard of the Partnership for Carbon Accounting Financials (PCAF). CDPQ began disclosing its carbon intensity in 2017, two years before the PCAF standard was published. The benchmarking validated the robustness of CDPQ’s methodology and found that it differed only slightly from the PCAF standard. As a result, we have decided to continue making our disclosures based on the CDPQ methodology.
  • In 2023, we published the carbon intensity of our sovereign bond portfolio for the first time. The methodology used to make this calculation complies with the PCAF standard and reflects the latest NZAOA recommendations. Since this intensity is calculated in relation to macroeconomic metrics (gross domestic product), it is not comparable to the corporate intensity metric, which uses the long-term capital employed by a company. It is therefore excluded from our carbon intensity calculation, and is not subject to decarbonization targets. A large portion of the government bond portfolio is a source of cash or duration management, and consists of Canadian or U.S. federal government bonds. We therefore have neither the usual levers nor the necessary discretion to manage their intensity.

  • CDPQ’s corporate portfolio intensity is calculated on a perimeter of $422 billion, or 100% of our corporate exposure (for more details, see Appendix 2).
  • In 2023, the carbon intensity of CDPQ’s corporate portfolio was 32.2 tCO2e/M$, down 47.2 tCO2e/M$ from 2017 (for more details, see the Our carbon intensity section).
  • In order to be aligned with PCAF disclosure standards and the NZAOA recommendations, we have calculated the carbon intensity associated with our sovereign bonds with and without a country’s emissions corresponding to land use, land-use change and forestry (LULUCF). As at December 31, 2023, the intensity of CDPQ’s sovereign bond portfolio, as defined by NZAOA, was:
    • 233 tCO2e/M$ without LULUCF and 223 tCO2e/M$ with LULUCF for our return-seeking portfolio
    • 222 tCO2e/M$ without LULUCF and 206 tCO2e/M$ with LULUCF for our liquidity sub-portfolio.

  • We disclose the carbon intensity of our total portfolio annually. We also provide information on the contributions made by various sectors to our overall carbon footprint, in addition to their weights in CDPQ’s total portfolio, in billions of dollars.
  • The methodology used to measure the intensity and absolute footprint of our corporate assets is available in Appendix 2 and has been certified by external auditors (for more details, see Appendix 3). This methodology applies to our corporate portfolio subject to targets, as well as to the transition envelope for which decarbonization targets are set based on each investment.
  • The methodology used to measure the absolute intensity and footprint of our sovereign bond portfolio is presented in section 11. These data are not certified.

  • Our carbon intensity reduction targets are broken down by portfolio based on asset class, time horizon and investment universe.
  • In 2023, we reduced the carbon intensity of our corporate portfolio (excluding the transition envelope) by 59% compared to 2017 and increased our low-carbon investments by $35 billion compared to 2017, for a total of $53 billion.
  • We now hold $5 billion in transition assets and $135 billion in assets that are compliant or near-compliant with the Paris Agreement.