It’s a Good Thing: Institutional investors—including B.C. players—put sustainability at the fore of financial decision-making

British Columbia Investment Management Corp. has made environmental, social and governance issues a priority in recent years.

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British Columbia Investment Management Corp. has made environmental, social and governance issues a priority, with an emphasis on climate-conscious investment tools

Going into the UN Climate Change Conference in Glasgow this November (also known as COP 26), there were high expectations about what the world’s leading economies could accomplish. First and foremost, countries were asked to come prepared with “ambitious 2030 emissions reductions targets”—with the goal of getting to net-zero emissions by mid-century, and thus keeping global temperature rises to under 1.5 C. After one of the wildest weather years on record—including a heat dome that brought unprecedented temperatures and death to the Pacific Northwest—the call for climate action grew even louder.

But high on the list of the Glasgow goals—third of four listed priorities—was the need to mobilize “at least $100 billion in climate finance” each year, both in public finance (to develop greener infrastructure) and private finance (to fund green technology and innovation). “To achieve our climate goals,” said the conference organizers, “every company, every financial firm, every bank, insurer and investor will need to change.”

The push to hit that target is being felt across the financial industry and in all corners of the world. British Columbia Investment Management Corp. (BCI), based in Victoria, is the provider of investment management services for B.C.’s public sector and one of the largest asset managers in Canada, with about $200 billion under its care. Like a lot of institutional investors, it has made ESG (environmental, social and governance issues)—and, particularly, climate-conscious investment tools—a priority in recent years.

“When I first started at BCI 10 years ago, we were largely a manager of managers,” says Jennifer Coulson, senior managing director of ESG. “We had retained our proxy voting rights, we did engagement, but in terms of integrating ESG into actual investment processes? There just wasn’t that opportunity when you’re relying on external managers.” In 2014, the organization decided to become an active asset manager and develop a specific ESG strategy—engaging with the companies it invests in to achieve more sustainable results.

One of the ways BCI has done this is by purchasing so-called green bonds. In February, the asset manager announced its commitment to buy $5 billion in sustainability bonds (based on initial participation values) by 2025, with the funds raised specifically earmarked for environmentally sound projects. BCI has also become involved in a global initiative called Climate Action 100+—an investor-led engagement project that brings together 545 signatories in 32 countries to ensure the world’s largest greenhouse gas emitters are taking action on climate change.

As one of those signatories, BCI leads or co-leads engagement with four North American companies, including Vancouver-based mining giant Teck Resources. “They’re very constructive conversations,” Coulson says. “We’re not interested in making demands and pounding our fists on the table. We all need to play our part.”

READ MORE: In a world facing several crises, the question of purpose has never been more important for corporate directors

One climate action strategy that BCI has not pursued is divesting from fossil fuels—which has become popular with some large institutional investors, including the Caisse de dépôt et placement du Québec. “We’re very public about the fact that we don’t believe that divestment actually is going to make an impact,” Coulson says. “It’s not a great way to manage risk in a portfolio—but also, it doesn’t actually impact greenhouse gas emissions, if that’s your ultimate goal. We can sell a company, but somebody else is going to buy it.”

For Coulson, who first pursued environmental studies (at Western University) in the early 1990s, it’s been a transformative three decades in the ESG space. She’s seen many UN Conferences come and go, and governance fads fade into the distance. But she’s optimistic about where things are heading in 2022.

“When I first started, ESG was not an acronym that we even used. It was very challenging to get executives’ attention,” she says. Now, with capital flowing into ESG funds and ESG issues being raised in mainstream earnings calls, the field is suddenly on everyone’s radar. “And hopefully, that change will lead to climate action.”

Global Financiers Unite!

Bringing together 250+ financial firms responsible for $88 trillion+ in assets, the Glasgow Financial Alliance for Net Zero (GFANZ) aims to accelerate the transition to net-zero emissions by 2050

The world will need significant infrastructure investment over the next 15 years—about $90 trillion by 2030, according to 2019 data from the World Bank

But shifting to a green economy can unlock new economic opportunities and jobs, the World Bank found. On average, a $1 investment yields $4 in benefits

Compared with business as usual, bold climate action could yield a direct economic gain of $26 trillion through 2030, the New Climate Economy report conservatively estimated in 2018

Source: United Nations. All dollar figures in USD