AIMCo Sets Up $1 Billion Energy Transition Fund
Alberta Investment Management Co. has established a $1-billion fund to invest in energy-transition and decarbonization opportunities, while saying it will hang on to high-carbon assets within its portfolios.
AIMCo, which manages public-sector pensions and other endowments within the province, said the move is part of an overall approach to climate investing that is aimed at reducing emissions within its portfolio over the long term. It does that by putting money into low-carbon assets but also pushing for greenhouse-gas reductions among high emitters, it says.
The new fund, called the Energy Transition Opportunities Pool, or ETOP, will be used to invest in industrial decarbonization, carbon capture, sustainable fuels, renewable energy production, as well as electrification, energy storage and efficiency. Many of AIMCo’s clients have dedicated funds to the pool, it said.
AIMCo expects to make its first investments from the fund in the current quarter, chief investment officer Marlene Puffer said in an interview. ETOP will be an addition to its asset mix, alongside money markets and fixed income, public equities and private markets. The latter comprises investments in infrastructure, real estate, renewable resources and private equity.
“We’ve been working on this for some time in determining the right approach, really defining the parameters, looking at its risk profile, determining the strategy of how we’ll go about it. Then it has been a lengthy process of consulting with our clients and helping them understand how this fits into their portfolios,” Ms. Puffer said.
AIMCo invests around the world on behalf of 17 clients, which include pensions for teachers, police, municipal workers and others. It’s also responsible for public funds, such as the Alberta Heritage Savings Trust Fund. As of the middle of 2023, it managed $146-billion of assets.
It said it has considered the climate ramifications of its investments for a decade, and has set up an in-house taxonomy to guide how it allocates money to its portfolios. It categorizes investments as green, or emission-free, through various stages of energy-transition, all the way to “hard to abate” and a category called “black box.” Those represent the large opportunities to make emissions cuts and improve disclosure, said Carmen Velasquez, AIMCo’s managing director, sustainable investing.
“That’s a place where we think we can really help, and we’ve been doing that for a number of years,” Ms. Velasquez said. “For instance, when assets come into the portfolio and they’re at the beginning stages of their journey, we’ll work with them to actually help them develop their carbon footprint [plan].”
However, environmental activists have criticized AIMCo for not setting a net-zero emissions target, in contrast with some other large Canadian pension managers, including Ontario Teachers’ Pension Plan, Canada Pension Plan, Ontario Municipal Employees Retirement System and Caisse de dépôt et placement du Québec. AIMCo has also resisted calls to divest holdings in the oil and gas industry and other high-carbon sectors.
Indeed, it has studied making an investment in the Trans Mountain oil pipeline, which Ottawa is planning to divest, AIMCo chief executive officer Evan Siddall said last week.
It has responded by saying that maintaining ownership of such companies gives it sway to influence boards of directors to improve their environmental performance. As such, it is a member of the Climate Action 100+ and Climate Engagement Canada, groups of institutional investors that seek to persuade companies to bolster their climate-related disclosures and emissions reductions.
“If we green things that are already green, what’s the impact of that? But if you can reduce the emissions of a high-emitting asset by 1 per cent, the impact from an emissions standpoint is much higher,” Ms. Velasquez said. “So that’s been a lot of our drive, and part of it, too, is just the opportunity that’s in front of us.”
That includes investments in such fields as transport, agriculture and health, among others, she said.
AIMCo is supportive of portfolio companies setting plans to get to net-zero emissions, but has so far not taken that step itself. Mr. Siddall has said the larger need is to balance energy supply and emissions reductions, and he is unable to make that commitment without seeing a clear path to achieve it.
The organization is in charge of portfolios for several clients, all of which are at different stages of defining their own goals, Ms. Velasquez said.
“Part of our role is to advise them and to lead them on this topic, so for now that is where we are. But we are very much in service of decarbonization, and that is part of why we wanted to put this out today,” she said.
The Canadian Press also reports AIMCo sets up fund worth $1 billion to invest in energy transition opportunities:
The Alberta Investment Management Corp. has set up a new $1-billion fund dedicated to investing in the global energy transition and decarbonization sectors.
The investment manager says the money represents new capital and investments made through the fund will be in addition to its other climate-related investments across asset classes.
AIMCo chief investment officer Marlene Puffer says it has been strategically evaluating climate change risks and opportunities for the last decade and the organization has a strong track record of making investments in the energy transition space.
AIMCo says the new fund will look to offer exposure to a range of energy transition opportunities such as industrial decarbonization, carbon capture and sequestration.
Other areas could include renewable fuels, low-carbon renewable energy production and related technologies and electrification, storage and energy efficiency.
AIMCo invests on behalf of pension, endowment, insurance and government funds in Alberta and has more than $158 billion in assets under management.
Last week, AIMCo outlined its approach to climate investing and issued a press release going over its new $1 billion fund created to invest in energy transition opportunities:
The Alberta Investment Management Corporation (AIMCo) today outlined its approach to climate investing. It also introduced its Energy Transition Opportunities Pool (ETOP), which is a $1 billion fund dedicated to investing in the global energy transition and decarbonization sectors.
“AIMCo has been strategically evaluating climate change risks and opportunities for the last decade and the organization has a strong track record of making investments in the energy transition space,” said Marlene Puffer, Chief Investment Officer, AIMCo. “Our climate approach provides important transparency around how we consider climate in our investments and how we will, over the long run, help reduce emissions.”
AIMCo’s climate approach includes the introduction of a climate taxonomy that evaluates and classifies the energy transition readiness and carbon intensity of existing and new investments. This tool helps the investment teams analyze climate risk within client portfolios, as well as measure and improve total portfolio transition readiness.
Energy Transition Opportunities Pool (ETOP)
The initial $1 billion in AIMCo’s ETOP represents new capital. The investments made through ETOP will be in addition to AIMCo’s other climate-related investments across asset classes. Many of AIMCo’s clients have allocated funds to the new pool, which will offer them exposure to a variety of energy transition opportunities and themes, including:
Industrial decarbonization, carbon capture and sequestration
Sustainable solutions and renewable fuels
Low-carbon renewable energy production and related technologies
Electrification, storage and energy efficiency
“We are gratified by our clients’ commitment both to the new pool and to our shared objective of supporting and benefiting from energy transition and decarbonization opportunities,” said Ben Hawkins, Executive Managing Director, Head of Infrastructure & Renewable Resources.
For more information about the climate approach and the ETOP, please click here.
About AIMCo
AIMCo is one of Canada’s largest and most diversified institutional investment managers with more than CAN$158 billion of assets under management. AIMCo invests globally on behalf of pension, endowment, insurance, and government funds in the Province of Alberta. AIMCo manages approximately 30 pools of capital on behalf of these clients. With offices in Edmonton, Calgary, Toronto, London, Luxembourg, and Singapore our more than 200 investment professionals bring deep expertise in a range of sectors, geographies, and industries.
I would urge my readers to click here to learn more about AIMCo's climate approach and how the ETOP will function in practice.
It's important to note that AIMCo has been taking sustainable finance very seriously and the introduction of this new ETOP Fund just adds another dimension to its portfolio:
Moreover, AIMCo's climate taxonomy is rooted in three key principles:
And the climate approach in terms of transition assets is clearly defined:
And AIMCo already invests in decarbonization projects:
Now, in terms of the $1 billion energy transition fund, I note this:
In consultation with clients, AIMCo has established an Energy Transition Opportunities Pool (ETOP). With many clients allocating to the pool, more than $1 billion will be deployed to capitalize on the tailwinds of the global energy transition and decarbonization sectors. This approach is additive to the efforts we already make on climate investing across asset classes.
By investing in ETOP, clients can seize the early-mover advantage, allowing them to capitalize on growing transition opportunities at scale. Its strategy is to complement existing products and concentrate investments in opportunities that may not be able to be leveraged within existing asset class mandates, enhancing clients’ overall investment strategies.
Due to the far-reaching effects of the energy transition and evolving innovation, ETOP investments will offer clients exposure to a variety of energy transition opportunities and themes, including, but not limited to:
- Industrial decarbonization, carbon capture and sequestration
- Sustainable solutions and renewable fuels
- Low-carbon renewable energy production and related technologies
- Electrification, storage, and energy efficiency
Clearly AIMCo didn't set up ETOP for fun and scoring points with environmentalists, it sees opportunities in the energy transition space and wants its clients to invest in them to make returns over the long run.
As I've been stating many times, energy transition is fraught with risks and opportunities and it's up to AIMCo and other large Canadian pension funds to navigate this space judiciously to capture these opportunities and mitigate risks.
Ben Hawkings, Head of Infrastructure & Renewable Resources, and his team will be in charge of this new fund and I'm certain they are already preparing to make new investments as opportunities arise.
Carmen Velasquez, AIMCo’s Managing Director, Sustainable Investing (featured above), and her team have done a great job outlining AIMCo's climate strategy and I would recommend you read AIMCo's Stewardship Report and other reports here.
She clearly states where AIMCo can offer value in the energy transition space working alongside companies that are looking to lower their carbon footprint and add value:
“That’s a place where we think we can really help, and we’ve been doing that for a number of years,” Ms. Velasquez said. “For instance, when assets come into the portfolio and they’re at the beginning stages of their journey, we’ll work with them to actually help them develop their carbon footprint [plan].”
Alright, let me wrap it up there, feeling a bit tired today and need to eat and rest tonight.
Below, once again, Evan Siddall, CEO of the Alberta Investment Management Corporation (AIMCo), joins BNN Bloomberg to talk about the investing landscape for pension funds in Canada. He says Canada is currently attractive but needs more incentives to attract more Canadian national and foreign buyers.
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