On PSP Investments' 2024 Sustainability Report

Earlier today, PSP Investments released its 2024 Sustainability Report highlighting progress in advancing its sustainability capabilities and climate strategy: 

Highlights

• $64.9 billion invested in green assets, compared to $48.9 billion in fiscal 2023*.
• Reported Scope 1 and Scope 2 GHG emissions data for assets in-scope showed a significant increase, reaching 62%, compared to 54% in fiscal 2023.
• Expanded knowledge and research capabilities foster sustainability expertise and drive innovation.

Montréal, Canada, September 11, 2024 – The Public Sector Pension Investment Board (PSP Investments) today published its annual Sustainability Report, which outlines how the organization is building its sustainability capabilities to deliver the long-term returns to support its mandate. Accompanying reporting includes PSP Investments’ 2024 Climate-related Financial Disclosures Report and the 2024 Green Bond Impact Report.

“Our mandate spans decades and shapes how we invest. We focus on the long term and strive to carefully consider sustainability-related risks and opportunities that may affect long-term value creation, the resilience of our portfolio and contribute to generating returns for our contributors and beneficiaries,” said Deborah K. Orida, President and Chief Executive Officer at PSP Investments.

The 2024 Sustainability Report outlines PSP Investments’ progress in strengthening data, technology and analytics infrastructure, further embedding the hub-and-spoke model to integrate material sustainability factors into the investment process and advancing its climate strategy. The Climate-related Financial Disclosures Report highlights progress on climate metrics and targets as well as enhancements to the approach.

“The launch of our sustainability research platform was an important step in reinforcing our sustainability capabilities,” said Herman Bril, Managing Director and Head of Sustainability and Climate Innovation at PSP Investments. “It equips us with the knowledge required to navigate the complex and uncertain landscape of long-term investing and it helps ensure that we are well prepared to identify and capitalize on sustainability-related opportunities.”

PSP Investments’ 2024 Sustainability Report, 2024 Climate-related Financial Disclosures Report and 2024 Green Bond Impact Report are available for consultation online.

*Green assets are investments in low-carbon activities, identified in accordance with the methodology set out in PSP Investments’ Green Asset Taxonomy.

About PSP Investments

The Public Sector Pension Investment Board (PSP Investments) is one of Canada’s largest pension investors with $264.9 billion of net assets under management as of March 31, 2024. It manages a diversified global portfolio composed of investments in capital markets, private equity, real estate, infrastructure, natural resources, and credit investments. Established in 1999, PSP Investments manages and invests amounts transferred to it by the Government of Canada for the pension plans of the federal public service, the Canadian Forces, the Royal Canadian Mounted Police and the Reserve Force. Headquartered in Ottawa, PSP Investments has its principal business office in Montréal and offices in New York, London and Hong Kong. For more information, visit investpsp.com or follow us on LinkedIn.

Below, I will be covering PSP's 2024 Sustainability Report which is available here.

Let's begin with CEO Deb Orida's message:

I note the following:

Embedding material sustainability considerations in our investment decisions is important to ensuring our portfolio remains resilient over time. To this end, we provided in-depth sustainability training to investment professionals in all of our asset classes in fiscal 2024. We rolled out tools that automate analysis and surface insights so that material sustainability considerations can be integrated into our investment decision-making. We also expanded our knowledge and research capabilities to foster  sustainability expertise and drive innovation.

Next, a summary of the 2024 sustainability highlights:

I note the following:

Built a strong foundation of sustainability-related data to gain greater insight into the sustainability performance of our investments and enhance our strategic foresight

Next, let's see how PSP is evolving its approach to sustainability:

I note the following from Herman Bril, Managing Director and Head of Sustainability and Climate Innovation at PSP:

“Our increasing use of technology and data has been noteworthy in advancing our approach to  sustainability. With breakthroughs in generative AI (GenAI), we see even more potential to drive efficiencies and develop insights and solutions to issues that can affect the long-term performance of our portfolio and specific assets.

GenAI will enable us to better manage the expanding volume of data covering a variety of relevant information in the space, including transition plans, progress on key sustainability metrics and new industry developments. We expect to use GenAI tools to synthesize all that information to identify patterns, anticipate risks, optimize complex processes and generate new ideas – faster than ever before.”

I certainly hope GenAI tools they're incorporating does all this and more but speaking to leading software engineers in Silicon Valley (one in particular who's brilliant), I am more cautious in terms of what GenAI will actually achieve at PSP and all our large pension funds.

It doesn't mean they should be incorporating it into their decision-making process to help optimize sustainability over the long run, it just means they'll need to be more realistic in terms of what it will do for them.

Far more interesting to me is how PSP launched its sustainability research platform:

As Herman notes:

“Building capabilities in transversal sustainability research is important for PSP Investments because it equips us with the knowledge that helps us to navigate the complex and uncertain landscape of long-term investing. It is a proactive step towards improving resilience and creating value in a world marked by challenges and rapid changes. Launching the sustainability research platform supports alpha optimization and thought leadership on thematic research and ensures that we are well prepared to identify and capitalize on sustainability-related opportunities.”

Next, I note PSP advanced the implementation of its hub-and-spoke operating model, which is intended to help embed their sustainability practices across the organization:

 

Next, some information on advancing their climate capabilities and hitting their short-term targets: 

Lastly, their fiscal 2025 priorities:

Now, I would have liked to have had a quick chat with Herman Bril on this report but was told he cannot today and we will revisit that for another day.

I highly recommend you also read PSP's 2023 Sustainable Investment Report available here in conjunction with this latest report as it's a bit more comprehensive in scope.

Missing in the latest report was more detailed information on an asset class level to demonstrate how their sustainability approach works in practice.

I'll give the last word to PSP's outgoing CIO Eduard van Gelderen since he (along with Herman who he helped bring over to PSP) has helped shape PSP sustainable investment approach more than anyone (from the 2023 Report):

Alright, let me wrap it up there, hope everyone enjoyed the most beautiful day in Montreal in a while (we took our baby boy to the park earlier and he loved it).

Below, BCI Vice-President Rob Field offers an overview of their operations and Ethical-Social-Governance investing strategy.

This was done 10 months ago and I am embedding it here because it's worth watching and we don't see enough of these presentations on sustainable investing at Canada's Maple Eight. I encourage more funds to explain their ESG operations in detail like this.