Our upcoming event, GLOBExCHANGE (Feb. 27-Mar. 1, 2023) builds on our recently published 10×10 Matrix, which identifies the 10 areas where we need to take action in the next 10 years to get to net zero.
In our 10×10 Takes video series we’re talking with climate leaders who are working to advance these action areas. First up, let’s get down to business on Unlocking Innovation with MaRS Discovery District’s Senior Director of Cleantech, Tyler Hamilton.
We are at the beginning of the most decisive decade in our lifetimes. What we do in the next 10 years will set the course for our net-zero future. To meet the moment, GLOBE Series launched Destination Net Zero Events—a three-event series culminating in GLOBE Forum 2022, the largest and longest-running sustainability conference in North America.
We’re embedding action and accountability into these events with the 10×10: 10 actions in 10 years we need to take to get to net zero. The actions identified in the Energy and Transportation Days event, which took place virtually October 26-27, 2021, are summarized in the 10×10 Outcomes Report. These outcomes will feed into the final 10×10 that is produced after Forum.
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!
GUEST CONTENT
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.
CONTENU COMMANDITAIRE
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.
GUEST CONTENT
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.
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:
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:
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.”
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.
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?
Guest Content by David Knight Legg, Chairman of the ESG Working Group of the Province of Alberta and CEO of Invest Alberta Corporation
Canada is unique in the world: a free democracy of 38 million citizens, home to vast water supplies and forests, and seemingly endless mineral deposits and hydrocarbon reserves that hold more oil than Russia, China and the U.S. combined and make us the fourth largest gas supplier in the world. We share a border with the world’s largest consumer economy and our critical shipping and logistics trade routes connect us directly to the vast emerging growth markets in Asia.
This extraordinary strategic position and natural wealth bring tremendous opportunity and responsibility: developing our resources to provide the energy needed to lift 3 billion people out of poverty—while also leading the world in developing cleaner and greener fuels, renewables and innovative technology to ensure a better world for our children.
This balance isn’t easy and commitments to net zero need to be reconciled with results. According to data from the Government of Canada, we have removed less than 2% of emissions from our 2005 baseline, well below our 30% by 2030 target. And it’s taken us 16 years to get this far, partly due to population growth and a grid that is already 80% non-emitting.
The recent Earth Day announcement to increase that 2030 target to a 40-45% reduction means that Canada, which has reduced less than 1 megatonne (mT) a year for 16 years, will now find a way to remove over 300 mT—over 30 mT a year—in the remaining nine years.
The foreign press has quickly pointed out how unlikely this is.
There is however a path to achieve and even exceed this goal if Canada thinks globally, applies what has already worked around the world, and invests in scaling home-grown innovation.
Electricity and heating account for one quarter of all global emissions, and the world’s consumption of electricity has doubled since 2000. The growing use of coal in electricity has driven global emissions higher every year. Because coal burns at 100% higher carbon intensity per unit of energy than natural gas, the conversion of grids from coal to gas has been the largest single contributor to global decarbonization. The U.S. has led with a reduction of over 900 mT since 2000, and Europe and the U.K. are a close second, using gas imports from Russia, Algeria and Norway to drive the lion’s share of their reduction of over 700 mT.
Asia, on the other hand, accounts for the vast majority of all emissions growth globally thanks in large part to coal. Just four nations: China, India, Japan and South Korea account for two thirds of all coal-fired CO2 emissions globally. And this is increasing. In 2018, China was solely responsible for 47% of all global emissions from coal-fired power, and in 2020 the country built three times the total new coal capacity of the rest of the world combined, with planned production at five times the planned coal-fired capacity of the rest of the world.
It is critical to note that this is happening not because nations are intentionally careless about the environment but because they are relentlessly focused on supporting the long transition of over 3 billion people globally emerging from grinding poverty into the middle class. Asia is the epicentre of this historic moment. This requires critical infrastructure—including reliable electrical grid capacity—to support hundreds of millions of people every year that require new homes, hospitals, schools, transport, roads, heat, and light in thousands of rapidly expanding cities.
Energy—and our ability to harness it for light, heat, and cooling—has supported the greatest expansions of prosperity in human history. It has also driven up emissions. And Asian nations are desperate to find affordable lower-carbon solutions to meet this demand more responsibly.
Canada has a massive abundance of the low-cost, high-quality natural gas Asia desperately needs to replace coal and reduce emissions while supporting their core anti-poverty growth agenda. By providing Asia with natural gas, Canada can remove well over our entire carbon footprint of 739 mT a year. This is an emissions reduction tactic with specific production, supply, trade and carbon reduction math applied to every country, and can happen as quickly as we can build the essential infrastructure and strategic trade to meet gas demand that has grown 12.5% to 359 million tonnes in 2019 alone, with China emerging as the third largest buyer in the world, and India and Indonesia looking to clean the air in their urban centres and reduce carbon overall.
The numbers are exceptional: when fully online in three years, Canada’s $40 billion Shell LNG project alone is estimated to remove 70-80 mT of Asian emissions. This project—the largest infrastructure investment in Canada—is sponsored by Korea and Japan, the largest buyers of LNG in the world. Our Invest Alberta seven national Asian offices are having conversations every week with dozens of investors, firms and governments intent on securing our LNG—and looking to invest heavily in Canada’s ultra low-carbon hydrogen capacity that will retrofit into LNG infrastructure in the future.
Today, successfully ensuring net zero while growing the Canadian economy requires major capital investments into our LNG and hydrogen future as well as critical decarbonization infrastructure. In Alberta alone, investments of $30 billion into the large-scale deployment of carbon capture, utilization, and storage (CCUS) will help offset another 60 mT of production-related emissions. To quote the Hon. Seamus O’Regan, Minister of Natural Resources: “Carbon capture technology creates jobs, lowers emissions and increases our competitiveness. It’s how we get to net zero.”
The International Energy Agency (IEA) forecasts that the world will need approximately 1,000 CCUS facilities by 2050 to achieve net-zero ambitions. Currently only 21 are in operation, with the largest now in Alberta. Without CCUS investment, the IEA predicts that the cost of climate mitigation will increase by 138% putting many communities and countries on the brink of poverty. We can’t let that happen. Canada’s net-zero pathway demands CCUS capacity to decarbonize energy and industrial systems and set the stage for growth in the global demand for cleaner natural gas and net-zero hydrogen production.
The Paris Accord explicitly recognizes the global nature of emissions. Solving for net zero is, by its very nature a global problem requiring transnational and trade solutions because most of the world is fighting poverty and energy shortages without Canada’s advantages of low population, clean grids and a 300-year supply of natural gas. For Canada, our role can be so much greater than our current targets, or our record in hitting them suggests.
The Paris Accord Article 6 establishes a basis to negotiate credit for global trade as a principal tool of emissions reduction, and Article 9 credits the importance of technological transfer and CCUS. Canada holds a position of strategic proximity, cost and supply advantages of natural gas and hydrogen as well as global leadership on decarbonization technologies and sophisticated regulatory and incentive frameworks that are all tradeable and transferable in helping developing nations.
The global scope of the challenges we face—poverty and climate—will be solved by collaboration between nations. When I took part in the GLOBE Capital session, Destination Net Zero: Governments’ Role in Achieving Carbon Neutrality, there was a consensus on the panel that collaboration is the key to unlock a net-zero future. It will take our best entrepreneurs, scientists, investors, diplomats and dealmakers to realize Canada’s global leadership in a low carbon future. In this, as with so much else, Canada has the advantage of abundant human talent and natural resources to do something extraordinary in the world.
David Knight Legg is chairman of the ESG Working Group of the Province of Alberta and CEO of Invest Alberta Corporation. He was also a speaker at the GLOBE Capital session: Destination Net Zero: Government’s Role in Achieving Carbon Neutrality. GLOBE Capital registrants can watch the session recording here and non-registrants can purchase access here.
By: Emile Lavergne, Senior Consultant, ESG Strategy & Sustainable Finance, The Delphi Group
The race to net zero is off to a flying start.
Public and private commitments to reach net-zero carbon emissions by 2050 have doubled in less than a year. By the time COP26 in Glasgow rolls around in November this year, countries responsible for 78% of global GDP will have pledged to reach net zero by 2050 or, in the case of China and Brazil, 2060.
Now comes the tough part. We have a lot of work to do and we need to find a way to pay for it.
Sustainable finance is an umbrella term for funding that supports projects and organizations delivering green, social, and climate-related impacts. While net-zero targets have grown, sustainable finance has also skyrocketed, as seen by the increase in sustainable debt issued in 2020:
In the chart above, you’ll notice four categories of sustainable finance:
Green and social finance (including bonds and loans) fund projects, assets, and activities tied to beneficial environmental or social impacts. These depend on frameworks identifying on which projects the use of proceeds (capital raised) can be spent.
Sustainability bonds is a catch-all term for bonds raising capital for sustainable projects, as defined by the use of proceeds. These could include projects that touch on both social and green topics and are therefore classified as sustainable, as opposed to specifically labeled green or social.
Sustainability-linked finance (including bonds and loans) provides an incentive for a company seeking a loan or issuing a bond to reach a pre-determined sustainability goal. For example, if a company reaches a certain key performance indicator, they may get a lower cost of capital, as agreed with the lender at closing.
The sustainable finance market was designed to finance projects defined as green, social or climate–related and it is effective in this regard. However, these types of financing are not designed to support all projects that could help companies reach carbon neutrality, especially in high–emitting sectors (e.g. oil & gas, mining, etc.). These high-emitting sectors have the most potential to move the dial to reduce global GHG emissions.
Sustainability-linked financing is relevant for corporate commitments to net zero, but is not used finance to specific projects.
Enter transition finance—a growing market where investors finance projects not considered green, social or climate-related that nevertheless advance the transition to net zero. For example, efforts to reduce the emissions intensity of energy production in the short term, including oil and gas, may be considered a transition activity but would not be considered a climate-related activity due to the narrow definition of ‘climate-related’ only including non-emitting sources of energy (i.e. excluding oil and gas). Hence the name ‘transition’ finance—it finances projects that contribute to a change in the highest-emitting sectors to enable the world to reach the goals of the Paris Agreement.
Conventional financing remains available for all projects. However, a growing number of investors are interested in growing the climate resilience of their portfolios and supporting sustainability efforts, meaning the transition finance market could enable companies in high–emitting sectors to access capital.
The challenge is that participants in the global capital markets have not agreed on a definition of ‘transition’. Without the clarity, transparency, and assurance of a definition, investors may be reluctant to invest in projects essential to reaching net zero due to concerns about the climate resilience of certain sectors, like oil and gas. The transition will be implemented differently across sectors, and ensuring investors, issuers and regulators understand what is considered eligible under a definition of ‘transition’ will reduce friction for companies in high-emitting sectors to access financing.
Green and social finance both have broadly accepted definitions. They are defined through industry group principles and taxonomies (the International Capital Markets Association (ICMA) definitions, for example). The European Union has stated how it defines ‘sustainable finance’, and separately, how it defines a ‘sustainable’ activity with the EU Taxonomy.
The ICMA and the Climate Bonds Initiative have both published documents to begin to build a normative definition of ’transition.’ The OECD has also published Transition Finance Guidance.
To work through how ‘transition’ might be defined in a Canadian context, the Canadian Standards Association (CSA) has assembled a Technical Committee to work to develop a private sector-led definition of ‘transition’, along with sector-specific taxonomies for natural resource sectors across Canada. The CSA work ties into the international efforts to define ‘sustainable finance’.
Other countries, including Australia and Japan, are working to define what a transition would look like for their economies. We can expect Canadian and Australian definitions to diverge from Western European definitions, given that these countries’ economies have a strong reliance on natural resource sectors.
Despite the lack of definition, a few trailblazers have taken the lead with early transition finance transactions, notably HSBC and BNP Paribas. These transactions are built on foundational frameworks established by the ICMA and other industry voices.
It is clear that transition finance can accelerate the race to net zero by filling a gap in the existing sustainable finance market. Establishing a definition in the Canadian context will activate its potential. In the meantime, I invite Canadian companies to consider how transition finance could apply to their sector and their strategies.
To explore this timely and important conversation, join us for the GLOBE Advance Transition Finance Session.
Net zero
Thought leadership on the topic:
Norm-setting documents:
By: Mike Rowlands, President and CEO, Junxion Strategy
We’ve been doing business upside down.
For far too long, we’ve been prioritizing economic success at the expense of societal well-being. The need for business to support equity, justice, and resilience in society has never been clearer than in the past year, when the words Black Lives Matter reached corporate boardrooms and pandemic-related unemployment and isolation sparked a massive mental health crisis.
We’ve bought the myth that the business price of social purpose is too high. In fact, 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. This financial performance follows consumer sentiment: some 87% of global consumers buy brands that support a cause they care about and some 76% refuse to buy a brand if it doesn’t. And most Canadians (74%) agree that “a company can take specific actions that both increase profits and improve the economic and social conditions in the community where it operates.”
So you see, you really can have your cake and eat it too! As we contemplate the light at the end of the pandemic tunnel and think about what it will take to ‘#emergestronger’ or ‘#buildbackbetter,’ social purpose is moving to the centre of strategy conversations. But what is a ‘social purpose’? How can you secure its benefits for your business? And how can you put investments to work to support a purpose agenda?
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.” This is what our communities need as we embark on the road to recovery post-COVID. And it’s what 21st century business needs if we’re going to solve the wicked problems of social justice and the climate emergency.
So, how can you harness these benefits for your business? Along with our partners at the Social Purpose Institute, I believe there are four critical steps to developing a social purpose.
Step 1: Socialize the Concept
For your social purpose to make an impact on your business and society at large, you’ll need leadership buy-in.
Dissecting terminology can be helpful as a starting point. There is often confusion about the differences between social purpose, CSR, and ESG. “Social purpose isn’t what you do—it’s why you exist,” said Mary Ellen Schaafsma, Director of the Social Purpose Institute. Whereas CSR and ESG describe environmental and social practices that businesses follow, social purpose is at the core of a company’s raison d’être.
Share the Social Purpose Business Case with your executives, board, investors, and owners. Start asking questions: Are we ready? Is this the right time? Will this create value?
“Building a consensus amongst leadership is critical to the success of the undertaking,” says Coro Strandberg, President of Strandberg Consulting and Advisor to SPI.
Step 2: Develop a Social Purpose Statement
There are many ways to develop a social purpose. Some companies will turn to the UN Sustainable Development Goals and select one or more goals that they think their business could contribute to achieving. Look at what’s happening in society—is there a problem your business could help solve?
Once you have a draft social purpose statement, turn to your “critical friends,” as SPI calls them, to stress test it and ensure it accurately reflects your values and the reality of your business. “Leaders learn a lot about their businesses through social purpose discussions,” says Ms. Schaafsma.
Step 3: Bring your Social Purpose to Life Internally
Before you launch your social purpose externally, it needs to become a lens that you apply to every internal business decision. Examine your products, services, policies, and procurement. Can you optimize them for social purpose? Are there any gaps to fill in order to achieve your social purpose goals?
Help employees understand how the new social purpose will impact their roles. Build social purpose check-ins into your regular employee touchpoints. Exit out of products and services that don’t serve your purpose. “Collect proof points before you go public,” advises Ms. Strandberg.
Step 4: Share your Social Purpose Externally and Grow
Your business now has a true social purpose and it’s time to shout it from the rooftops! Incorporate social purpose into external communications and engage your full community to help you achieve your goals. Then, reap the benefits.
The majority of Canadian consumers (89%) believe business needs to place the same weight on society’s interests as on business interests. The next generation of talent is also famously purpose-focused: 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.
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.
As the world turns toward recovery, investors are tracking the upswing of interest in social purpose and identifying ways to put their capital to work. Joel Solomon, the pioneering impact investor and Co-Founder of Renewal Funds makes the opportunity clear: To invest in purpose-based businesses is to put money into “regenerating ecosystems and engendering a healthy balance between people and planet. Money that builds true security: long-term, safe, fair resilience.”
After a year when our resilience (personal and organizational) has been tested to the limit, the notion of investing in resilience intrigues. What value might that unlock?
To start capitalizing on social purpose for your business, check out the GLOBE Advance: Activating Social Finance: Advancing Purpose and Impact session at GLOBE Capital, produced in partnership with Junxion Strategy, and the Social Purpose Institute at United Way.
Further reading: