“Everyone on stage agrees on one thing — [environmental, social and governance] integration is just smart,” said moderator Francisca Quinn, co-founder and president of Quinn and Partners Inc., during a panel at the 2023 Responsible Investment Association conference last week.
She was joined by representatives of two Canadian public sector investment organizations with very different approaches to ESG integration — the Alberta Investment Management Corp. and Ivanhoé Cambridge, the real estate arm of the Caisse de dépôt et placement du Québec. While both organizations incorporate ESG into the investment decision-making process, the AIMCo hasn’t adopted formal carbon emissions reduction targets and Ivanhoé Cambridge while is aiming to eliminate its portfolio’s carbon emissions by 2040.
Shama Naqushbandi, the AIMCo’s portfolio manager for value creation and asset management in infrastructure and renewable resources, said it’s making significant investments in transition-aligned businesses and factoring in climate criteria to lower investments risks. “We see it as an important source of value creation in the portfolio.”
Rob Simpson, senior director of sustainable investment and head of climate change strategy at Ivanhoé Cambridge, noted the investment organization was among the first to adopt a formal ESG strategy. “Real estate is, directly or indirectly, responsible for something like 40 per cent of emissions, so it’s something we’re very much paying attention to. Our work integrating ESG considerations began nine years ago.”
These efforts haven’t always followed a straightforward path, he said, noting that, while the organization now ties employee bonuses to emissions reductions, it also considered other methods to incentivize portfolio decarbonization. “One thing we’d experimented with was an internal carbon pricing scheme. The math on those rarely works out.”
While Ivanhoé Cambridge committed to achieving carbon neutrality by 2040, there’s no master plan for reaching that goal. “Setting [carbon reduction] targets are one thing and achieving them is another entirely. Incremental improvements are easy, but those won’t be at the scale we need.”
The AIMCo invests in the energy sector and favours an engagement-based approach over divestment. According to Naqushbandi, the organization feel its responsibility is to improve companies it invest in rather than passing the problem on by divesting. “We won’t get to net zero without decarbonizing high-emitting sectors.”
In addition, she said the AIMCo is looking to become more thematic investment aware as part of an investment-led approach to climate “Watch this space.”