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Canada’s Bâtirente awards fossil-free global equity mandate to AGF following Montreal Carbon Pledge

December 21, 2015

Quebec-based investor awards high growth environmental portfolio

by Vibeka Mair | December 17th, 2015

Quebec-based Bâtirente, the C$977.2m (€648.4m) pension fund for members of labour unions, has awarded a C$7m mandate to Toronto-based asset manager AGF to run a fossil-free, sustainable global equity portfolio as part of its commitment to the PRI-led Montreal Carbon Pledge.

The Montreal Carbon Pledge was launched last year at the annual PRI in Person event in Montreal and it commits investors to measuring and disclosing the carbon footprint of their investment portfolio on an annual basis. So far, it has attracted over 120 signatories with US$10trn assets under management.

The latest signatories include the Church Pension Fund of Finland, Swedish buffer fund AP2, the University of Ottawa and French asset manager Amundi.

In a report released this month, Bâtirente says it measured the carbon footprint of its 13 equity portfolios with support from the South Pole Group, the carbon data specialist.

It found that the carbon intensity of all its corporate shares, directly or indirectly held, represent 32% less than a composite index. However, the carbon intensity of its Canadian equity portfolio is higher than the composite S&P/TSX 60 and S&P/TSX small cap index.

So Bâtirente has taken the step to recently award a fossil-free, sustainable global equity mandate to asset manager AGF.

Bâtirente describes it is a “high growth environmental portfolio with no participation in fossil fuels that will bring exposure to environmental solutions in the area of water management and waste water treatment, energy and electricity technologies, health and safety, healthy lifestyles, waste management and pollution control”.

The asset owner has also taken the step of engaging with its other portfolio managers on climate change risk, asking them to achieve a reduction in carbon risk exposure and start contributing to tackling carbon risk.

It has given its portfolio managers a list of suggestions to carry its request forward, including the introduction of a “low carbon” market index in parallel to the traditional benchmark; substitution of lower carbon intensity securities for higher carbon intensity securities if they meet investment criteria; and signing up to the Montreal Carbon Pledge and the PRI. Speaking to Responsible Investor, Daniel Simard, CEO of Bâtirente and a PRI board member, said there were various degrees of receptiveness from its portfolio managers. “It was a reality check for all,” he said. “The extent of open-mindedness was varying. But this is just a first step. It’s an ongoing discussion. Some were very positive and responsive.” Simard said Bâtirente would report over the next year on how the discussions were evolving.

On the availability of products for low-carbon portfolios, Simard said: “In our case we are considering a global approach of reallocating capital in the mid to long term. There will be a research process around the issue. And more tools to engage with in the portfolio would be useful.” Simard said the extent to which it will raise its current C$7m allocation to AGF would depend on how the portfolio behaves over the next period.

Martin Grosskopf, Vice President and Portfolio Manager, Sustainable Investing at AGF, said: “Bâtirente has obviously been involved in the PRI for quite some time. They are considered leaders in Canada on ESG factors. Now they are being more explicit in having a portfolio moving away from fossil fuel exposure into positive solutions.”

He added that there had been a spike in interest in low-carbon mandates over the last six months. “We are happy to see the increase in interest and hope it continues.”

Bâtirente is using the MSCI Global Equity benchmark for its new fossil free sustainable global equity portfolio. The money it taken off its three other global equity mandates and represents 6% of Bâtirente global equity fund’s assets.