OMERS Targets a 20% Carbon Intensity Reduction by 2025

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Satish Rai, CIO at OMERS, posted a comment on Linkedin on how the organization is committing to a low-carbon future, targeting a 20% carbon intensity reduction by 2025:

Sustainable investing has long been a focus for OMERS, but never have environmental, social and governance (ESG) issues been as front of mind as they are today. Climate change is one of the most pressing issues of our time and represents both risks and opportunities for financial markets. As investors, we play a role in supporting accelerators of the transition to a lower carbon economy and across OMERS we have made a commitment to become a leader in Sustainable Investing.

Demonstrating that commitment, last year we undertook the organization’s first total portfolio carbon footprinting exercise based on the recommendations of the Task Force on Climate-related Financial Disclosures (TCFD). The exercise measured the carbon footprint across our investments and allowed us to assess our total portfolio through the lens of climate change. The results of the study can be accessed in our Annual Report and on our website along with our commitment to reduce the carbon intensity of the portfolio by 20% by 2025.

Setting an ambitious, but tangible, short-term goal is critical to ensure our approach remains fit-for-purpose and that today’s leadership is accountable. The complexities of climate change and its impacts means companies must evolve their strategy to stay ahead of the curve. We are committed to engaging with our portfolio companies on how they are facing this challenge.

We will continue to partner with like-minded institutions around the world to exchange information, evolve sustainability practices and advocate for better transparency. This includes participation with initiatives such as TCFD, the Sustainability Accounting Standards Board and organizations like the Investor’s Leadership Network (ILN) and the Canadian Coalition for Good Governance (CCGG).

This commitment is significant, but our investment culture is already geared to take on the challenge. Applying an ESG lens – among others - to our investment decisions is already an integral part of how we assess value and risk, and our teams will continue to do this as we also actively focus on balancing our portfolio through capital allocation to lower-carbon opportunities. We will continue to work closely with our portfolio companies to promote sustainable business practices and to support their transition to a low-carbon economy.

We all have a role to play in delivering a more sustainable future. Factoring the risks posed by climate change into our investment decisions is essential to ensure that we continue to generate stable returns for our members over the long-term. We have made this commitment because we know that integrating ESG factors into our investment approach is a key part of delivering value for future generations.

Late this afternoon, I had a quick chat with OMERS' President and CEO Blake Hutcheson on this new target. More on our conversation below.

First, OMERS has made a commitment to reduce the carbon intensity of its portfolio by 20% by 2025.

In doing so, it joins CDPQ, BCI, OTPP  and other large Canadian pensions which have set similar targets.

What I like about this goal is 2025 is right around the corner, which tells me they're very serious about delivering on their target and have have a clear vision and path of how they're going to deliver on this promise.

As Satish Rai explains:

Demonstrating that commitment, last year we undertook the organization’s first total portfolio carbon footprinting exercise based on the recommendations of the Task Force on Climate-related Financial Disclosures (TCFD). The exercise measured the carbon footprint across our investments and allowed us to assess our total portfolio through the lens of climate change. The results of the study can be accessed in our Annual Report and on our website along with our commitment to reduce the carbon intensity of the portfolio by 20% by 2025.

He also mentions that this is being done to address the risks and opportunities of climate change.

It's important to note that OMERS already takes sustainable investing very seriously. 

In fact, Satish Rai posts a letter on the website stating this on sustainable investing:

The world is changing and so is our role as an investor. Charged with the stewardship of our members’ retirement futures, it is a role we take to heart. Thinking long into the future we seek out the highest quality assets around the globe - those responsible, sustainable businesses and services that think about, and are built for the future.

Climate change is one of the most pressing issues of our time, and we see the world transitioning to a lower-carbon economy. The pace and scope of this transition will largely be determined by governments and communities, as well as by innovation and technology. As investors, we play a role in supporting accelerators of this change and are partnering with our portfolio to find opportunities to evolve business practices and grow sustainably.

Across OMERS we have made a commitment to becoming a leader in Sustainable Investing. We made that same pledge within our Oxford Properties portfolio several years ago and are now the gold standard amongst real estate peers worldwide ranking #1 in North America in the office/retail sector by GRESB (Global Real Estate Sustainability Benchmark) for six of the last seven years. Oxford is also building Canada’s first two zero-carbon office towers and has committed to make a 30% reduction in carbon emissions from its global property portfolio by 2025. With this blueprint in hand, we are actively working across our portfolio, ensuring that the values we believe in are integrated into every aspect of our investment approach. And we’re on our way, anchored by a strategy that will see us grow our investments in clean energy, beyond our more than $3B in the sector currently.

OMERS is involved in a number of institutional investor collaboration efforts focused on ESG and climate change issues. We believe that by collaborating with both our portfolio as well as other institutional investors, governments and regulators, we can have a greater influence and impact. As signatories to The Task Force on Climate-related Financial Disclosures (TCFD), we believe that more transparent disclosure of climate risks will assist us in continuing to make thoughtful decisions as our portfolio shifts and grows. Over time, climate change-related financial disclosure practices and metrics will evolve to provide a better understanding of the long-term impact of climate change on our investments and on our ability to deliver the returns required to meet our pension promise to members.

Finally, leadership in sustainable investing requires a nimble mindset to adapt to emerging issues. We continually advance our capabilities and practices to deepen our knowledge of Sustainable Investing and come to work every day ready to act in the best interest of our members.

Now, late today, I had a brief chat with Blake Hutcheson, OMERS' President and CEO.

Let me thank him for calling me back to quickly go over some of the important issues pertaining to this commitment of reducing the carbon intensity reduction in their portfolio by 20% in 2025.

Here are the important points he shared with me:

  • Last year, OMERS undertook its first total portfolio carbon footprinting exercise based on the recommendations of the Task Force on Climate-related Financial Disclosures (TCFD). "We set out target reduction date at 2025 to make it tangible for all our employees."
  • But even before they undertook their carbon footprinting exercise, OMERS was already spearheading change in its portfolio. Blake told me he spent 10 years as head of Oxford Properties and under his watch, they became a leader in sustainable investing. "We had a dedicated team that was set up 10 years ago focusing on sustainable investing and we quickly became leaders consistently ranking high on the Global Real Estate Sustainability Benchmark (GRESB) and 90% of our buildings have achieved an industry-leading green building certification for their region and asset class." (see Oxford's Sustainability Report here).
  • Importantly, Blake added this: "It's a win, win, win. A win for our clients, a win for our investors and a win for our employees and it pays dividends over the long run."
  • In Infrastructure, he mentioned Bruce Power which they own 50% of and it provides 35% of the energy to Ontario (clean energy). He also mentioned OMERS important investment in Leeward Renewable Energy (see my coverage here).
  • I asked him about Private Equity where they have investments in 20 portfolio companies and he explained their sustainable investment policy applies to all their public and private investments. 
  • He told me Michael Kelly who is OMERS Chief Legal & Corporate Affairs Officer also chairs the Sustainable Investing Committee which oversees OMERS approach to matters such as environmental, social and governance (ESG) integration in its investing activities. Katharine Preston who joined OMERS two years ago as Vice President, Sustainable Investing reports to Mr. Kelly. In her role, she assists OMERS with evolving its sustainable investing practices and liaises with OMERS investment, risk and communications teams on matters such as ESG integration, climate risk, and stakeholder communications and reporting (she's great, met her two years ago at a conference in Mont-Tremblant). 
  • Blake also told me OMERS is part of the the Investor’s Leadership Network (ILN) which is taking the lead on sustainable investing. He spoke highly of Charles Emond, CDPQ's CEO who is the co-chair at the ILN CEO Council (along with Jean Raby) and said this is an important organization to bring about critical change to sustainable investing (see my recent conversation with Charles Emond  here).

 Alright, I think I covered the more important points of our conversation. 

Once again, I thank Blake for speaking with me on such short notice, always enjoy his insights.

The only thing I asked Blake was to have a dedicated YouTube channel for OMERS where they post great videos I can embed in this blog. You can view some of them on their website here.

By the way, that's the same message I have for all the CEOs at Canada's large pensions, start posting more interviews of yourselves, your senior managers, managing directors and employees on a dedicated YouTube site. We are 2021, the younger generation isn't into reading, they want video content.

And no excuses please, part of good pension governance is excellent and timely communications, it requires some effort to make these videos but it pays to be ahead of the curve on communications.

Alright, let me wrap it up there.

Below, a short clip where Oxford Properties' CEO Michael Turner discusses the future of the office:

Great insights. You can see the entire clip here (registration is free).

I also embedded a recent responsible investing panel discussion hosted by Amundi and Nuveen which I found extremely interesting. Take the time to watch this as it covers ESG investing across all asset classes and the panelists provide great insights.

Just remember what Blake Hutcheson told me: ESG investing is a win, win win for all stakeholders and it pays long term dividends.

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