Manulife Financial Corp. (MFC-T) grew its portfolio of green investments in its general account to $45.7 billion, the Toronto-based insurer and financial services company showed in its 2023 Sustainability Report.

A large proportion of those investments in 2023 were green or sustainable buildings at $19.9 billion, followed by renewable energy at $10.8 billion and sustainably managed timberland at $4.7 billion. Green assets made up 11 per cent of its $416.4-billion general account portfolio in 2023, compared to $45 billion in 2022 (11 per cent of the portfolio).

The company also began to exclude direct investments into the construction or expansion of thermal coal mines or unabated thermal coal power plants in 2023. Exposure to companies depending on thermal coal for revenue in North America and Europe would also be limited if they have no “credible decarbonization or abatement plans.”

“In pursuit of emissions reductions in our real estate, timberland and agriculture assets, we are focused on a suite of methods,” Sarah Chapman, Manulife’s global chief sustainability officer, told Sustainable Biz Canada in an email exchange.

“Our primary levers of decarbonization include efficiency, electrification and fuel switching, and renewables, as well as advancing natural climate solutions, while we continue to prioritize enhancing our data quality.”

How Manulife aims to cuts its operating emissions

Manulife reports emitting 140,202 tonnes of carbon dioxide equivalent (tCO2e) of Scope 1 emissions and 108,380 tCO2e of location-based Scope 2 emissions in 2023.

Its absolute Scope 1 and 2 greenhouse gas emissions were down 8.7 per cent since 2023 from its 2019 baseline, with a 40 per cent reduction goal by 2035.

The emissions intensity — measured in kilograms of carbon dioxide per square foot of real estate — from Manulife’s investment management side fell to 2.1 in 2023, from 2.3 in 2022 and 3.1 in 2021.

These reductions were achieved through:

• replacing equipment such as HVAC systems or lighting, with low-carbon solutions;
• prioritizing energy efficiency; and
• sustainable management of timberland and agriculture assets.

The $19.9 billion invested for green buildings includes spending and commercial mortgages backed by certifications such as LEED, BOMA BEST and Energy Star, Chapman said.

Manulife’s Toronto office, for example, has a BOMA BEST Silver certification. The 980 Howe building in Vancouver and 900 de Maisonneuve in Montreal hold Zero Carbon certifications from the Canada Green Building Council.

Over 90 per cent of its global properties — spanning over 81.1 million square feet of office, industrial, retail and multifamily assets — had one or more third-party sustainability certifications in 2023, Chapman said.

As of the end of 2023, 55 per cent of its real estate greenhouse gas emissions are covered by a decarbonization plan, making up 42 per cent of its real estate assets under management.

Farmland and timberland decarbonization efforts

As the owner of over 399,000 acres of farmland valued at $5.8 billion, and 5.4 million acres of timberland worth $15.8 billion, Manulife took steps to certify these natural assets that absorb carbon, and explore innovations to further reduce climate impacts.

All of its Canadian farmland investments joined the Leading Harvest Standard pilot program. Additionally, 100 per cent of its forest assets are certified by the Sustainable Forestry Initiative or Forest Stewardship Council.

To reduce greenhouse gas emissions from timberland, Manulife participated in a pair of projects:

• in New Zealand, a green hydrogen-powered truck was tested to remove emissions from shipping; and
• permanently trapping carbon in soils through added biochar is an innovation the company expressed interest in through tests in the Pacific Northwest.

Aiming for a net-zero portfolio

For Manulife’s investments and supply chain, the target is reaching net-zero for its general account by 2050. As of 2023, the company says its Scope 3 emissions stood at 520,681 tCO2e, with 42 per cent of its portfolio aligned with the Science Based Targets initiative’s methodology.

Other climate targets are a 72 per cent reduction in per-kilowatt-hour emissions intensity from project financing activities by 2035, and shifting the pathway for its listed debt and equity portfolio from 2.9 C in 2019 to 2.5 C by 2027 based on the issuer's total value chain activities.

Its reduction in per kilowatt-hour emissions intensity is in progress as of 2023, and its listed debt and equity portfolio’s target is 2.6 C.

Investment policies include:

• further green investments within its general account;
• growing its transition-related equity investments for high-emitting sectors, which grew to $690 million in 2023;
• obtaining more climate-related data on high-emitting sectors and setting decarbonization targets;
• restricting thermal coal investments; and
• training analysts and portfolio managers on climate-related issues.

Manulife has invested in hydrogen production, solar manufacturing, energy storage and carbon capture technologies as part of its sustainable investments, alongside greener buildings, renewable energy and sustainably managed timberland.

Exposure to carbon-related assets in its general account was approximately $68 billion, 16 per cent of the portfolio. Manulife had been identified for investing billions into coal, oil and gas in 2022 by Investors for Paris Compliance, which analyzes the climate strategies of public companies.

Chapman noted Manulife’s rules against direct thermal coal investment, and said the company believes “divestment as an immediate strategy is not the most effective approach to reducing emissions in the real economy.”

She argues there is no evidence divestment encourages better practices, and may turn companies away from commitments. But holding a stake gives Manulife the right to raise its environmental concerns.

Where Manulife plans to improve

Crucial challenges for Manulife to overcome are data quality and reliability, Chapman said, which affect its investment decisions and forecasting emissions trajectories.

To address this, Manulife will enhance its climate-risk framework, further expand climate risk metrics and update its climate risk appetite in 2024, the report states. Chapman also noted its membership in the Sustainable Finance Action Council and ESG Data Convergence Initiative to refine its decarbonization data.

According to its supplementary Climate Action Implementation Plan, from 2024 to 2025 Manulife plans to cover:

• 80 per cent of its real estate emissions with a decarbonization plan; and
• 50 per cent of high consumption real estate assets with retro-commissioning.

It also aims to:

• trial low-emissions shipping for its forestry assets;
• fuel switch 15 per cent of its natural gas emissions in its capex plan; and
• have over two megawatts of on-site renewable generation in its capex spending.

Chapman emphasized the role of government in the net-zero transition.

“We are actively engaged in conversation with national governments and regulators as they seek feedback on climate-related policies and regulation,” she said.

“Given the capital requirements of insurers, we are broadly supportive of modernizing capital requirements in line with the low-carbon economy, however the core role of maintaining financial stability and regulatory independence from policymaking should not be put at risk.”