Published on: January 18, 2024
Looking back, 2023 may go down as a pivotal year in sustainable investing. The undeniable impact of climate change was clearer than ever across multiple regions of the globe, awareness surrounding diversity continued to surge, and the International Sustainability Standards Board (ISSB) published its inaugural disclosure requirements. The year ended with a significant development as nations at COP28 issued a statement finally acknowledging the need to transition away from fossil fuels.
As we step into 2024 with this backdrop, the significance of our role at Addenda Capital has never been more apparent. Recognizing our distinct responsibility as stewards of capital, we understand the importance of serving our clients’ financial needs while considering environmental and social challenges.
To actively contribute to positive change, we proudly support various sustainable investing initiatives, frameworks, and statements. The following summary outlines a selection of commitments that underscore our dedication to advancing sustainable investing.
Principles for Responsible Investing (PRI)
Addenda became a signatory of the PRI, supported by the United Nations, in 2012. The PRI operates on two tenets: understanding the investment implications of environmental, social and governance (ESG) factors, and supporting its investor signatories in incorporating them into their investment and ownership decisions. Since the PRI’s launch, more than 5000 organizations around the world have become signatories.
In addition to illustrating our commitment, being a member means having access to implementation tools and capacity building offered by the PRI Secretariat, as well as access to annual benchmarking of implementation of sustainable investing activities. And as a member of PRI, Addenda is required to respond to a detailed survey of our commitment and actions which demonstrate our sustainable investing activities. Responses are assessed and benchmarked by the PRI, which gives us feedback on where we can improve our performance.
Net Zero Asset Managers initiative (NZAM)
We became a signatory to NZAM in 2021 as part of our approach to creating sustainable wealth while aiming to improve the prospects for future generations. While we already integrate ESG factors in our investment process when applicable, aligning assets with the goal of net-zero emissions serves a dual purpose, which is to seek enhanced returns while putting our clients’ capital to work toward a net-zero society.
Being a signatory conveys a commitment to aligning capital with the objective of reaching net-zero emissions by 2050, in line with efforts to limit global warming to 1.5 degree Celsius. It also comes with a set of undertakings, such as:
- working in partnership with asset owner clients on decarbonization goals (our 2030 target is a 50% carbon emissions reduction in the portfolios of clients that have agreed to align to net zero, from a 2019 baseline);
- setting a 2030 interim target for the proportion of assets to be managed in line with the attainment of net zero (this target has been set at 75%);
- providing asset owner clients with information and analytics on net zero investing, as well as on climate risk and opportunity.
International Sustainability Standards Board (ISSB)
Addenda Capital supports the ISSB in developing the new generation of standards for sustainability disclosures. Created as part of the International Financial Reporting Standards (IFRS) Foundation, the ISSB builds on existing frameworks, including those from the Task Force on Climate-Related Financial Disclosures (TCFD) and the Sustainability Accounting Standards Board (SASB). The ISSB issued its own standards in June 2023.
- TCFD: Created by the Financial Stability Board (FSB) in 2017 following a request by the G20 and central bank governors, this was an integral framework for firms to understand and disclose the risks and opportunities that climate change could pose to their business. The disclosures revolved around four pillars: governance, strategy, risk management, and metrics and targets. Addenda published three TCFD reports. Our latest can be found here.
- SASB: We endorsed the SASB standards in 2020. Available for 77 industries, the standards aim to direct companies on disclosing ESG issues that are likely to be financially material to investors. This provides investors with information to support decision-making and inform engagement with companies. Our teams specializing in Canadian equities, global equities and corporate bonds have adapted the SASB standards framework to meet their needs in terms of ESG analysis.
Responsible Investment Association (RIA)
The RIA, whose Board of Directors is chaired by our CEO, is committed to advocating for responsible investment across both retail and institutional markets in Canada. Its institutional members collectively oversee more than $40 trillion in assets. Beyond its educational role, the RIA strives to stimulate market growth and actively supports the advancement of policy and regulatory frameworks within Canada. The RIA coordinated the two following initiatives:
- Canadian Investor Statement on Diversity and Inclusion: Launched in 2020, this initiative highlighted a desire by institutional investors to eliminate inequalities in business and in society. Signatories committed to take steps to integrate diversity and inclusion into their investment processes and pledged to take concrete steps to strengthen diversity and inclusion practices within their own institutions.
- Canadian Investor Statement on Climate Change: Signatories that endorsed this initiative pledged to undertake specific actions supporting the transition to a net-zero economy. These commitments include integrating climate-related risks and opportunities into their investment processes, formulating a climate action plan, engaging companies on climate expectations, and producing relevant annual disclosures.
Climate Engagement Canada (CEC)
This initiative was launched to bolster engagement with Canadian companies on their climate commitments and disclosures. Its design is based on Climate Action 100+ and is similarly led by the financial sector. As at December 20, 2023, there were 41 participants collectively managing $5.2 trillion in assets. The participants have identified about 40 companies with whom they will engage regularly to encourage leading practices with respect to climate change. Our Sustainable Investing team co-leads or participates in eight corporate engagements, and our CEO, Roger Beauchemin, is on the advisory committee.
Nature Action 100
Addenda joined this international initiative in 2023 as part of a group seeking to mobilize companies and encourage them to adopt more ambitious targets to mitigate nature and biodiversity loss. Its participants engage with companies in sectors deemed systemically important to reversing nature and biodiversity loss by 2030.
The eight sectors included in the initiative are: biotechnology and pharmaceuticals; chemicals, such as agricultural chemicals; household and personal goods; consumer goods retail, including e-commerce and specialty retailers and distributors; food; food and beverage retail; forestry and packaging; and metals and mining.
Climate Bonds Initiative (CBI)
The CBI is responsible for setting international best practices in labelling for green bonds and debt instruments, thereby supporting the development of a worldwide market through increased investor confidence. Addenda has long been a supporter of initiatives related to the developments of such standards.
The CBI’s umbrella includes the Green Bond Principles (GBP), which highlight the importance of environmental impacts among market participants while contributing to the integrity of markets. By raising awareness of the importance of environmental impacts, the GBP aims to attract more capital to support sustainable development.
Ceres Investor Network on Climate Risk and Sustainability
This organization is a network of more than 220 institutional investors managing assets exceeding $46 trillion. It aims to advance sustainable practices and advocates for policy and regulatory solutions to address the transition to net zero. Ceres’ global collaborations include Climate Action 100+, The Investor Agenda, the Paris-Aligned Investment Initiative, and the Net Zero Asset Managers initiative, among others.
In 2022, Ceres launched the Valuing Water Finance Initiative, an effort to engage 72 companies showing with a high-water footprint to address water as a financial risk. Addenda joined in 2023.
New Economy Canada
Addenda joined New Economy Canada to support systemic policy changes needed for Canada to stay competitive as the global economy transitions towards net zero greenhouse gas emissions. This collaboration of 45 organizations across 10 sectors aims to provide governments with the message that there needs to be more and faster action in a number of important areas:
- Advancing economic reconciliation with Indigenous nations
- Increasing the supply of clean energy and related infrastructure
- Accelerating investment in skills training
- Supporting clean innovation to ensure competitiveness across industrial sectors
Electrifying Canada
This initiative of the Transition Accelerator focuses on widespread electrification that enables an affordable, resilient, and clean energy system for Canada’s economic development. Its participants, including Addenda, form a diverse coalition of industry, Indigenous groups, labour and civil society. Electrifying Canada provides expert analysis and research, convening for identifying challenges and developing solutions that are relevant regionally. Electrification across many sectors is critical for Canada to meet its net-zero commitments and will require significant investment from the private sector.
Conclusion
Addenda’s commitment to these initiatives reflects our determination to promote sustainable investing. We see them not only as means to help enhance long-term returns for our clients, but as valuable tools for driving change in society. Guided by these, we strive to align our activities with the interests of our clients, taking into account the broader impacts on people and the planet.