Caisse to Reduce High-Carbon Investments, Boost Renewables

Written by Frederic Tomesco and Sandrine Rastello. This article first appeared in Bloomberg News. 

Caisse de Depot et Placement du Quebec, one of Canada’s largest pension funds, will scale back its high-carbon investments such as coal while boosting its renewable holdings in a bid to help fight climate change.

Already among the world’s largest renewable energy investors, the Caisse is pledging to increase low-carbon investments by 50 percent over three years, according to a statement Wednesday. This will represent more than C$8 billion ($6.4 billion) in new investment, the Caisse said. By 2025, the Montreal-based fund manager will also aim to reduce its carbon footprint by 25 percent per dollar invested.

“In the wake of the Paris Agreement and changing consumer choices and technology, we are already seeing markets undergoing rapid change,’’ Chief Executive OfficerMichael Sabia said. “This new reality has prompted us to review the risk-return profile of several industries and companies. It will also create new attractive investment opportunities for our clients.’’

Environmental groups such as Greenpeace and the David Suzuki Foundation have called on the Caisse to exit its investments in fossil fuels in recent months, saying that the pension fund manager should focus on renewable energy. Key energy holdings of the Caisse include France’s Total SA and Calgary-based Canadian Natural Resources Ltd. and Suncor Energy Inc., Bloomberg data show. While the Caisse now oversees about C$287 billion, it had about about C$11 billion invested in fossil fuels and about C$9 billion in renewable energy at the end of 2016.

Norges Bank of Norway, the world’s biggest sovereign wealth fund, began excluding companies on ethical grounds – such as coal producers and makers of nuclear weapons — in late 2014. In the U.S., the California State Teachers’ Retirement System and the California Public Employees’ Retirement System have been banned from investing in thermal coal companies.

Risk, Return

Earlier this month, the Caisse teamed up with a clutch of Mexican pension fund managers to acquire 80 percent of a group of eight wind and solar assets owned by Enel Green Power.

As part of the strategy announced Wednesday, the Caisse also said it will “review the risk-return profile’’ of its investments and reduce exposure to the assets with the highest carbon intensity in its portfolio, such as activities related to coal.

At a press conference in Montreal, Sabia refrained from singling out oil and gas assets as holdings that must also be reduced, while suggesting they will be impacted by the new policy. He prefers to let investment teams make their own decisions based on targets rather than declare a moratorium.

“The destination is clear,” he said. “By 2025 you will see considerable changes in the composition of our portfolio.”

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