Investment firms tackle net zero investing to make a difference

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“Net zero investing is about listening to the science, which is very clear,” says Addenda Capital’s President and Chief Executive Officer, Roger Beauchemin.

Addenda, which has made ESG integration a cornerstone of its sustainable investing approach, is one of the Canadian firms that joined the Net Zero Asset Managers (NZAM) initiative, committing to work with clients on aligning portfolios with the goal of reaching net zero by 2050. Launched in 2020, the NZAM initiative now includes 236 signatories worldwide representing US$57.5 trillion in assets under management.

“The carbon footprint is extremely important. We must strive for carbon neutrality. Not just for us or the economy, but for the planet,” says the President and CEO of Addenda, a multi-asset investment firm that manages about $40 billion for clients. “We allocate capital, which supports business models and produces financial returns. However, since we’re seeking a sustainable approach, we must think longer term about costs, inputs, and all climate-related risks and opportunities associated with an investment. The planet has a carbon budget, and in the absence of efficient and powerful price mechanisms, we must find another way of highlighting the costs associated with pollution.”

Steps to a lower carbon footprint

Firms joining the NZAM initiative commit to a number of obligations. In addition to working with asset owner clients on decarbonization goals, with a view to reaching net zero emissions by 2050 across all assets under management, they must set an interim 2030 target. There’s more. Signatories must also: implement a stewardship strategy and voting policy; provide clients with net zero analytics, TCFD disclosures and a climate action plan; create products aligned with net zero emissions as needed; and focus on achieving real economy emissions reductions in sectors and companies in which the firm invests.

The emphasis on real reductions is crucial, Roger Beauchemin points out. Canada’s economy is largely extraction-based and tilted toward energy production. In light of this, the country, which hopes to cut emissions by 40-45% from 2005 levels by 2030, still stands to make substantial strides in terms of reductions. In 2020, CO2 emissions in Canada were down 9.3% from 2005 levels, according to Environment and Climate Change Canada.