Caisse de Dépôt De-risks Portfolio and Supports Low-carbon Economy with New Investment Strategy
The Caisse de dépôt et placement du Québec (CDPQ)—Canada’s second biggest pension fund, with more than C$285 billion under management—just announced a new investment strategy to support the targets of the Paris Agreement and contribute to the transition toward a low-carbon global economy.
Referencing rapid climate-related policy, technological and market developments, CDPQ has decided to review the risk-return profile of various industries and companies, reduce its exposure to high-carbon industries such as coal and significantly boost its investments in lower-carbon assets.
Its strategy takes a carbon-intensity approach and relies on the expertise of its investment teams, giving its managers flexibility in assessing risks, as well as determining which investment opportunities will contribute to achieving these targets and which will generate good returns. Notably, certain of the targets CDPQ sets as part of its strategy are tied to employee performance and compensation.
Major components of CDPQ’s strategy include:
- Consider climate change in every investment decision. CDPQ will now factor climate change into “each and every investment decision” across its entire portfolio.
- Increase its low carbon investments by 50% by 2020. This would amount to over $8 billion in new investments in low-carbon assets such as renewables, energy efficiency projects, battery technology and public transportation infrastructure.
- Reduce the carbon intensity of its portfolio by 25% by 2025. To meet this goal, CDPQ will set annual carbon intensity (i.e. emissions per dollar) budgets for each of its portfolios. This approach grants managers latitude in selecting investments and flexibility in determining how to stay within those budgets, so long as the overall reduction of carbon intensity across all portfolios is 25% by 2025. CDPQ will also link employee compensation to performance against these targets.
- Report on its progress annually in its financial report. CDPQ will report on its progress against the above targets and disclose the carbon footprint of its portfolio as part of its annual report.
In addition to these targets, CDPQ also committed to strengthening its engagement with the financial sector and companies in its portfolio on climate-related issues.
In the pension fund’s press release, President and Chief Executive Officer, Michael Sabia, states “[w]e have also been guided by our longstanding conviction that we need to think and act as builders, in everything we do.” We commend CDPQ on its leadership and strategic foresight—turning risk into opportunity, supporting investments and industries that will ensure resilience to a climate-adjusted future and growing longer-term value for its beneficiaries and beyond.
Read CDPQ’s full climate-smart investment strategy here.