Some of Canada’s largest pension funds and the Canadian government are drumming up international support to invest in issues of importance to the G7.
The Caisse de dépôt et placement du Québec and Ontario Teachers’ Pension Plan will lead a group of global investors with a combined $6-trillion in assets under management in an effort to improve climate-related disclosures, boost women in finance and bolster expertise in infrastructure. These focus areas line up with Canadian government priorities and Finance Minister Bill Morneau and Environment Minister Catherine McKenna attended an event in Toronto to support the initiative on Wednesday.
The investor group, which includes other large pension funds, European insurers and asset managers, believes it can use its member contact networks and investment expertise to launch targeted programs that will, over time, improve investment and economic conditions across the world.
It’s a big goal that begins with the design of some small pilot programs in three priority areas. One such effort includes a fellowship for senior public-sector infrastructure managers in emerging markets run in partnership with York University’s Schulich School of Business. This program is being touted as a way to “help fill the gap in markets where infrastructure needs are most critical,” because increasing a region’s financial and operations expertise in the sector could lead to more investment interest and opportunities for the funds.
The G7 investor organization plans to contribute between $10-million and $15-million toward its programs over the next few years. But Michael Sabia, chief executive of the Caisse, said the institutions’ main contributions won’t be financial.
“It’s much more about using all the other resources we have – our people, our expertise, our relationships, our networks,” he said during a presentation at the Toronto event.
In recent years, most large investment groups have heightened their focus on environmental, social and governance (ESG) factors when evaluating potential deals. Many are focused on the impact of long-term trends such as a transition away from fossil fuels, disruption caused by technology and labour issues that can affect their returns and reputations.
As ESG becomes an increasingly important term to institutional investors, it has changed their expectations of assets they buy and businesses they invest in. And they’re not alone. Other international groups have rolled out new targets, such as the 17 sustainable development goals identified as priorities by the United Nations in the years leading up to 2030. And last year, a task force founded by the G20′s Financial Stability Board, which is chaired by Bank of England Governor Mark Carney, set out its recommendations for better climate-related financial disclosure.
Although there are many frameworks and initiatives being developed across the world, Mr. Sabia said this new investor group was trying to bring a more targeted and disciplined approach to a few key issues. “What we’re trying to do with this group is work more intensively together … and have very specific and practical actions that we will continue to develop,” he said.
Along with the infrastructure initiative, the group is also pursuing a partnership with the CFA Institute focused on encouraging women at universities in developing markets to gain experience in the investment industry.
The third initiative looks at moving quicker to implement uniform and comparable climate-risk disclosures among businesses. That will include the investor group’s members leaning on their respective portfolio companies to adopt international recommendations.
Co-ordinating all of the investor and government priorities and deciding on three main areas of focus took about six months, organizers said. Partner institutions include insurers Allianz and Aviva, U.S. pension fund CalPERS and Natixis Investment Managers, along with many Canadian pension funds.