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PSP Investments refines ESG data, issues $1B green bond

PSP Investments is centring its ESG strategy around improving its data collection, green bonds and reducing the greenhouse gas intensity of its portfolio.

Public Sector Pension Investment Board (PSP Investments), a Crown corporation pension investment manager, released its 2022 Responsible Investment report to unveil its focus on recognizing green assets, improving access to ESG data and adopting a new business model.

PSP Investments has $230.5 billion of assets under management with almost a million contributors and benefactors. Its notable clients consist of the federal Public Service, the Canadian Forces, the Royal Canadian Mounted Police and the Reserve Force.

This is PSP Investments’ sixth responsible investment report.

PSP Investments’ climate goals

In 2021, PSP Investments released a climate strategy that included a 2050 net-zero goal for global operations, a 30 per cent target for the absolute reduction of Scope 1 and 2 emissions, and a commitment to a 50 per cent increase in electricity sourced from renewable energy by 2030.

The pension manager plans to reduce the greenhouse gas (GHG) emissions intensity of its portfolio by 20 to 25 per cent by 2026 compared to a 2021 baseline.

PSP Investments does not name a third-party verifier for its GHG emissions.

As part of its strategy, it developed a "Green Asset Taxonomy" to measure an “investment’s potential to contribute to the low-carbon transition based on its carbon intensity and the credibility of its transition plan.” PSP Investments also launched a Green Bond Framework and issued a $1 billion green bond to fund climate and environmental projects.

It is committed to increasing its investment in green assets to $70 billion by 2026 from $40.3 billion in 2021, and increasing its investment in transition assets from $5.1 billion to $7.5 billion by 2026.

The company intends to have assets representing 50 per cent of its carbon footprint to have science-based transition plans by 2026. For carbon-intensive assets with no transition plan, PSP Investments seeks to shrink its holdings by 50 per cent, from $7.8 billion in 2021 to $3.9 billion by 2026.

PSP Investments monitors the ESG maturity and robustness of its real estate partners’ ESG approach with its proprietary, GRESB-aligned ESG assessment framework for real estate.

Gathering its ESG data

To better understand its placement on ESG and climate matters in its portfolio and investments, PSP Investments developed several tools which it says increased transparency.

It used a tool called the Corporate Governance Dashboard to manage proxy voting data and developed a technology-enabled ESG due diligence and engagement workflow for its capital markets group.

PSP Investments reviewed its ESG assessment framework for external managers and general partners to align with "evolving best practices" and to integrate climate change and diversity, equity and inclusion considerations both at the firm level and within investment activities.

Additionally, it developed the ESG composite score to “quantitatively assess and monitor a company’s performance on key ESG considerations,” increased its total fund climate-related data collection efforts and doubled self-reported GHG data available from its portfolio companies.

The company scaled up its approach to managing and monitoring performance of key ESG considerations by introducing total fund ESG key performance indicators in the areas of climate change, diversity and inclusion, business ethics, cybersecurity and data privacy, and human capital management.

Read the full report here.

Algonquin Power

Algonquin Power (AQN-T), an Oakville-based renewable energy and regulated utilities company, announced it met its greenhouse gas reduction goal and is making steady progress toward renewable energy generation in its 2022 ESG report.

The company reports a US$9.7 billion market cap on the NYSE with 3,400 employees. It has completed or is building a total of 4 GW of renewable power.

“Our vision of an inclusive net-zero journey entails not only curbing emissions, but also striving towards creating meaningful work, promoting diversity and inclusion, uplifting communities, building strong relationships with local stakeholders, and including community members in our decision-making processes,” said Arun Banskota, president and CEO of Algonquin Power, in the report.

This is Algonquin Power’s fourth ESG report.

Algonquin’s emissions reductions in 2021

Last year, Algonquin Power says it emitted 2,278,149 tonnes of carbon dioxide equivalent (tCO2e) of Scope 1 emissions across global operations. It also claims to have emitted 83,209 tCO2e of Scope 2 emissions across its global operations.

The company did not provide specific Scope 3 emissions figures, but said its Scope 3 emissions account for 68.7 per cent of its total emissions. Thus, the company emitted approximately 5,182,916 tCO2e of Scope 3 emissions.

In 2021, Algonquin Power says it managed to reduce its Scope 1 and 2 emissions by 38.3 per cent from a 2017 baseline. It surpassed its goal of reducing its GHG emissions by 1 million tonnes from 2017, having slashed 1,468,002 tCO2e.

Algonquin Power measures its GHG emissions according to the Greenhouse Gas Protocol. It engages with an unnamed third-party to perform a limited assurance review of its Scope 1 and 2 GHG emissions inventory.

How Algonquin plans to reach net-zero

Algonquin Power’s long-term goal entails achieving net-zero across its Scope 1 and 2 emissions by 2050.

The company embarked on its ‘Greening the Fleet’ initiative. It covers:

  • The acquisition and construction of three new wind generation facilities, comprising 600 MW of wind energy;
  • Decreasing its annual GHG emissions by over 900,000 metric tons of CO2e and the fleet’s water dependence by 240 million litres as a result of retiring its Asbury coal-fired facility in 2020;
  • and reducing its annual Scope 1 and 2 emissions by approximately 35 per cent and 41 per cent in its Midwest operations and its California electric operations, respectively, relative to 2017 levels.

The firm grew renewables in its portfolio from 53 per cent to 65 per cent. Algonquin Power has set a target of 75 per cent renewable generation by the end of 2023.

Algonquin Power acquired a renewable natural gas development platform of four projects in 2021. Using waste from dairy farms, it will capture methane and convert it into renewable natural gas.

Meeting its DEI and governance commitments

Across its diversity, equity and inclusiveness (DEI) promises, Algonquin Power says it exceeded its target of having women in 30 per cent of its senior leadership roles – currently at 40 per cent. It also developed a ‘talent acquisition playbook’ to reduce hiring bias, a DEI calendar for cultural and gender awareness and employee resource groups.

For its leadership, Algonquin Power mandated 'Workplace Civility Classroom Training' and educated over 250 senior leaders on unconscious bias.

To better embed ESG into its corporate fabric, Algonquin Power aims to facilitate stakeholder engagement on sustainability topics and support groups integrating ESG principles into their work, collecting sustainability data and reporting ESG disclosures.

For transparency with ESG, Algonquin Power released its ESG Data Hub. The company says it is a nexus for stakeholders to view data Algonquin Power will share related to sustainability and ESG.

Read the full report here.

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