The Canada Pension Plan Investment Board is pursuing a new strategy that involves investing in businesses with high greenhouse gas emissions and a desire to reduce them.
The strategy, which is published in a new report, aims to identify companies committed to creating value by lowering their emissions in a manner that’s consistent with the CPPIB’s own timeframe. The strategy was devised by Bill Rogers, managing director and head of sustainable energies; Mike Conrad, principal in sustainable energies; and Art Pithayachariyakul, principal in sustainable energies.
“Most current initiatives to tackle the climate crisis do not address strategic sectors that are both essential and high-emitting,” stated the report. “The successful decarbonization of these strategic sectors is not only essential to meet wider net-zero ambitions, but also to sustain economic growth, stability and a responsible transition.”
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The CPPIB also identified several sectors in which it intends to use the strategy, including agriculture, chemical, cement, power, oil and gas, steel and heavy transportation sectors. It estimated that the decarbonization of each of these sectors will cost between US$100 trillion and US$150 trillion — equivalent to between 15 and 18 months of gross global earnings.
In a press release, Deborah Orida, the CPPIB’s first chief sustainability officer and its global head of real assets, said companies with high carbon footprints that are working to reduce overall emissions offer a significant value proposition to long-term investors. “High-emitting companies that successfully navigate the economy-wide evolution to a low-carbon future will preserve and deliver embedded value for patient long-term investors like CPP Investments.
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“This new investment approach complements the fund’s ongoing commitment to investing in companies that have the potential to develop innovative climate technologies around the world and furthers our existing capabilities in technologies that enable the energy evolution.”
In the report, the CPPIB also indicated it would like to see other institutional investors engage with its strategy — as either investment partners or to help support the overall goal of reducing carbon emissions. “As we expand our competency in this space, we hope others will work alongside us to advance the push to identify, fund and facilitate opportunities on the journey toward a sustainable future.”
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