In the latest demonstration of institutional investors’ commitment to taking action on climate change, asset owner La Caisse de dépôt et placement du Québec (CDPQ), as well as asset managers Sarasin & Partners and Latin America-based SURA Asset Management have today joined the United Nations’ Portfolio Decarbonization Coalition (PDC).
With the addition of these three large institutional investors, the Coalition now convenes 31 investors overseeing the gradual decarbonization of a total of more than USD 800 billion in assets under management (AUM). This has dramatically surpassed the Coalition’s original target of USD 100 billion by 2015 by a factor of 8.
By joining the Coalition, and pledging to manage their core investment portfolios to achieve decarbonization, the three organizations are sending a strong signal on the importance of mitigating climate change to the world’s governments gathering in Paris for President Macron’s One Planet Summit.
"Investments with more carbon translate to higher risk, not just from potential carbon fees or pricing, but also from shifts in technology that can leave high carbon assets stranded," said Erik Solheim, Head of UN Environment. UN Environment's Finance Initiative is a co-founder of the Portfolio Decarbonization Coalition.
"The success of the Coalition is a clear signal to both governments and companies that climate change, and the strategies with which companies across sectors respond, are already firmly on the radar-screen of the world’s largest investors; and that they are there to stay," said Solheim.
Portfolio decarbonization means investors systemically integrate carbon-related information, such as fossil-fuel-derived revenues, into portfolio design and capital allocation, signaling that climate change, and the corporate response to it, will be critical to shareholder value and investor interests going forward.
La Caisse de Depot de Placement de Quebec has committed to, among other targets, a 25% reduction in the carbon footprint per dollar invested by 2025, for a total of USD 195 billion of assets under management (including all asset classes except sovereign debt), as well as an increase of 50%, so USD 8 billion, into low-carbon investments by 2020.
Michael Sabia, President and Chief Executive Officer of CDPQ said: “Our strategy is based on our commitment that climate change will factor into each and every investment decision we make across the breadth of our portfolio. This is why we set a short-term target to increase our investments in low carbon assets by over $8 billion, and a medium-term target to reduce our carbon footprint by 25% per dollar invested. Moreover, our engagement with our portfolio companies will also be a key element of our plan: we strongly believe that information sharing and collaboration are necessary to develop credible standards that have a positive impact on markets.”
Co-founded by the United Nations Environment Finance Initiative (UNEP FI), the Fourth Swedish National Pension Fund, AP4, Europe's largest asset manager, Amundi, and CDP, the non-profit global environmental disclosure platform, the Coalition was launched at UN Secretary-General Ban Ki moon's Climate Summit in September 2014.
“PDC and its investor members have come a long way since the climate agreement in Paris in December two years ago. What was then seen as odd and unique is now becoming mainstream,” said Mats Andersson, Chair of PDC, and former CEO of AP4.
“Not only will the Coalition continue to grow. It will also see existing investor members supporting each other as they deepen their efforts to align their portfolios with a low-carbon future. It is also about monitoring and publishing the progress made by investors. And the results, as presented in this year’s progress report, speak for themselves. For instance, from 2014 to 2016 Dutch investment giant ABP reduced the carbon footprint of its equities portfolio by 16%; in France FRR achieved in 2016 a portfolio carbon intensity that was 30% lower than benchmark; and in Australia, Local Government Super outperformed its benchmark, on carbon-efficiency, by 16%; the list goes on and on,” he added.
Other investor members of the PDC include major European funds such as France's ERAFP (AUM $26.9 billion) and the world's largest insurance company, Germany's Allianz Group.
Read the progress report here.
Notes to editors
Quotes from co-founders and partners of the Portfolio Decarbonization Coalition:
Paul Simpson, CEO of CDP
"It is encouraging to see this international collaboration among leading asset managers and owners working to decarbonize their portfolios and better manage climate risk. However, we have not yet created a truly sustainable financial system. More investors need to take urgent action to ensure their portfolios are compliant with the below 2 degree ambitions of the Paris Agreement."
Fiona Reynolds, Managing Director of the Principles for Responsible Investment
“Our signatory base has told us that the material risks around climate change are their number one concern; yet, within the investment community, whilst there are some outstanding leaders in the field - such as the first-movers in the PDC - decisive, systematic action is still exception rather than norm. This year, at our annual conference, PRI in Person, Christiana Figueres challenged large asset owners and managers to invest 1% of their total assets in clean energy and technology by 2020. I am confident that the experiences made by PDC members over the last 3 years can inspire a much larger number of PRI investors to start shifting their portfolios and, in doing so, not only deliver on Christiana's challenge but also make a meaningful contribution to the low-carbon economic transition.”
Guy Matthews, Managing Partner, Sarasin & Partners LLP
“Divestment alone is unlikely to deliver decarbonisation. It is individuals and institutions that can — and should — play a proactive role as shareholders to drive change through robust dialogue with company directors, and publicly speaking out to call for strategies that are aligned with the global effort of decarbonisation. If ever there was a moment for shareholder activism, this is surely it.”
About the Portfolio Decarbonization Coalition
The Portfolio Decarbonization Coalition was co-founded by CDP, the UN Environment Finance Initiative, The Fourth Swedish National Pension Fund (AP4) with assets of $34 billion, and Amundi, Europe's largest asset manager with more than $1.07 trillion in assets. In the 15-month lead-up to the December 2015 Paris climate talks the Coalition received $600 billion in commitments from investors of capital positioned towards a low-carbon economy, six times more than its $100 billion goal. For more information, and to download the 2017 progress report, please visit: unepfi.org/pdc
About CDP
CDP is an international non-profit that drives companies and governments to reduce their greenhouse gas emissions, safeguard water resources and protect forests. Voted number one climate research provider by investors and working with institutional investors with assets of US$100 trillion, we leverage investor and buyer power to motivate companies to disclose and manage their environmental impacts. Over 6,300 companies with some 55% of global market capitalization disclosed environmental data through CDP in 2017. This is in addition to the over 500 cities and 100 states and regions who disclosed, making CDP’s platform one of the richest sources of information globally on how companies and governments are driving environmental change. CDP, formerly Carbon Disclosure Project, is a founding member of the We Mean Business Coalition. Please visit www.cdp.net or follow @CDP to find out more.
About UN Environment Finance Initiative
The UN Environment Finance Initiative is a partnership between UN Environment and the global financial sector created in the wake of the 1992 Earth Summit with a mission to promote sustainable finance. Over 200 financial institutions, including banks, insurers and investors, work with UN Environment to understand today's environmental challenges, why they matter to finance, and how to actively participate in addressing them. For more information, visit www.unepfi.org.
Contact at UN Environment Finance Initiative
Sally Wootton, sally.wootton@un.org, tel +41 22 917 8591
