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Alberta Investment Management Co. has established a $1-billion fund to invest in energy-transition and decarbonization opportunities, while saying it will hang on to high-carbon assets within its portfolios.

AIMCo, which manages public-sector pensions and other endowments within the province, said the move is part of an overall approach to climate investing that is aimed at reducing emissions within its portfolio over the long term. It does that by putting money into low-carbon assets but also pushing for greenhouse-gas reductions among high emitters, it says.

The new fund, called the Energy Transition Opportunities Pool, or ETOP, will be used to invest in industrial decarbonization, carbon capture, sustainable fuels, renewable energy production, as well as electrification, energy storage and efficiency. Many of AIMCo’s clients have dedicated funds to the pool, it said.

AIMCo expects to make its first investments from the fund in the current quarter, chief investment officer Marlene Puffer said in an interview. ETOP will be an addition to its asset mix, alongside money markets and fixed income, public equities and private markets. The latter comprises investments in infrastructure, real estate, renewable resources and private equity.

“We’ve been working on this for some time in determining the right approach, really defining the parameters, looking at its risk profile, determining the strategy of how we’ll go about it. Then it has been a lengthy process of consulting with our clients and helping them understand how this fits into their portfolios,” Ms. Puffer said.

AIMCo invests around the world on behalf of 17 clients, which include pensions for teachers, police, municipal workers and others. It’s also responsible for public funds, such as the Alberta Heritage Savings Trust Fund. As of the middle of 2023, it managed $146-billion of assets.

It said it has considered the climate ramifications of its investments for a decade, and has set up an in-house taxonomy to guide how it allocates money to its portfolios. It categorizes investments as green, or emission-free, through various stages of energy-transition, all the way to “hard to abate” and a category called “black box.” Those represent the large opportunities to make emissions cuts and improve disclosure, said Carmen Velasquez, AIMCo’s managing director, sustainable investing.

“That’s a place where we think we can really help, and we’ve been doing that for a number of years,” Ms. Velasquez said. “For instance, when assets come into the portfolio and they’re at the beginning stages of their journey, we’ll work with them to actually help them develop their carbon footprint [plan].”

However, environmental activists have criticized AIMCo for not setting a net-zero emissions target, in contrast with some other large Canadian pension managers, including Ontario Teachers’ Pension Plan, Canada Pension Plan, Ontario Municipal Employees Retirement System and Caisse de dépôt et placement du Québec. AIMCo has also resisted calls to divest holdings in the oil and gas industry and other high-carbon sectors.

Indeed, it has studied making an investment in the Trans Mountain oil pipeline, which Ottawa is planning to divest, AIMCo chief executive officer Evan Siddall said last week.

It has responded by saying that maintaining ownership of such companies gives it sway to influence boards of directors to improve their environmental performance. As such, it is a member of the Climate Action 100+ and Climate Engagement Canada, groups of institutional investors that seek to persuade companies to bolster their climate-related disclosures and emissions reductions.

“If we green things that are already green, what’s the impact of that? But if you can reduce the emissions of a high-emitting asset by 1 per cent, the impact from an emissions standpoint is much higher,” Ms. Velasquez said. “So that’s been a lot of our drive, and part of it, too, is just the opportunity that’s in front of us.”

That includes investments in such fields as transport, agriculture and health, among others, she said.

AIMCo is supportive of portfolio companies setting plans to get to net-zero emissions, but has so far not taken that step itself. Mr. Siddall has said the larger need is to balance energy supply and emissions reductions, and he is unable to make that commitment without seeing a clear path to achieve it.

The organization is in charge of portfolios for several clients, all of which are at different stages of defining their own goals, Ms. Velasquez said.

“Part of our role is to advise them and to lead them on this topic, so for now that is where we are. But we are very much in service of decarbonization, and that is part of why we wanted to put this out today,” she said.

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