Sustainability Integration into the Investment Lifecycle

A Fireside Chat with CPP Investments

For many years, CPP Investments has been vocal about its belief that organizations able to effectively anticipate and manage sustainability-related risks to their business are more likely to create and maintain long-term value. As an investor, CPP Investments has clear expectations of how companies manage ESG-related risks and opportunities and a long track record of engaging with companies to convey these views.

With continuous improvement and transparency in mind, CPP Investments recently engaged TD Securities along with Deutsche Bank to canvass top ESG investors globally to understand their priority areas of focus, uncertainty, and concern when considering asset managers' approaches to ESG integration within the investment lifecycle.

Susan Thompson, Director on the ESG Solutions team at TD Securities sat down with Richard Manley, Chief Sustainability Officer, and Managing Director & Head of Sustainable Investing at CPP Investments for a conversation addressing the top questions raised by global investors.

Here are some key takeaways from that fireside chat. For the full discussion, follow the link at the bottom of the article.

Assessing emissions abatement capacity

In 2022, CPP Investments piloted an impressive emissions abatement capacity assessment framework to measure the capacity of organizations to remove or abate their greenhouse gas (GHG) emissions.

What they sought was a methodology to identify how much GHG emissions a company can reduce from its portfolio. The assessment identifies emissions reductions that are technically and economically feasible in order to determine proven abatement capacity. CPP Investments hopes companies will then report what they plan to phase down/out, what they plan to offset and where they are actively assessing new solutions that may become economic over time.

CPP Investments will publish a report ahead of COP28 outlining the results of 11 pilots of the assessment framework.

Expectations of fossil fuel companies

CPP Investments remains invested in fossil fuel companies so that it can enforce expectations and use its governance rights to influence companies failing to adequately address climate risks. Climate-related governance expectations of boards were published three years ago. The last three cycles of engagement have focused on the highest emitting assets within portfolios and those that CPP Investments has the greatest economic exposure to.

CPP Investments expects the oil and gas sector to present robust targets with respect to the reduction of fugitive methane release as well as commitments to net zero.

Long-term value through climate change mitigation

CPP Investments believes it has an obligation to work out how to protect long-term value by confronting climate change. A major consideration for the real economy and for financial market participants is that almost every government in the world has committed to pursuing comprehensive decarbonisation of its economy by the middle of this century.

That is the clearest forward-looking policy guidance that a fiduciary could be given; while the government may not have yet identified every single intervention it will pursue, we should be anticipating these interventions.