GLOBE Capital Q&A: Sarah Chapman, Global Chief Sustainability Officer, Manulife
In April 2021, Manulife’s Global Chief Sustainability Officer, Sarah Chapman, participated in the Nature is Calling: Invest in Biodiversity or Bust? at GLOBE Capital. This session brought together leaders in this space to discuss the link between biodiversity and the economy, and how we can assess, stop and potentially capitalize on reversing nature loss.
We caught up with Sarah to learn more about how Manulife is creating value through the sustainable management of natural resource investments, biodiversity impacts on portfolio investments, and more.
The mission of Manulife Investment Management Timberland and Agriculture* is to create value through the sustainable management of natural resource investments. What does this look like in practice?
We are in a unique position with our timber and agriculture business: by investing in forests to create carbon sequestration, and other conservation opportunities derived from forests, we can have a positive climate impact.
We’re proud that Manulife is net zero in our operations. We achieved this through the carbon removals from our substantial forests and farmland outweighing our emissions. Manulife Investment Management’s global timberland portfolio team has removed an average of 1.38 million metric tons of CO2 annually by assets owned by Manulife’s general account.
*Manulife Investment Management’s diverse private markets businesses—including timberland and agriculture—have operated within the global wealth and asset management business for decades and recently Hancock Natural Resource Group has changed its name to Manulife Investment Management Timberland and Agriculture Inc.
You’ve recently created a new role of Managing Director, Impact Investing and Natural Climate Solutions at Manulife Investment Management Timberland and Agriculture Inc. to develop impact-first investment strategies. What have been the most promising/exciting opportunities to emerge, and how are your clients responding?
Timberland and agriculture investments can both serve as natural climate solutions, or investments that utilize nature’s own benefits to further climate, ecological and social goals.
The rapid expansion of private sector net-zero commitments and the continued evolution of public climate policies are increasing global attention and appetite for natural climate solutions and driving additional demand to global carbon markets.
Although both represent significant opportunity to generate competitive financial returns and a range of ecological and social benefits, forestry is currently further ahead than agriculture in terms of impact investing and natural climate solutions opportunities. Specifically, forest-carbon markets are well established, with a range of regulatory (compliance) and voluntary methodologies and protocols having evolved over time. Soil carbon also holds enormous promise to help achieve global climate goals and create value for investors, although consistent measurement applications and protocols are still developing.
Manulife is currently developing a Forest Climate Strategy (FCS) to provide clients with a scaleable solution to help meet their net-zero goals. The FCS will prioritize carbon sequestration and high-quality carbon credit generation via third-party validation, verification and registries in addition to adherence with MIMTA’s Carbon Principles that we adopted last year and are aligned with the Taskforce on Scaling Voluntary Carbon Markets (TSVCM) Core Carbon Principles. Other impacts refers to other ecological and social benefits that the FCS will seek to support through long-term protection of high biodiversity and high conservation value land via conservation easement sales as well as non-timber activities like recreation leases and mitigation banking that can support local communities and the environment.
Current clients and investors—Manulife included—are actively developing net-zero goals and action plans, often with expert guidance from organizations like the Science Based Targets Initiative (SBTi). There is a rapidly growing recognition of the unique climate mitigation and sustainable investment role that timberland and agriculture investments can play in client portfolios. We are seeing new interest in these asset classes from a range of investors outside of our traditional client base.
How do you factor biodiversity implications into investment portfolios?
When it comes to investing in biodiversity, there’s a place for scientists: to measure, track, monitor, and verify the impacts and dependencies of investments. We need scientific measurements of species abundance, water quality, and soil carbon.
At Manulife Investment Management Timberland and Agriculture, our timber group employs wildlife biologists who prepare biodiversity indexes for the forests we manage. It’s why we have wildlife and biodiversity guidelines and policies that inform our research processes and how we build our portfolios.
On a more granular level, to ensure that all relevant ESG risks and opportunities are considered in a standardized way across every possible deal, our acquisition teams use our new SRI Toolkit. It has been developed to enable a consistent and structured approach to assessing the characteristics of an investment opportunity.
What impact have green bonds had on the debt market?
The rise of sustainable financing—in which proceeds are used exclusively to fund projects that bring about environment and/or social benefits—has been well documented. Green bonds, in particular, found favour with many investors, having hit an important milestone in September 2020 by crossing the US$1 trillion issuance mark globally since their introduction in 2007.
The impact of green bonds on the debt market continues to grow. Investors are interested in the ability to influence positive change through their investments. Green bonds provide transparency on the allocation of green finance and will hopefully provide transparency on what has been successful (or not), where more funds are needed, etc.
Until recently, knowledge of social bonds was mostly restricted to sustainability practitioners and the investment community; however, the COVID-19 outbreak changed all that. Social bond issuance globally in 2020 soared to more than US$160 billion, up from US$13.3 billion a year ago. The rationale behind the surge? Issuers—which include sovereigns, supranationals, and financial institutions—saw it as a means to help mitigate the socioeconomic impact of the pandemic.
Manulife was the first global life insurer to issue a green bond. The environmental benefit of the General Account’s low-carbon investments that underpin our green bond issuances amount to 150,000+ tonnes of CO2 avoidance. Sample investments include solar and wind energy in the U.S. and Canada as well as sustainably managed forests.
What could change the game in a positive way for impact-first investment strategies?
Public policy and private sector net-zero commitments are increasingly recognizing nature’s critical role in addressing climate change. There are three key factors that could help the supply of natural climate solutions and other impact investing opportunities proliferate and scale to meet this potential increased demand: improved pricing, standardization, and transparency.
Pricing ecological and social benefits that have historically been undervalued—or not valued at all—is critical to incentivize project developers and investors. Carbon markets—specifically for forest carbon sequestration—have developed and evolved over the past decades, although prices have historically been relatively low and volatile. As corporate net-zero commitments continue to increase and investors search for high-integrity, investable climate solutions at scale, demand and pricing for natural climate solutions that generate real, additional and durable carbon sequestration is expected to increase. Co-benefits—or ecological and social benefits beyond carbon sequestration—are already starting to demand price premiums when combined with recognized natural climate solution strategies, such as improved forest management and reforestation/afforestation. Placing a value on other impacts, such as supporting and expanding biodiversity, is quickly evolving in the footsteps of the carbon markets.
Standardization and transparency across diverse natural capital markets will be key to increasing investor and buyer confidence and could help channel capital at scale towards these solutions. For example, the Taskforce for Scaling Voluntary Carbon Markets (TSVCM)—an international multi-stakeholder effort to develop standards, governance and transparency for the voluntary carbon markets—is helping a historically patchwork system of independent protocols, registries and opaque bilateral trades evolve into a more efficient market.
In addition to TSVCM and similar governance efforts, numerous climate and impact exchanges have been established in the last few years to address the market infrastructure needs of credit suppliers, buyers and intermediaries. Many exchanges and intermediaries have established standardized contracts that enable greater comparability across projects. Numerous research and data providers are shining a light on pricing and volume data that was previously difficult to obtain. With increased standardization and transparency, greater clarity on underlying credit quality—and confidence in tangible climate benefits—could follow.
What is the most important thing that investors need to know right now?
Investors need to understand that the enormous task of improving environmental, social, and governance norms is taking place at all levels of society, and the resulting changes will have profound implications for investors.
In turn, investors are increasingly intentional in their efforts to influence positive change. This intentionality is an evolution from previous forms of sustainable investing, which focused solely on the integration of sustainability factors into investment decisions. I think this positive momentum will continue, but investors will still need to navigate and manage increasing pressures from regulators and society to do more.
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GLOBE Capital Q&A: The Future of Accounting—Making the True Value of Business Comparable
The world is undergoing a paradigm shift from profit maximization to value optimization. To deliver long-term value, companies need to manage potentially conflicting targets and trade-offs. Companies are reporting not just on financial returns, but also on environmental and social targets.
The Value Balancing Alliance (VBA) was founded to further standardize existing approaches in sustainability accounting. The objective is to arm decision-makers with consistent and robust information to make more informed decisions and steer companies towards sustainable and inclusive business models. The VBA members—international companies from various sectors—have successfully tested the first version of the methodology. The results will enable stakeholders to have a better understanding of the true value of a company.
Leaders from VBA and its member organization and founding member in Canada, BASF, joined GLOBE Capital to challenge Canadian business leaders to spearhead economic transformation in the Americas.
To learn more about what makes VBA different and how Canadian companies can get involved, we spoke with VBA CEO Christian Heller and Thilo Birkenheier, BASF Canada CFO and Director of Business Services.
How is VBA redefining the concept of creating value for businesses around the world?
Christian Heller: Contrary to the current international landscape which focuses on reporting and disclosure, VBA focuses on developing methodologies and tools to integrate sustainability into decision-making. The concept of ‘double materiality’ is growing in dominance around the globe. It requires companies to assess two things.
Firstly, how do sustainability aspects inform and influence enterprise value? For example, climate patterns may impact where a company builds a new site. Sustainability can also affect enterprise value through intangible aspects like diversity or reputation.
Secondly, what value does this business create for society, the environment, and the wider economy? This is called an externality assessment and requires you to examine how your business affects third parties. To this effect, we’re currently developing new methodologies to assess companies’ true value to society across the complete value chain. For example, VBA is reassessing how to account for wages and taxes. These have traditionally been seen as deductions from profits. However, if you consider the value contribution to society, wages are our purchasing power and taxes enable the government to provide infrastructure that supports our business, including streets, legal systems, healthcare, and education. By introducing this more holistic perspective, it can transform our understanding of a company’s value.
Thilo Birkenheier: You asked how VBA is redefining the concept of creating value. I would say it’s significantly broadening it. As Christian said, historically, companies have really focused on financial value creation, e.g. maximizing EBITDA. Now with VBA, we can consider environmental and social contributions as well.
What is the greater problem that VBA is aiming to solve?
CH: It’s a bit political. The broader challenges in our society—climate change, biodiversity, and social insecurity to name a few—affect businesses directly. The political framework in recent years has failed to address these concerns. We need to find smart solutions to integrate climate change and social challenges into a broader political framework. Net-zero commitments and the Sustainable Development Goals are a good start.
However, at VBA, we’re convinced the market economy is the best system to increase wealth and innovation in order to find solutions for these challenges. As we adopt new regulation, we need to ensure we’re employing a market-based logic. This is where VBA comes in. Alongside our partners, we’re providing a methodology to measure performance that takes society’s broader challenges into account.
TB: For BASF, we rely on VBA to help us make environmental and social impacts measurable in a way that is comparative to financial impacts. It’s tough to compare financial targets to emission reductions calculated in tonnes of CO2. Without adequate comparison, you can’t maximize the whole system. VBA provides a framework to make all targets comparable in US dollars.
To give a very concrete example, imagine you have the option to adopt a new technology that will change your feedstock from conventional to renewable, which will reduce your carbon footprint, but also increase your land use. How do you make a decision? VBA gives you a framework where you can compare finances, carbon emissions, and land use, allowing you to make a decision that maximizes your impact on society and not just financial returns.
How does VBA relate to other sustainability accounting frameworks, e.g. TCFD, SASB, etc.?
CH: We need to differentiate reporting frameworks and performance measurement methodologies.
In terms of reporting, the IFRS Foundation has established an International Sustainability Standards Board. The content for this board will be provided by the Value Reporting Foundation, which is a merger of SASB and IRCC that took place in June. We also expect to see the more climate-related reporting frameworks like CDP and CDSB moving in this direction. In short, the reporting landscape is consolidating. It’s also growing rapidly through the global adoption of taxonomies—classification systems that assess the impact of business activities on sustainability performance.
VBA is working on another layer—how to measure performance. We’ve got top notch partners on our side including the Volt Business Council, CERES, Harvard, and Oxford. To give a practical example, the reporting frameworks may require companies to report about human capital. This will likely mean considering training, but the frameworks may not go into detail on how to report or measure the impact of training. Without consistency, you can’t compare. If your performance isn’t comparable, your stakeholders can’t really use the information you’re providing.
What are the business rewards of adopting VBA?
TB: It’s clear that sustainability is at the core of the future of business. That is why we believe that, in order to be successful in the long term, BASF has to be able to show our stakeholders that we have a positive contribution to environment, society, and the economy. As Christian illustrated, we need to develop transparent language to assess that contribution.
The other business reward for us is direction on resource allocation. BASF is a complex global company and determining which resources to use across different projects and countries is challenging. We know how to solve this problem by focusing on financial returns, but we want to broaden our assessment to include society and the environment and VBA helps us do that.
CH: To add to what Thilo said, the VBA methodology is a brand-new approach to materiality metrics. It allows companies to identify both where they have the highest risk exposure and where they have the biggest business opportunities. In the past, companies have relied on stakeholder interviews, which can be biased. VBA provides a measurement framework that is more objective.
The second benefit I’d like to introduce is risk management. In our methodologies, as Thilo mentioned, we bring everything down to US dollars. But this dollar amount doesn’t signify market price. It’s the value we’re attributing to a tonne of CO2, for example. In that case, the amount would be derived from the total cost of climate change to society. We’re currently valuing a tonne of CO2 at $100 CAD. This cost is a risk indicator or an internalization of externalities. Canada is ahead of the world in implementing a carbon price, which can be a valuable tool for businesses. We expect the rest of the world to follow suit in the coming years. In the meantime, a global company like BASF needs to take the cost of carbon emissions into account at a global scale. VBA provides the tools to do that.
Lastly, policymakers around the world are creating new standards, frameworks, and legislation. In response, business needs to provide and demonstrate solutions. Companies that engage in initiatives like VBA will be seen as front runners, and they’ll have insight into future standards, which will ultimately be a competitive advantage.
To that point, Thilo, it seems that BASF’s support for VBA isn’t just risk management, but also a strategic move. Could you speak more to that?
TB: Our VBA membership shows stakeholders that BASF is contributing to a sustainable future, which is one of our competitive advantages. Our customers want to work with companies that help them become more sustainable at the same time that regulators want to understand our contributions to society and the environment. VBA is the perfect tool to increase our transparency with both of these groups of stakeholders. As the saying goes, you can’t manage what you can’t measure.
One other aspect that VBA contributes to is employee attraction and retention, because nowadays people want to work for companies that have a positive impact on the environment and society. In this sense, VBA allows us to showcase our achievements and, thus, increase employee engagement.
Christian, for those unacquainted with VBA, where should they start?
CH: First of all, I recommend that companies consider the current economic transformation. All businesses will need to find ways to cope with this. VBA can provide insights in this area. To learn more, individuals should feel free to reach out to us directly.
VBA members get direct access to the methodologies we are developing. We are practitioner-led, so every member company has a say in the development of the methodologies. Secondly, membership isn’t just discussion-focused. We’re testing and piloting the methodologies by applying them to member businesses and members regularly share benefits and challenges with one another. This is much more efficient than trying to apply the methodologies in a vacuum or by working with a consultancy.
TB: When you first look at this topic, it can be a bit overwhelming. The key is to start now. If you wait another 3-4 years, VBA and similar impact calculations will start becoming mandatory. Then, you’re in a catch-up game.
Why is VBA critical in the race to net zero?
CH: It goes beyond net zero. Businesses have optimized all decision-making processes along profit maximization. At the international level, we’re just starting to add climate into the equation. However, other concerns like biodiversity and social inequality are not broadly incorporated into business decisions. If you want to optimize a company’s value contribution to society, you need to consider many more indicators than just net zero.
Why is that critical? Firstly, as Thilo mentioned, you can’t manage what you can’t measure. Secondly, competition benefits everyone. Once the market has comparable data, it creates a race to be the best. If we have consistent data, companies will improve much more quickly than they do today.
TB: I agree it goes beyond a net-zero target. VBA helps you to not make mistakes while racing to net zero. You could maximize that target alone and then have many negative ripple effects. The art of future business is to take a holistic approach—economic, social, and environmental. Companies need to find an optimum within all those aspects while reducing CO2 emissions.
How did GLOBE Capital accelerate action?
CH: VBA is currently working on enabling a fundamental transition of the economy. This can’t be done by one country, one policymaker, or by one alliance. We need to move the whole system. This means beginning with a broad stakeholder engagement that will eventually become collaboration. GLOBE Capital enabled VBA to position itself in the Canadian market and the financial market in particular. The finance sector will be a multiplier and enabler of the transition, allocating capital to certain trends and industries. If we can enable capital allocation to transformational technologies and companies, this is going to be the major step forward.
TB: VBA will grow as standards are established, which requires broad buy-in. We need to generate public interest. I’m hopeful that Canadian companies will join VBA in order to impact its direction and also to adopt the methodologies, so we can define this language both internationally and within Canada, and ultimately maximize the benefit for society, the environment, and all of us.
GLOBE Capital Q&A: Jon Mitchell, Vice President, Sustainability, Suncor
Jon Mitchell, Vice President, Sustainability, Suncor joined the panel on Digital Transformation: Enabler or Enemy of a Resilient Future at GLOBE Capital to discuss the nexus of the energy transformation and digitalization. The months since the conference have been busy for Mr. Mitchell, with Suncor’s Investor Day in May and the launch of the Oil Sands Pathways to Net Zero initiative in June, followed by the company’s annual Report on Sustainability and Climate issued in July. We followed up with Mr. Mitchell to learn more about what net zero means for Suncor.
In late spring, you held your 2021 Investor Day and your strategy figured prominently. Tell us about your sustainability plans within the context of your strategy.
Our strategy is to be Canada’s leading energy company by growing our business in low greenhouse gas (GHG) fuels, electricity, and hydrogen, while sustaining and optimizing our existing hydrocarbon business and transforming our GHG footprint. All of this is enabled by our expertise, long-life resources, integrated business model, strong connection to customers, and world-class environment, social and governance (ESG) performance. It’s important to note that we don’t have a separate sustainability strategy—sustainability and the energy transition are integrated within the business strategy. It was our objective at the outset to ensure they were neither distinct from one another nor independent conversations.
As part of our strategy, one of our six strategic objectives is to become a net–zero company by 2050. To get there, we will be reducing emissions from our base business; expanding our low–emissions power, renewable fuels and hydrogen businesses; and working with our customers, suppliers and other stakeholders on reducing emissions elsewhere. To measure our progress, we’ve set a new target to reduce emissions across our value chain by 10 MT per year by 2030.
ESG investing has recently expanded into a USD$30 trillion-plus business. We’ve seen more and more investors seizing opportunities in the clean economy and advocating for the disclosure of climate-related business risks through the Task Force on Climate-Related Disclosure (TCFD), for example. How has this impacted investor relations at Suncor? Are your sustainability and IR teams working more closely together?
We’re fortunate that our investor relations and sustainability teams have always had a close working relationship, and over the past few years the collaboration between our teams has grown even more. Along with my colleagues from finance, I regularly meet with our investors, bankers, and insurers to discuss all aspects of our climate strategy, ESG performance and our actions to continually improve our disclosure. This is to ensure that we are meeting the needs of the investment community and that they have the information they need to make informed decisions about the material ESG issues that are shaping our business.
Suncor was an early adopter of the Sustainability Accounting Standards Board (SASB) oil and gas standards. We were also the first oil company in North America to signal support for the TCFD. We recently published our fifth stand-alone climate report and have been continuously progressing our alignment with the TCFD recommendations.
The Canadian government has committed to net-zero carbon emissions by 2050, alongside over 100 countries and many of the world’s largest corporations. To achieve this target on a global scale, the latest International Energy Agency (IEA) report recommends no new oil and gas developments. What does a net-zero future mean for Suncor and its sustainability strategy?
The drive to accelerate climate ambitions and net-zero commitments, both by governments and industry, is going to materially shift corporate strategies for decades to come. Suncor continues to progress along our sustainability journey and our strategy reflects our view of what is required to thrive as the energy system shifts to realize a net–zero future. Suncor’s strategy is aligned with the Paris Agreement and recognizes the need for the world to reach net–zero emissions by 2050. We also support Canada’s efforts to develop enabling policies, fiscal programs and regulations to provide predictability for the long-term, large-scale investments needed to achieve our country’s net–zero aspirations. Our purpose—to provide trusted energy while caring for each other and the earth—signals our intention to be a leading player in the energy transition. For us, that means reducing emissions in our base business and continuing to expand into low–GHG lines of business while working with customers and suppliers to help them reduce their emissions.
In their report, the IEA presents what it emphasizes is one possible route toward net–zero emissions in the energy sector. It should not be construed as a recommendation, but rather a scenario, and not the only scenario to realize the net–zero future we are all aspiring to achieve. Suncor continues to explore multiple scenarios and opportunities to reach net–zero emissions. Suncor also considers other key guidance, including the 2018 1.5°C report from the UN’s Intergovernmental Panel on Climate Change (IPCC) that outlined 90 possible scenarios for reaching net-zero emissions. In the end, all sectors must reduce their emissions substantially and as quickly as possible, and the oil sands sector is no exception. In Canada, the oil sands sector has set itself the goal of doing exactly this through its recent Pathways announcement.
The oil sands sector is well positioned to advance the technology, innovation, and investment needed to reach net zero. To bet otherwise underestimates the determination and talent that exists in these companies, and the power in the art of the possible.
Canada’s Net Zero Future report by the Canadian Institute for Climate Choices suggests there is a role for both safe bets (established solutions) and wild cards (unproven yet innovative tech) on the road to net zero. In terms of reducing emissions, what are the safe bets for Suncor and what are the wild cards?
As a company with a long history of successful innovation and technology development, we think the framing of safe bets and wild cards has the potential to oversimplify or discount solutions. Reducing emissions and preventing climate change is one of the most challenging and complex issues facing the world today. It will require tremendous innovation, collaboration, and all kinds of technologies, some of which have not been invented yet. We encourage a multitude of options because, as history has shown us, what is perceived as a wild card today may be a sure bet tomorrow—and vice versa. For example, in 1900, the electric car would have been considered a safe bet and the internal combustion engine a wild card. In the 1990s, the electric car would have been a wild card, but today it is a safe bet. To build on the analogy used by the CICC, in the card games I’ve played, the wild cards are the most powerful cards in the deck, so we shouldn’t underestimate the role they will play in realizing our climate objectives. Ultimately to win, or in this case meet our objectives, all cards in the deck need to be played.
There is an opportunity to empower and employ people who have been historically underrepresented in the energy sector—women, people of colour, and Indigenous peoples for example. What is Suncor doing to ensure that future talent and diverse perspectives are part of the energy future?
As a people-focused and purpose-driven company, we have a strong emphasis on diversity and inclusion, ensuring women, people of colour and Indigenous peoples feel included and represented in our workforce. Recent conversations and events over the last few years are shedding an even greater light on how critically important this is in our society and encouraging us to do more to address systemic racism and reconciliation with Indigenous peoples. We’re learning more as a company and offering programs, training, and forums to challenge our blind spots and our own biases to create a workplace that’s a great place for everyone.
We recently refreshed our social goal to the Journey of Reconciliation to reflect our continued transformation both within our organization and in our relationships with Indigenous peoples. It’s a journey that will require hard work and some uncomfortable reflections, but it’s necessary. It will require us to further foster a culture of inclusion, humility, and honesty, as well as a willingness to shift our mindsets and behaviours. On a personal note, I’ve had the privilege of participating in some of our Indigenous-led education programs that help to build a deeper understanding of the rich culture and history of Indigenous Peoples in Canada. Often when these experiential learning opportunities conclude, there is not a dry eye in the room. These have been some of the most powerful experiences in my career and have helped me on my own reconciliation, inclusion and diversity journey. I encourage all Canadians to seek out opportunities of their own to learn about Indigenous Peoples, their history and culture.
What does the just transition mean for Suncor?
We are always thinking about the impact of energy development on people and communities and that won’t change in the future. It is clear we can’t look at the energy transition through a single lens. We need to take a systems approach and recognize the economic, environmental, and social implications of the transition. This will open our minds to new ideas and expand our understanding of what the transition means to our country, our citizens and all the sectors of our economy—not just energy.
We believe the best way to manage impacts or major change is to be open and transparent and to seek input from those affected. Accounting for the impacts to people in energy development will continue to be critical to our success and the resilience of our business through the transition.
We’ve learned a lot from partnerships with Indigenous Peoples and communities and know that we often haven’t gotten it right in the past. We are committed to continuing to learn and make changes in our business through the Journey of Reconciliation. This includes efforts to further partner with Indigenous businesses and communities, strengthen Indigenous workforce and inclusion, incorporate Indigenous worldviews, and partner with Indigenous youth.
When it comes to communities, we have evolved our approach from simple philanthropy to working much more deeply alongside community partners to tackle complex social issues together. This social innovation approach is exemplified by the efforts of the Suncor Energy Foundation, with the goal of supporting communities near our operations to grow, thrive, and build long-term resilience.
We’re also committed to ensuring employees have the training and skills needed to work in the technology-enabled future. We think these skills will be foundational in the future and will help enable the future we are all seeking, regardless of the sector.
The energy transition will take many decades and our intention is to help shape and play a leadership role in the process and to be a trusted provider of energy now and in the future. Through that process, we will work with our employees and communities to manage the transition.
What is the greatest opportunity in sustainability in the next 10 years?
Throughout my career I’ve always enjoyed the challenges and opportunities presented by work in sustainability. The combination of complexity, impact, and values means that success makes a big difference. When I look out over the next ten years, I believe there will be an opportunity to improve sustainability outcomes at an unprecedented pace. The convergence of sustainable finance, corporate ambition, and social engagement brings together the ingredients we need to realize our climate and sustainability goals. I’m very optimistic because I see businesses mobilizing effort and collaboration on these challenges like never before; significant capital being mobilized to accelerate innovation by traditional sectors and emerging ones; engagement with Indigenous communities and youth unlocking new potential partnerships; top talent within firms is being deployed to develop solutions; and companies creating a sense of purpose that goes beyond the balance sheet. This combination of factors creates the potential to re-write our relationship with the environment and with each other. If we’re smart, we have the opportunity to implement solutions that will reduce our impact on the environment and lead to cleaner air and water, less waste, more forests, greater diversity, more liveable cities, healthier food choices, and a renewed value on nature. The possibilities for a better quality of life are endless and that’s what excites me about working in this area.
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GLOBE Capital Q&A: John Casola, Chief Investment Officer, Canada Infrastructure Bank
For decades, investment in infrastructure has been viewed as a key mechanism for stimulating economic growth by creating jobs and helping to revitalize communities. Absent an economic crisis, the world typically spends over $2 trillion every year on infrastructure. In light of a global pandemic, stagnant investment, growing unemployment, and rock-bottom interest rates, investment in infrastructure—including our built environment as well as energy, transportation, water and telecom systems—is perceived by many as a prime opportunity to kick start growth.
As Chief Investment Officer at the Canada Infrastructure Bank (CIB), John Casola is at the forefront of key initiatives put in place by the CIB to help drive economic recovery. At GLOBE Capital in April 2021, he joined the Reimagining our Infrastructure session to share the CIB’s progress to date. We caught up with him to learn more about the progress they’ve made over the last three months and what a ‘green recovery’ means for Canada.
As so many others have remarked, we are living in unprecedented times in a plethora of ways. You’ve been in this business for over 20 years now. Have you ever seen so much public attention on infrastructure?
I think infrastructure is currently front and centre for so many reasons. It tends to be a government go-to during down economic cycles, mainly because it provides jobs. I’ve been in this business long enough to see a few of those cycles and I think this time is different. There’s a recognition of the importance of infrastructure for long-term growth, for future well-being, and a recognition of the importance of quality. We’re no longer building things for the sake of building things. All levels of government across the country are really focusing on what’s going to make a long-term difference for their communities, citizens, and growth. They’re not opting for short-term fixes that create jobs, but don’t add anything to society.
“Green recovery” is an ideal that the CIB is truly putting into practice. Could you tell us more about that?
The green part of what we’re doing is critical. Our shareholder, the federal government, has established five priority sectors for us: trade and transportation, public transit, broadband, clean power, and green infrastructure. We have been allocated $35 billion to invest across these sectors, $10 billion of which is dedicated to our Growth Plan. This Plan is our response to the economic slowdown due to the pandemic. It aims to accelerate Canada’s transition to a low-carbon economy and strengthen economic growth.
The past 16 months have shown us the critical need for sustainable infrastructure, and the importance of building up our economy to be resilient in the face of global challenges. At the beginning of the pandemic, our Chair challenged us to come up with a program that we could implement quickly with positive impacts on jobs, the environment, and the economy. We developed the Growth Plan—a $10 billion investment over three years, which is divided into the following components:
- $2B for building retrofits
- $1.5B for zero-emission buses
- $2B for broadband
- $1.5B for agricultural infrastructure
- $500M for project acceleration
With eight announcements in the last six months, we have an incredible start and we’re gaining strong momentum.
At GLOBE Capital, the CIB announced an investment of up to $655 million in the Lake Erie Connector project as part of the Growth Plan. How will this investment help reduce greenhouse gas (GHG) emissions?
That’s a fascinating project and a complex one. It provides a two-way highway for power, allowing Ontario’s clean energy producers to sell their power to the U.S. This is important, because emissions don’t recognize borders. The Connector also allows Ontario to buy American power in times of need, as determined by the regulator (Independent Electricity System Operator). This allows us to import clean power, instead of building back-up power sources. The most cost-efficient standby power is natural gas, but thanks to the Connector, we won’t have to rely on that emissions-intensive power source. This project is a win-win for all involved.
What other progress have you made since GLOBE Capital in terms of projects that reduce GHG emissions?
There is lots on the go. I’ll share the ones that are publicly announced to give you some sense of momentum. This is the second time in the last five months that we’ve had to schedule extra board meetings to approve projects, because they’re at that stage where they’re ready for investment. We recently approved an investment of up to $170 million in the Oneida Energy Storage project. Once completed, it will be the largest battery storage project in North America. The project will allow us to store energy that is produced at off-peak times and release it into the grid when demand is high. It will help Ontario reduce GHG emissions by 4.1 million tonnes, or the equivalent of taking 40,000 cars off the road every year. We’re also pleased that the Six Nations of the Grand River Development Corp., a First Nations group, are 50% equity participants in the project.
Other projects we’ve announced include an investment with Algoma Steel Inc. in Sault Ste. Marie, Ont.—up to $220 million to retrofit their operations and phase out coal-fired steelmaking processes. This electricity-based process is expected to reduce GHG emissions by over 3 million metric tonnes per year by 2030. We also recently announced an investment in zero-emission buses with the City of Ottawa—up to $400 million to help purchase approximately 450 buses. This a key initiative to help the city achieve its goal of reducing GHG emissions in its operations by 100% by 2040. We’re seeing lots of interest across the country in electric buses. The pandemic has drastically reduced public transit use, so many municipalities are revising their capital plans. This is where CIB can help. When it comes to sustainability, there is often a gap between the right thing to do and financial support. CIB can help bridge that gap. We can offer capital at an under-market rate of return to make green infrastructure more feasible.
In the race to achieve net zero by 2050, how do we overcome the challenges of political cycles and changing visions and priorities? How do we select the right projects that will maximize economic, environmental, and societal benefits?
Our entire team is very outcomes-focused. Those high-level outcomes are: reducing GHG emissions, connecting Canadians (i.e. broadband and transit), closing the Indigenous infrastructure gap, and improving GDP and jobs. We’re very methodical in choosing projects to invest in and keeping these outcomes top of mind. For example, with our retrofits program, we offer an interest rate between 1 and 3%. The greater the GHG reductions from the retrofit, the lower the interest rate. We want to incentivize people to go deeper.
2050 is less than 30 years away. Looking ahead, what do you see as the biggest challenge and the biggest opportunity in clean infrastructure?
It’s always going to be a challenge to compete with other government programs for scarce tax dollars. I think a lot of us could sit around a table and come up with a list of all the great things we would love for our society to have, but there’s a sprinkling of reality that needs to happen in terms of costs and resources. The challenge is building a consensus around which infrastructure projects to build and finding creative ways to fund them.
Another opportunity is to synchronize the sticks and carrots of government regulation. Carbon pricing is absolutely critical, but it can’t be the only lever. We need to also provide affordable capital.
The other obvious opportunity is broadband. You asked me if I’ve ever heard so much mention of infrastructure? The answer is probably yes. Have I ever heard so much mention of the importance of a broadband network? No, I don’t think I have. The pandemic has shown us that internet access is vital. This isn’t just about YouTube and Netflix. For some remote communities, this is vital for access to healthcare and education.
I truly believe there are some silver threads of good that have come from the pandemic. Increased broadband is one of them. We’re ready to build on that.
For more insights on the road to 2050, join our Destination Net Zero Events:
ENERGY AND TRANSPORTATION DAYS
Sept 28-29, 2021 | Virtual | Complimentary
NATURE AND BIOECONOMY DAYS
Nov 23-24, 2021 | Virtual | Complimentary
Mar 29-31, 2022 | Host Hub: Vancouver Convention Centre West | Virtual Programming | Partner Hubs Across Canada
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GLOBE Advance 2021: Scaling Cleantech in Canada – Summary Report
As Canadian governments and corporations commit to net zero by 2050 targets, accelerating market deployment of clean solutions has become an increasingly urgent imperative. Building on insights gained from GLOBE Advance 2020, the Scaling Cleantech in Canada session hosted at GLOBE Capital 2021 focused on the barriers impeding cleantech deployment, solutions, and leadership.
In partnership with Emissions Reduction Alberta (ERA) and sponsored by Foresight Cleantech Accelerator Canada (Foresight) and the Natural Gas Innovation Fund (NGIF), GLOBE Series and The Delphi Group engaged 70 workshop participants and speakers from Tourmaline, Intelligent City, Foresight, and ERA to discuss key barriers, best practices, and lessons learned in deploying and scaling cleantech in Canada.
The partners and sponsors involved in this initiative hope that this summary supports advancing scaling and deployment of cleantech in Canada and welcome any stakeholder feedback. Stay tuned for the next outcomes-oriented installment of Scaling Cleantech in Canada at GLOBE Forum 2022!
GLOBE Capital Q&A: Jonathan Fowlie, Chief External Relations Officer, Vancity Credit Union
“We must work towards a climate transition that puts people at its centre and leaves no one behind,” Vancity proclaims as part of its commitment to net-zero by 2040. After a year when our environment and social safety nets were tested like never before, this approach seems very timely. Jonathan Fowlie, Chief External Relations Officer, Vancity Credit Union, joined No One Left Behind: How We Build a Just Transition to the Net-Zero Economy at GLOBE Capital to discuss the role of financial institutions in supporting a just transition. We caught up with Mr. Fowlie to learn more about how Vancity has integrated an equity lens into its climate commitments.
Tell us more about Vancity’s net-zero commitments.
We’ve recently released five commitments on climate action and climate justice that take a holistic approach to how we as a financial institution can respond to the climate emergency. It starts with decarbonization and getting our lending portfolio to net-zero. We’re also working to enable responsible investments that create a clean and fair future. This past year has exemplified how a global event can widen the systemic gaps in our economy. The climate emergency is having and could have a similar impact. We’re applying this systemic view to climate change to anticipate community and economic impacts.
Earlier this year, Vancity became the first financial institution in Canada to make a commitment to net-zero emissions by 2040 across your full lending portfolio. To ensure success, you’ve gone one step further by also committing to regular targets on the road to 2040—the first of which will be in 2025. How will you set that 2025 target?
In its most basic form, Vancity was carbon neutral across our operations in 2008. We know we can have a much greater impact on reducing emissions by extending this commitment to what we finance, i.e. the loans we give people to buy homes or start businesses. Our 2025 target will aim to reduce these finance-related emissions.
The first step is understanding the carbon footprint of our loans. If you have a Vancity mortgage on your house, what are your emissions and how do we record that? Our most recent annual report discloses the emissions that we estimate to be associated with our loans. The next step, which we’re undertaking right now, is a rigorous science-based process to understand Vancity’s pathway to net zero with that inclusive lens in mind. Once we identify that pathway, we’ll engage government to ensure we’re aligning with current regulations. Then, we’ll be ready to publicly commit to targets that are aggressive, achievable, and science-based.
What actions is Vancity taking to incorporate equity into its climate work and why do you think it’s important that we include equity in climate finance conversations?
Getting to net zero is important. How we get there is essential. As I mentioned earlier, the pandemic has shown us the impact a global event can have on marginalized communities. We also saw how a financial institution like Vancity can immediately meet those needs. We have a history of financial inclusion—of trying to serve the underserved. That approach has become all the more relevant during the pandemic.
For example, on Vancouver’s Downtown Eastside, health restrictions have interrupted a lot of the services that residents rely on. In the first months of the pandemic, various levels of government introduced new and increased benefits to support the safety and well-being of vulnerable and hard-hit individuals. As a financial institution, our role is to form a bridge between the resources being made available and the people who need to access them.
Our Pigeon Park Savings branch was the only financial institution in the Downtown Eastside that stayed open during the height of the pandemic. We see this as an illustration of financial inclusion and how it can ensure systemic gaps aren’t widened in extreme situations.
We’re taking the same approach to the climate emergency with a view to ensuring the transition to a clean economy will be equitable and just. That means talking a little bit less about decarbonization and climate and more about understanding existing inequities and of course, including marginalized communities in that conversation.
When it comes to the just transition, what do you think is the biggest opportunity and the biggest challenge?
The biggest challenge is ensuring the transition is just. What do I mean by that? We’re at a place where we look ahead to the effects of climate change and we’re still not entirely clear on the questions we need to ask, the things we need to measure, and the actions we need to take. Some are apparent, but some, as we saw during the pandemic, emerge as secondary and tertiary issues. How do we ensure we can adjust and be flexible?
Conversely, the biggest opportunity is to re-imagine our economy. How can we shift, innovate, create leaders, and form the jobs of tomorrow? We’ll need to consider the skillsets of people across our economy. Part of that is considering the workforce that will need to transition from a job that might not exist 10 years from now into a job that is driving innovation. It’s also about creating opportunities that make our economy more equitable and inclusive.
When you ask people: do you think there needs to be a fundamental change towards an economy that is cleaner and fairer? Unanimously, you get a yes. It’s not at all clear exactly what that future looks like, but that consensus creates an opportunity to chart a new path.
How can financial institutions take a leadership role in the just transition?
Financial institutions like credit unions and banks make crucial decisions every day about where money goes, what gets funded, and who benefits. So, we have a crucial role to play in determining the future economy and frankly the future of our planet. Accordingly, there are a number of questions that all financial institutions should be asking: Are we just offsetting climate impacts? Are we working to avoid them in the first place? How are we measuring the changes to our balance sheet in a rigorous way that ensures transparency? Finally, how do we ensure that the actions we are taking are leading towards an economy that is both clean and fair? I strongly believe that we have an obligation to understand the impacts of our decisions on where to allocate capital, because those who have the least to do with causing climate change in the first place are those who will be impacted the most and who will have the least available resources to adapt. We have a unique opportunity right now to learn from the past and explore what it means to truly build back better.
If you could ask the GLOBE Capital community to take one action, what would it be?
I’d ask the GLOBE Capital community to bring an equity lens to every action they take on climate. For example, when you’re looking at climate risk across a portfolio of buildings, consider the demographics of the locations and local people’s ability to adapt. Considering equity means asking: are there choices that we can make today to ensure we’re not only protecting our investments against climate risk, but we’re also fostering equity and resilience? It goes back to the premise that yes, we need to decarbonize. We could do that overnight by just stopping funding a variety of activities, but that’s neither practical nor will it lead to an equitable economy and society. So, we need to ensure we’re inviting everyone into the conversation and framing that conversation in a way where everyone, particularly marginalized communities, can see themselves reflected.
GLOBE Capital Q&A: Bryan Gilvesy, Chief Executive Officer, ALUS
The Canadian countryside conjures up images of both vast wilderness and plaid-clan farmers in bright red tractors. The first is a symbol of conservation and nature; the second a symbol of economy and production. ALUS is blurring those lines to bring us an innovative approach to nature-based solutions. Its New Acre Project helps corporations exceed sustainability objectives by supporting farmers and ranchers to build nature on their land one acre at a time. Bryan Gilvesy, Chief Executive Officer, ALUS, joined Not Your Grandpa’s Farm: Welcome to the NEW Bioeconomy at GLOBE Capital to discuss the financial, environmental, and social opportunities of a bioeconomy. We caught up with Mr. Gilvesy to learn about the great potential for ecosystem services through agriculture.
Was there a Eureka moment for you in terms of understanding the role for agriculture in fighting climate change?
Yes, there was. I was the third participant farmer to enroll in the ALUS program in 2006. The project that intrigued me at the time was the restoration of the native tall grass prairie here on my ranch in Norfolk County, Ontario. As I learned more about the grass, I realized it had extraordinarily long roots—12-16 feet—with a root ball that replenished itself every two years making it highly effective at sequestering carbon into the soil.
And then, because of the technical support offered by ALUS, my learning only grew. I realized that the grass prairie supports a whole suite of grassland birds like the meadow lark, and it was an important habitat for endangered species, like the American badger. My land became home to a whole suite of native pollinators that I didn’t even know existed. On top of that, those deep roots meant these grasses were extremely drought tolerant and could form part of my drought season feed for my cattle.
This was an ‘aha’ moment for me. I realized how effective native ecotypes can be at sequestering carbon and supporting biodiversity.
What makes an ALUS farmer different from the farmer down the road?
ALUS farmers come to view their farm as multifunctional. They don’t just see it as a means of producing food and fibre, but they also see that they can build natural capital, sequester carbon, increase biodiversity, foster climate resilience, and support wetlands and water. We’re all beginning to recognize that these things have value in the marketplace. ALUS farmers have come to the realization that their farm can be productive beyond the one thing they’ve typically been paid to produce.
What are some common misconceptions about farmers and ranchers and climate change?
Traditionally, we haven’t seen farmers as solution providers for climate change, but I think that notion is disappearing.
One misconception that’s still common is: we often interpret climate action as only the reduction of greenhouse gas emissions. It’s so much more than that. When farmers take climate action through nature, it creates a tremendous amount of leverage. You get a whole suite of co-benefits for biodiversity, resilience, water filtration, and more. Further, sequestering carbon effectively means improving soil, which makes our food stores more resilient as well.
ALUS’ New Acre Project captures the full suite of benefits that come from climate action on a farm and makes those benefits available through a marketplace.
Nature-based solutions have exploded in popularity in recent years. For professionals who are new to this space, where do you recommend they start?
I think they should start at the beginning by understanding how native plants function. Plants are part of the carbon cycle. They are energized by the sun and by breathing in carbon dioxide, which they then deposit into the soil through their roots. To reduce greenhouse gas emissions, we need more of this carbon cycle in the world. Native plants established in the correct locations using the correct ecotypes provide the ideal solution. These native plants don’t just absorb carbon, but they also serve as habitat for pollinators, water filtration devices, and habitat for endangered species. With all of this in mind, the advantages of nature-based solutions over mechanical solutions for carbon capture become more obvious.
Could you tell me more about your recent announcement with A&W Canada and Cargill and how it will help us achieve a net-zero future?
Sure. We’re really pleased that A&W Canada and Cargill have collaborated with us to create the Grazing Forward program, which is an extension of the New Acre Project at ALUS. This program will accelerate and enhance rancher-led grazing projects that mitigate climate change. A&W Canada and Cargill have generously committed $1.8 million over three years to support ranchers in Alberta, Saskatchewan, and Manitoba as they continue to scale regenerative agriculture practices. The program is expected to sequester up to 12,578 MT greenhouse gas emissions per year, equivalent to more than 50 million kilometres driven by the average passenger vehicle. ALUS will take a hands-on, local approach, working with interested Canadian beef ranchers to plan and implement practices that contribute to environmental outcomes. This effort will impact more than 6,000 acres and engage ranchers in 20 communities, extending the New Acre Project’s current reach by 233%. Needless to say, we’re very excited about it!
What was your biggest takeaway from GLOBE Capital?
Well, it was a pleasant experience for us, because our session included a poll asking attendees for their opinion on the greatest opportunity in the bioeconomy. Obviously, we thought emission reductions would be number one, but biodiversity rose to the top as a very important issue for the attendees, which is mostly a business audience. I would not have that expected that. It’s a pleasant surprise for us, because we believe biodiversity is the apex indicator of environmental health, and economic prosperity. If biodiversity shows up, we’ve put the right plants in the right places and managed them correctly. Biodiversity is a sign of a more resilient climate.
GLOBE Capital Q et R : Stéphane Villemain, Vice-président Responsabilité sociale d’entreprise, Ivanhoé Cambridge
Stéphane Villemain, Vice-président Responsabilité sociale d’entreprise, Ivanhoé Cambridge, s’est joint au panel Reimagining our Infrastructure de GLOBE Capital afin d’échanger sur sa vision d’une infrastructure mondiale favorisant la résilience et matérialisant un avenir net-zéro. Nous avons fait un suivi avec M. Villemain pour en savoir plus sur le récent engagement net-zéro d’Ivanhoé Cambridge et ses plans concrétiser ce projet.
Que retenez-vous principalement de GLOBE Capital ?
L’intérêt du secteur financier pour l’ESG et en particulier pour le changement climatique est en pleine croissance, c’est fascinant. Il y a à peine 3-4 ans, seule une poignée d’institutions financières au Canada avait pris des engagements dans ce domaine. Le changement climatique est maintenant largement reconnu comme un risque et une opportunité d’investissement et Globe Capital est un excellent lieu pour apprendre de ses pairs sur la meilleure façon d’aborder ce défi.
Le mois dernier, Ivanhoé Cambridge a annoncé son engagement à atteindre la neutralité carbone pour son portefeuille international d’ici 2040. Qu’est-ce qui a motivé cet objectif ?
Chez Ivanhoé Cambridge, nous avons la conviction qu’il est de notre devoir d’avoir un impact positif sur l’environnement. L’urgence climatique nous pousse à aller plus vite, et plus loin.
Notre secteur (l’immobilier et la construction) est responsable d’une grande part des émissions de gaz à effet de serre (40%) et en même temps en subit les risques. Le changement climatique menace nos actifs au travers d’événements climatiques extrêmes dont on anticipe qu’ils seront plus nombreux et sévères. D’un autre côté, une transition vers une économie propre ouvre beaucoup d’opportunités et renforcera la résilience de nos actifs. Nous savons aussi que les investissements durables sont plus profitables sur le long terme. Ne rien faire sera nécessairement plus coûteux.
En fixant une cible net-zéro carbone, notre objectif est à la fois ambitieux et réaliste. Nous nous appuyons sur une approche scientifique en ligne avec l’Accord de Paris de 2015 et nous considérons notre performance carbone actuelle, notre stratégie d’investissement, les cibles carbone des pays dans lesquels nous investissons, et les outils récemment développés dans notre industrie, comme le Carbon Risk Real Estate Monitor (CRREM).
J’ajoute que pour atteindre sa cible net-zéro carbone d’ici 2040 Ivanhoé Cambridge a fixé des jalons. Nous nous sommes engagés à réduire notre intensité carbone de 35% d’ici 2025 par rapport à 2017, à augmenter nos investissement sobres en carbone de plus de $6B (€4M) d’ici 2025 (par rapport à 2020), et à rendre tous nos développements net-zéro carbone à partir de 2025. Ces nouvelles cibles carbone portent sur la portion de notre portefeuille en exploitation et en détention directe (i.e. la majeure partie de notre portefeuille, là où nous pouvons avoir le plus d’impact).
Quels sont les moyens que vous allez employer pour atteindre cet objectif ?
Concrètement, nous utiliserons trois principaux leviers : l’efficacité énergétique, l’énergie décarbonée, et de nouveaux développements.
L’énergie la plus propre est celle qu’on ne consomme pas. Ainsi, l’amélioration de la performance énergétique de nos principaux actifs devrait contribuer à plus de 20% de notre objectif. Nous travaillons également sur la consommation d’eau, la gestion des déchets et des ressources.
Deuxièmement, nous visons à réduire significativement l’utilisation des énergies fossiles dans nos propriétés, et accroître au maximum la part des énergies renouvelables, soit en la produisant sur site (panneaux solaires par exemple), soit en s’assurant que l’énergie acheminée est renouvelable. Cela devrait contribuer également à plus de 25% de notre objectif. Nous estimons également à 30% la part de notre objectif qui sera atteinte grâce aux efforts de transition énergétique des fournisseurs d’électricité, qui décarbonent leurs réseaux.
Troisièmement, 20% de notre cible sera atteinte grâce à la construction de propriétés bas-carbone, à partir de 2025).
En ligne avec le World Green Building Council, nous définissons un bâtiment net zéro carbone opérationnel comme un bâtiment à haute efficacité énergétique et entièrement alimenté par des énergies renouvelables sur site ou hors site, incluant en dernière priorité la compensation des émissions opérationnelles carbone restante).
La partie résiduelle de notre objectif net-zéro carbone pourra être atteinte via une stratégie de compensation carbone, en dernière priorité.
Pour favoriser notre réussite, nous lions une partie de la rémunération de nos employés à l’atteinte de nos cibles carbone, parmi d’autres tactiques.
Quelle partie du chemin avez-vous déjà parcourue ?
En 2017, Ivanhoé Cambridge avait pris l’engagement de réduire son intensité carbone de 25% d’ici 2025. Nous avions déjà atteint une réduction de près de 20% en 2019. C’est pourquoi cette cible a été relevée à 35%. Depuis 2017, Ivanhoé Cambridge a augmenté de près de 200% ses investissements sobres en carbone, soit 14,6B CAD (au 31 décembre 2020).
Comment la durabilité se traduit-elle économiquement chez Ivanhoé Cambridge ?
Nous souhaitons opérer un alignement plus qu’une opposition entre performance durable et performance financière.
La pérennité de notre portefeuille nous aidera à bien performer dans les années à venir et saisir ces occasions nécessite d’intégrer le climat dans notre analyse d’investissement et dans la gestion de nos actifs.
Nous considérons que ces engagements constituent une stratégie de création de valeur. Promouvoir l’efficacité énergétique et l’innovation dans l’opération de nos bâtiments, c’est contribuer à prolonger leur durée de vie (« future-proofing »), réduire les risques d’obsolescence et anticiper de futures règlementations et coûts liés au carbone.
Nos bons résultats en matière de décarbonation nous permettent d’augmenter nos financements verts, dont les conditions sont en partie liées à notre intensité carbone. Par exemple, plus l’intensité carbone de notre portefeuille est faible, moindre est le coût de notre dette. Notre ambition est d’accroitre et de diversifier ces financements.
Comment intégrez-vous le climat dans vos investissements ?
Le climat est systématiquement intégré dans notre analyse d’investissement pour toutes nos nouvelles transactions, ainsi que notre gestion d’actifs : chaque transaction est évaluée en fonction des risques climatiques et de son impact sur l’empreinte carbone de notre portefeuille et sur nos cibles.
La majorité de nos quelques 1,100 propriétés est également évaluée en fonction de son exposition aux risques climatiques actuels et futurs.
Les changements climatiques ont et auront un impact sur le risque et les rendements de notre portefeuille. Nous évaluons ces impacts selon 2 dimensions : 1) l’atténuation des changements climatiques (efficacité énergétique, énergie propre, matériaux de construction comme le bois (CLT) qui entraînent des réductions d’émissions de carbone liées à la construction et à l’exploitation de nos propriétés ; 2) l’adaptation climatique, c’est-à-dire l’optimisation de la résilience de nos propriétés dans un contexte de changements climatiques, par exemple à l’image des risques d’inondation dans certaines régions.
Un sacré défi vous attend. Quelles sont les prochaines étapes ?
Nous voyons tout cela comme une progression.
Aujourd’hui, notre stratégie est principalement axée sur le carbone opérationnel lié à la consommation énergétique de nos propriétés. D’ici les deux prochaines années, nous travaillerons également sur le carbone associé à la construction, particulièrement au regard des matériaux utilisés.
Nous fixons un cap : nous ne prétendons pas avoir toutes les réponses aujourd’hui, mais nous croyons que nos récentes réalisations et cette cible ambitieuse et réaliste nous donnent un bon départ.
GLOBE Capital Q&A: Stéphane Villemain, VP Corporate Social Responsibility, Ivanhoé Cambridge
Stéphane Villemain, VP Corporate Social Responsibility, Ivanhoé Cambridge joined Reimagining our Infrastructure at GLOBE Capital to discuss a vision for global infrastructure that fosters resilience and activates a net-zero future. We followed up with Mr. Villemain to learn more about Ivanhoé Cambridge’s recent net-zero commitment and plans to make it a reality.
What was your top takeaway from GLOBE Capital?
I’m amazed by the increased level of interest from the finance sector on ESG and in particular on climate change. Just 3-4 years ago only a handful of financial institutions in Canada had made commitments in this area. Climate change is now widely recognized as an investment risk and opportunity and GLOBE Capital is a great venue to learn from peers on how to best approach this challenge.
Just last month, Ivanhoé Cambridge announced a commitment to net-zero carbon emissions for its international portfolio by 2040. What prompted this target?
We at Ivanhoé Cambridge believe it is our duty to make a positive impact on the environment. The climate emergency is pushing us to do so more quickly. And to go further.
Our sector (real estate and construction) is both responsible for a huge share of global greenhouse gas emissions (40%) and at great risk. Climate change threatens our assets through extreme weather events that are expected to be more frequent and severe. On the flip side, a transition to a clean economy opens many opportunities and will strengthen the resilience of our assets. We also know that sustainable investments are more profitable in the long term. Doing nothing will inevitably cost more.
In setting the net-zero target, our goal was to be both ambitious and realistic. We took a science-based approach in line with 2015 Paris Climate Agreement and considered our current carbon performance, our investment strategy, the carbon targets of the countries in which our properties are located, and recently developed industry tools, such as the Carbon Risk Real Estate Monitor (CRREM).
I should add that to achieve net zero by 2040 Ivanhoé Cambridge has set milestones targets. We’ve committed to reduce carbon intensity by 35% by 2025 compared to 2017, increase our low-carbon investments by over $6B (€4M) by 2025 (compared with 2020), and make all our developments net-zero carbon by 2025. These new carbon targets cover the operating and directly owned portion of our portfolio (i.e., the bulk of our portfolio, where we can have the most impact).
What does Ivanhoé Cambridge’s pathway to net zero look like?
In concrete terms, we will use three main levers: energy efficiency, decarbonized energy, and new developments.
The cleanest energy is the energy we don’t consume. Accordingly, improving energy performance should contribute to more than 20% of our net-zero target. We are also working on water consumption, waste, and resource management.
Secondly, we aim to significantly reduce the use of fossil fuels at our properties, and increase the share of renewable energy as much as possible, either by producing it on site (e.g., solar panels) or by ensuring the energy source is renewable. This should contribute over 25% of our net-zero target. We also estimate that 30% of our target will be achieved through the energy transition efforts of electricity suppliers, who are decarbonizing their electricity grids.
Thirdly, 20% of our target will be achieved through the construction of net-zero carbon properties, starting in 2025. In line with the World Green Building Council, we define net-zero carbon buildings as highly energy efficient buildings, powered entirely by on- or off-site renewable energy that has all remaining operational emissions offset (as a last priority).
The remaining part of our net-zero target can be achieved through a carbon-offset strategy, as a last priority.
To ensure success, we link employee remuneration to the achievement of our carbon targets, among other tactics.
What progress have you made in reducing emissions to date?
In 2017, Ivanhoé Cambridge committed to reducing its carbon intensity by 25% by 2025. We had already achieved a reduction of nearly 20% in 2020. As a result, this target has been raised to 35%. Since 2017, Ivanhoé Cambridge has increased its low-carbon investments by more than 200% to $14.6 billion (as at December 31, 2020).
What is the economic case for sustainability at Ivanhoé Cambridge?
We want to align, rather than oppose, sustainable and financial performance.
The sustainability of our portfolio will help us to perform well in the years to come, and seizing these opportunities means integrating climate into our investment analysis and asset management.
We see these commitments as a value-creation strategy. Promoting energy efficiency and innovation in the operation of our buildings helps to extend their lifespan (“future-proofing”), reduce the risk of obsolescence, and anticipate future carbon-related regulations and costs.
Our past successes in reducing carbon are enabling us to increase our green financing, the terms of which are partly linked to our carbon intensity. For example, the lower our portfolio carbon intensity, the lower our cost of debt. Our ambition is to increase and diversify this type of financing.
How are you incorporating climate into your investments?
Climate is systematically incorporated into our investment analysis for all our new transactions, as well as our asset management: Each transaction is assessed for physical climate risks and for its impact on our portfolio’s carbon intensity and targets. The majority of our approximately 1,100 properties are also assessed for their exposure to current and future climate risks.
Climate change has, and will have, an impact on our portfolio’s risks and returns. We assess these impacts across two parameters: 1) climate-change mitigation (energy efficiency, clean energy, and building materials, e.g. cross laminated timber), which reduces carbon emissions from the construction and operation of our properties; 2) climate adaptation, i.e. maximizing the resilience of our properties in a changing climate for example in light of increased flooding risks in certain areas.
You’ve got quite a task ahead of you. What are your next steps?
We very much see this as a journey.
Today, our strategy is primarily focused on operational carbon related to our properties’ energy consumption. Over the next two years, we will also be working on the carbon associated with building construction, particularly with regard to the materials used.
We are setting a course: we don’t pretend to have all the answers today, but we believe our recent achievements and these ambitious yet realistic targets have given us a great start.
GLOBE Advance at a Glance: Activating Social Finance
In partnership with Junxion Strategy and the Social Purpose Institute at United Way
At GLOBE Capital 2021 (April 13-15), participants joined the action-oriented GLOBE Advance sessions to help us go farther and faster to address risks and capitalize on opportunities in the clean economy. To propel the conversation, we’re pleased to share this summary of the GLOBE Advance session, Activating Social Finance: Advancing Purpose and Impact. This 2021 session built on the 2020 session GLOBE Advance: Turning Social Purpose Dialogue and Vision into Action, to inspire, inform, and help you explore how purpose pays.
The COVID-19 pandemic and a historic, global movement for racial justice have amplified a conversation that’s engaging corporate boards, C-suites, entrepreneurs, and investors around the world—the role of purpose in business. As we start the work of recovery, governments, corporations, entrepreneurs, and investors have the opportunity to reimagine our economy and their role in it.
Participants at GLOBE Advance: Activating Social Finance learned from businesses and investors operating at the intersection of profit and purpose, who are delivering financial returns and societal benefits. They considered new ways of valuing and measuring impact—from ‘E’, ‘S’ and ‘G’ perspectives. And they got the tools to go from defining, to measuring, to capitalizing on being a purpose-driven organization.
Activating Social Finance Speakers:
- Mike Rowlands, President and CEO, Junxion Strategy (Moderator)
- Sandra Odendahl, Vice President of Social Impact and Sustainability, Scotiabank
- David Redfern, President and CEO, Eastern Canada, Lafarge Canada Inc.
- Mary Ellen Schaafsma, Director, Social Purpose Institute at United Way
- Joel Solomon, Co-Founder, Renewal Funds
- Coro Strandberg, President, Strandberg Consulting
What is social purpose?
Larry Fink, CEO of Blackrock—has put his money behind social purpose. “To prosper over time, every company must not only deliver financial performance, but also show how it makes a positive contribution to society… Society is demanding that companies, both public and private, serve a social purpose,” Mr. Fink wrote in his widely quoted Annual Letter to CEOs.
How did ‘social purpose’ reach the desk of the world’s largest asset manager? To understand the importance of ‘social purpose’ today, it’s helpful to examine the roots of the movement.
‘Socially responsible investing’ or ‘SRI’ first started gaining traction in the 1980s. For the first time, investments looked beyond the financial bottom line to a goal of positive social impact. In the mid-90s, ‘corporate social responsibility’ began to catch on, a self-regulating business model that invited companies to be aware of and accountable for their economic, social, and environmental impacts. Increasingly, investors began to expect this level of accountability across their portfolios. This gave rise to ESG (environmental, social and governance) investing in the mid-2000s—a set of standards that investors use to screen potential investments, protecting themselves from risk and ensuring alignment with their values. ESG investing mandates companies to move beyond philanthropic portfolios to managing their environmental and social performance.
Eventually, about five years ago, ‘social purpose’ businesses started to take off. The Social Purpose Institute at United Way (SPI) defines a social purpose business as “a company whose enduring reason for being is to create a better world.” Social purpose has brought the social conversations that began in the 1980s into the C-suite. It’s no longer a line of business. Social purpose is a reason for doing business.
David Redfern, President and CEO, Eastern Canada, Lafarge Canada Inc., worked with SPI to develop a social purpose for Lafarge Western Canada (when he was the head of its Western operations). He found it helpful to think of purpose within existing business architecture:
- Purpose is why your business exists.
- Vision is where you want to go.
- Mission is how you want to get there.
- Values are what’s going to support it.
In working to define their social purpose, the Lafarge team took the opportunity to reflect on and refine the rest of its architecture as well. “The social purpose process made us more efficient, more aligned, and more engaged,” said Mr. Redfern.
Imagine how different our economy would be if every company embraced a social purpose. That’s what Mike Rowlands, President and CEO, Junxion Strategy, calls the ‘Next Economy’. “Social purpose isn’t an HR or PR exercise,” he said, “It’s an exercise in reshaping the role of business in society.”
In short, purpose pays
Companies that operate with a social purpose outperformed other companies by 134% in the stock market in 2019. This reinforces evidence from 2008, when researchers found B Corps—the leading certification for business as a force for good—were 64% more likely to survive the recession.
SPI Director Mary Ellen Schaafsma shared the success story of one social purpose company that applied a social purpose lens to its three-year strategic planning process. In doing so, the leadership discovered about 80% of their priorities did not align with their social purpose. By dropping these priorities, they opened up space for creativity and innovation.
Social purpose is also popular with the public and with employees. The majority of Canadian consumers (89%) believe business needs to place the same weight on society’s interests as on business interests and 60% of millennials want to work for companies with a purpose. Consumer trends and talent management are each drivers of business success—and therefore valuable to investors.
Joel Solomon can testify to the rise of investor interest in social purpose. He co-founded Renewal Funds, a venture capital firm that invests in innovation to advance the sustainability of food, water, and climate. He’s watched his firm’s invested assets grow to $250 million. “Social purpose is unstoppable,” Mr. Solomon said.
For those hesitant to act, there is a real risk in failing to adopt a purpose and being left behind. Mr. Redfern shared that this past financial year was successful for Lafarge and they expected to see their stock value increase. It didn’t. Why? Investors were concerned about the high carbon footprint of cement and were reluctant to invest further. “That reinforced for me the importance of having and acting on purpose,” said Mr. Redfern.
Ahead on the path to impact
With increasing evidence that adopting and implementing a social purpose is good business, how do we measure success?
When Sandra Odendahl joined Scotiabank in 2020 as the Vice President of Social Impact and Sustainability, she spent her first year examining the bank’s impact and identifying a social area to focus on that was consistent with the bank’s social purpose. She chose economic resilience and launched ScotiaRISE, a 10-year, $500 million initiative to promote economic resilience among disadvantaged groups.
To measure success for ScotiaRISE, the bank tracks very specific markers linked to its programming, including completion of high school and post-secondary training, increase in family income, and the number of black female entrepreneurs attracting investors, for example. In the diverse world of social purpose, these tailored measures provide the best gauge of Scotiabank’s success.
But what about a measurement that allows for comparison from one social-purpose business to another? Enter SPI’s new Social Purpose Assessment tool, launched at GLOBE Capital. The tool allows stakeholders to assess social purpose companies using 25 practices across seven different areas.
It’s encouraging to see innovation and growth in the social purpose space after a year when social inequalities were exposed like never before. “The COVID-19 crisis was a reckoning on social issues that have been papered over with spit and bubble gum for years,” said Ms. Odendahl. She cited guaranteed basic income, alternatives to long-term care for seniors, racism, and childcare as key issues that the pandemic has brought into stark relief.
However, Ms. Odendahl does see a new mindset in how business is responding to the pandemic, compared to how they responded to previous economic crises. “Our CEO recently made a recommendation to top up the Canada Child Benefit and massively increase the Canada Child Tax Credit, because providing greater flexibility to families is good for the country, for women, and for communities. I can’t imagine a CEO responding to the 2008 financial crisis in the same way.” (You can read more about Scotiabank CEO Brian Porter’s recommendation here.)
Ms. Strandberg agreed that the pandemic was an inflection point. “Now people are starting to say ‘let’s create the economy we want’ instead of the economy that grew by topsy,” she said. Ms. Strandberg sees the beginnings of a social purpose for finance—a trend with the potential to provide a new lens on investing that could even become a new asset class.
Mr. Solomon said next generations will push social purpose faster and further. “Tens of billions of dollars are being inherited in North America alone over the next few decades… Young investors are increasingly concerned about what money is doing in their name.”
With such exciting trends on the horizon, we look forward to continuing the conversation at Propelling Purpose: The Road to the Purposeful Economy (November 17-18, 2021) and at GLOBE Forum (March 2022).
Until then, we’d like to leave you with a challenge: What’s one commitment you can make to accelerate the movement to purpose-based business?