A Discussion With CDPQ's Marc-André Blanchard on Sustainability, COP28 and More

This afternoon I had an interesting conversation with Marc-André Blanchard, Executive Vice-President and Head of CDPQ Global and Global Head of Sustainability.

Mr. Blanchard is a very busy man so I was pleased to have the opportunity to talk to him and I want to begin by thanking him for taking the time to talk to me and also thank Conrad Harrington for arranging this discussion.

Let me just say this was the first time I spoke with Marc-André and found him very nice, polished, classy and extremely knowledgeable.

He spoke perfect English and he has tremendous experience so when you speak with him, you get a good sense that he brings a wealth of experience and knowledge to the organization.

I told him he acts like the ambassador of CDPQ to the outside world and in his role as Head of CDPQ Global and Global Head of Sustainability he meets with many different stakeholders across the private and public sector.

He told me he tries to leverage the institution to form solid partnerships and add meaningful value.

We began with a quick overview of his career.

He joined McCarthy Tétrault back in 1997 and was a corporate litigator working on mergers and acquisitions, bankruptcies and other files.

He quickly rose up the ranks, was responsible for the Montreal and Quebec City offices and in January 2010, he became chairman and CEO of  McCarthy Tétrault.

In that position, he was responsible for five offices across Canada and New York and London too.

In January 2016, Justin Trudeau's government appointed him Ambassador and Permanent Representative of Canada to the United Nations, a position he fulfilled from 2016 to 2020. 

At the time, he also served on the Canadian Board of the North American Free Trade Agreement (NAFTA). 

In November 2021, he was named co-chair of the Investor Leadership Network (ILN) CEO Council along with Blake Hutcheson, CEO of OMERS.

A member of the 1992 Bar, he completed his undergraduate studies in law at the Université de Montréal and holds a master’s degree in public international law from the London School of Economics and Political Science. 

He also holds two master’s degrees from Columbia University’s School of International and Public Affairs. In 2016, Canadian Business magazine named him one of Canada’s 50 Most Influential Business Leaders. 

All this to say, Mr. Blanchard, Marc-André, is very impressive and when he spoke, I just listened and soaked it all in.

I didn't even get a chance to tell him about my experience during my undergrad years participating at McGill's Model United Nations club where we got to travel to Harvard, Princeton, Yale, Columbia and UPENN to debate Ivy League teams (and almost always won because Tim Wu was part of our club).

Marc-André told me when he was part of the United Nations, UN Secretary General António Guterres told him it's rare they have someone like him with private sector experience.

That experience proved useful at the UN as he was able to discuss policies with global policymakers and heads of multinational companies.

He also understood early on if climate change policies were to work, you needed to embrace developing countries.

He retired from his diplomatic postings on July 31, 2020, shortly after Canada lost the 2020 United Nations Security Council election, and was named head of CDPQ Global with responsibility for the United States/Latin America, Europe and Asia/Pacific.

A year later, he also took on responsibility of being CDPQ's Global Head of Sustainability.

He shared this with me on this role:

The leadership of CDPQ (on sustainability) has been there since 2017. We were the first institutional investor to develop such an ambitious plan of agenda, and we are often ranked number one institutional investor in the world in sustainable investing and for us the transition is important.

Why is it important? Because more and more it's about partnerships and more and more, you invest with partners that are aligned with your values, with your ambitions. This is for us a way to be part of the institutions that get the first call for the best transactions in the world with the best partners in the world. 

At he end of the day, we recognize we have a significant role to play in the transition, but also we recognize it's good for our returns, it's good for our depositors because it leads us to the best investments in the world.

He added that over the last ten years, their green assets have been outperforming non-green assets. "For us, it's a question of returns and what's in the best interest of our depositors."

I told him I track pension funds very closely and there's no doubt CDPQ is a global leader in sustainable/ responsible investing. 

I also told him since CDPQ introduced its new climate strategy back in September 2021, too much focus has been on the fourth pillar, exiting out of oil production by 2022.

Marc-André responded:

Yes, the number one pillar was increasing our green assets, second to reduce our carbon intensity in the total portfolio by 60% by 2030 (base year 2017), the third one was the transition envelope to decarbonize highest emitting sectors and the fourth one was exiting out of oil producers. 

The transition envelope is interesting, we aren't the only ones doing this but he fact that we have ambitious targets to lower carbon emissions should not deter us from investing and doing was is right even if in the short-term you increase your level of emissions. In the long term, you reduce emissions in these industries and ensure they're part of the transition.

He gave me the example of Apraava Energy. CDPQ reinvested in this Indian electricity provider and ensured the implementation of a plan to increase the company’s renewable energy generation capacity to reduce its reliance on coal combustion. Apraava Energy also adopted an ambitious decarbonization objective inspired by the SBTi methodology.

See more examples in CDPQ's 2022 Sustainable Investing Report. 

He added:

That's what we have seen in COP28, commitments to triple the renewables capacity by 2030, to double the energy efficiency improvements by 2030, and then you have commitments with respect to methane and other emitting sectors, you see through the math, things are actually emerging as investments in the transition, so we need to be investing, not only to invest in transition per se but also in companies that are best in class in terms of being aligned with the transition.

For each investment we make, we do an in-depth ESG analysis and we've been doing that for a long time, we were one of the first to do this. For us it's important, I think $48B of our assets are green and another $48-$50 billion of our assets are certified as being STBi aligned.We increased that number over the last year by approximately 20% and our goal is to increase the share of investments that are SBTi aligned.

The other part that is very important for us and that's where the puck is heading for institutional investors, is the engagement with our portfolio companies. We have more say in private companies where we have a significant investment and more direct influence but we also engage with public companies where we make sure they have not only goals to be part of net zero but actually have a plan in place to put things in place. It's one thing to set objectives, it's another thing to act on them. And I think it's the role of institutional investors to sit down with our portfolio companies across public and private realm to ensure they are implementing best practices so they evolve and put plans into action.  We think it's about value creation, we believe it adds value to these companies and that's what ultimately we are all about.

He told me take two companies, Company A and Company B, exact same financial statements but let's say Company A uses less water, less fossil fuel, has less of a carbon footprint, it's obvious Company A will be worth more. "At the end of the day, the market is talking, so it's good stewardship dong this."

Our discussion then moved to real estate where I told him from an institutional portfolio perspective, this is the asset class where carbon intensity must be reduced the most.

I told him  I had a great discussion with Nathalie Palladitcheff, CEO of Ivanhoé Cambridge and Stéphane Villemain, Vice President, Corporate Social Responsibility exactly two years ago today.

Marc-André told me Ivanhoé Cambridge is doing an excellent job in lowering its carbon footprint and he praised them but said his team has to work across many different industries so they need to really engage with various portfolio companies to put a plan in place to lower carbon emissions. 

He emphasized "there will be no one size fits all" because of the heterogeneity of the industries his team is responsible for. He said it's a lot of engagement across many industries.

He also emphasized in order to create value and realize on these actions plans across various industries by 2030, they will need specialized resources. "For example, we will need more engineers to engage portfolio companies in the right way."

He then added this on leveraging the strength at CDPQ:

At CDPQ, we have engineering companies that are every good at this, we have insurance companies that are good at product development, so we need to bring  these assets to our portfolio companies to connect the dots. That's part of my job and this is how we create value. To me this is the level at which we need to be playing not only to achieve net zero as many of our portfolio companies are on the path to net zero but also to create value.

I then asked him specifically how do they measure outcomes because words are words but at the end of the day, it's all about outcomes.

He responded:

Leo, you're right. We are collecting data and it's the first time we as the world are doing this. I often say the path to net zero is not a straight line. So you're right, we need to measure and in some cases it's easy, in other cases it's more complicated.

COP28 was very special. 97,000 members attended and of all the COPs I've been at in my life, this was a real one focused on implementation. That's why I think it was such a success. Usually COPs are inter-governmental discussions to discuss public policy and then you have civil society like NGOs. In Glasgow, the UK started opening the door more to the private sector. And this year at COP28, there was double the representation of the last COP in terms of private sector companies, most of the institutional investors were represented, all of the global financial institutions were represented (all the Canadian banks were there), a lot of technology companies were there including clean tech and carbon capture companies, and then you have all sorts of other stakeholders, I can go on and on. 

That was the success of it, we were not just talking about investing in the transition but also how we get the risk reward acceptable to all parties. All sorts of investors have different fiduciary responsibilities. Family offices, for example, can take risks that we cannot make but then if you partner together, you can achieve something. Brookfield announced a partnership with Altera, UAE announced a $30 billion fund, so we expressed some interest for a fund developed by Brookfield with the contribution of Altera to make some investments.

We also expressed a call to action with key stakeholders like development banks to get the right data and be able to assess projects using this data to properly estimate risk. The most important thing is need for project preparation and first loss insurance. For example, we have an agreement between ILN and US Trade and Development Agency for a project preparation facility of $100 million.

Under the partnership, USTDA will use its project preparation tools to prepare projects in emerging economies for the financing consideration of ILN’s member organizations, which include some of the world’s leading asset owners and asset managers. This partnership will help increase the pipeline of bankable climate transactions in emerging economies (see details here).

In effect, they are de-risking projects for institutional investors to start investing in projects they otherwise wouldn't be able to invest in. "Sometimes its currency risk, country risk or technology in unproven, so you need to de-risk these projects."

He gave me the example of alternative jet fuel and how you need to bring airlines, regulators, agribusiness all together to discuss the transition and put a plan in place to transition.

I applauded him for being the first to say we need to bring developing countries into the equation.

He told me most of the emissions will be coming from Asia and the good news there was engagement at COP28 at the highest levels with John Kerry meeting his Chinese counterpart several times.

We ended with a brief discussion of COP28 where he told me "it wasn't perfect" but it was a huge success in terms of bringing different stakeholders together.

In terms of Quebec where CDPQ has a dual mandate, he told me there are huge opportunities in the agricultural sector (in Canada as well) as well as in emerging technology companies which focus on carbon capture and other cleantech technologies.

I said the transition is just getting underway and investments in Northvolt and Quebec based companies will lead to the development of Quebec's economy.

I also noted that all this will help CDPQ fulfill its dual mandate nicely and he replied: "we've been doing it for over 60 years and will continue doing it for many more years."

Alright, let me wrap it up there, my wife reminded me I have a newborn to take care of.

Let me take this opportunity to wish all my readers happy holidays/ joyeuses fêtes and all the best for the new year.

Below, Marc-André Blanchard, B20 Co-Chair, ECRE TF, EVP Head of CDPQ Global and Global Head of Sustainability, discusses why it's important to bring as many stakeholders together to tackle climate change.

Also, a walk in Syntagma square in Athens to see the Christmas lights for this year. Stroll along Ermou str, Monastiraki square, Psirri area and back to Syntagma square via Mitropoleos str. Merry Christmas to everyone.