The British Columbia Investment Management Corp. has published its investment plan for tackling climate change.
Motivated by its clients’ interest in thoroughly understanding their exposure to climate change risk and opportunity, the plan outlines four core activities: managing risk, integration, seeking out opportunities and engaging and advocating. It will also comply with recommendations from the Financial Stability Board’s task force on climate-related financial disclosures.
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“Climate change is becoming a focus of both long-term investment risk and opportunity at BCI,” said Gordon Fyfe, the organization’s chief executive and chief investment officer. “To continue to protect and grow the value of our clients’ funds, we need to be aware of the financial repercussions of climate change, including the shift in investment winners and losers.
“We anticipate transition risks from changes in government policies, technological innovation and adoption and altered consumer behaviour. If global temperatures rise past the agreed-upon threshold, we must then prepare for physical risks to our clients’ assets brought about by rising sea levels, more frequent and severe weather conditions and other environmental impacts.”
The BCI intends to quantify current risks and set up a number of signposts that will indicate when more analysis is required. These include carbon pricing and regulation, the global energy supply and demand mix, the cost of energy in various forms, as well as commercialization rates and disruptive technologies. Currently, the BCI has completed a climate change scenario analysis for all of its clients’ assets and plans to integrate the process into ongoing and future risk processes.
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As well, the BCI plans to integrate climate change risk into every investment decision at the asset, pool and client portfolio levels. Its current efforts include: integrating climate change indicators into its active equity mandates; encouraging fixed-income credit ratings agencies to incorporate climate change analysis; analyzing climate change risk during due diligence for its mortgages program; and reviewing legal, environmental and regulatory factors relating to climate change in making decisions on real estate, private equity and infrastructure investments.
The BCI also intends to seek opportunities to take advantage of a transition to a lower carbon future. This will include analyzing alternative energies, green buildings, energy efficiency, sustainable water and pollution prevention. It’s already invested $1.8 billion in these opportunities, according to the press release, and intends to build on that exposure.
Further, the BCI laid out its commitment to engaging as an active asset owner. It’s created metrics to measure its level of engagement in climate-related issues. It intends to encourage greater disclosure, in line with guidance from the task force on climate-related financial disclosures, as well as its participation in Climate Action 100+, an effort, alongside many other global institutional investors, to target the worst emitters.
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