Montreal

Climate change is an economic opportunity, Quebec pension fund manager says

Michael Sabia, chief executive of the Caisse de dépôt, says trillions of dollars should be shifted into investments that will counter global warming, in part because it's crucial to long-term profits.

'It's a profitable investment opportunity,' Michael Sabia, chief executive of the Caisse de dépôt

Michael Sabia, CEO of Caisse de Depot et Placement du Quebec, says climate change presents an economic opportunity. (Andrew Vaughan/Canadian Press)

One of Canada's largest pension fund managers says trillions of dollars should be shifted into investments that will counter global warming, in part because it's crucial to long-term profits.

Michael Sabia, chief executive of the Caisse de dépôt et placement du Québec, spoke Tuesday at a roundtable discussion on sustainable finance on the eve of a three-day meeting of G7 environment, oceans and energy ministers in Halifax.

The G7 ministers will be discussing climate change, plastics pollution, illegal fishing and clean energy at the meeting.

Sabia said government action is urgently needed, but he also urged capitalists to stop seeing climate change solely as a risk, and to "get on with'' seeking profits from the need for more renewable energy, low-energy real estate and low-carbon transport systems.

"Climate change and responding to climate change is an important investment opportunity. It's a profitable investment opportunity,'' said the executive.

The Caisse de dépôt et placement du Québec is behind a massive light-rail network being built in Montreal. (Caisse de dépôt et placement du Québec)

The pension fund manager told the gathering of business people, civil servants and non-governmental experts that about $45 trillion in long-term investments handled by institutional pension funds should move more quickly to areas such as clean-energy, low-energy buildings and low-carbon transport systems.

As Sabia began speaking, he reviewed the past summer's evidence of the impact of climate change.

"We see its impact every day. Heat waves and drought in Europe. This summer record temperatures of 33 degrees Celsius north of the Arctic circle," the executive said.

"Deadly hurricanes, floods, wildfires that were the largest in the history of the state of California." 

Some business leaders are starting to factor in climate change to their investment and planning decisions, but the pace needs to accelerate, he said.

"Some of that is happening across funds around the world. But my point is: not nearly enough,'' he told the gathering in his opening presentation.

"Why is that? Because too many investors, even long-term oriented investors, still see climate change as a constraint, as something that forces them to make a choice, to compromise their returns.''

'Not a constraint'

The executive with Canada's second largest pension fund manager — which handles $308 billion in net assets — said more investors must shift away from this way of thinking.

"Climate change is not a constraint. It's an opportunity to do two things: to contribute positively to the transition to a lower carbon economy and at the same time to generate the returns we need to be good stewards of people's savings.''

The Caisse announced last year it plans to reduce the carbon footprint of its overall portfolio by 25 per cent by the year 2025.

Sabia said it's working out well.

"There's growth everywhere as a result of the beginnings of a reaction to the threat of climate change. The energy sector is one example,'' said Sabia.

"At least 50,000 megawatts of new wind power is being installed annually. That's equivalent to the utility of Hydro Quebec.''

He cited his pension fund's investments in solar and wind energy, along with low-energy real estate projects, as producing strong returns, mentioning its investment in the fast-growing Azure Power, a solar producer in India.

Economist and climate expert Nicholas Stern, a teacher at the London School of Economics, also spoke at the opening panel, backing Sabia's argument that environmental policies are good for job creation and the economy.

"Finance ministers are interested in productivity, investment, innovation, growth and revenue. It's all here in the transition to the zero carbon economy,'' he said.

"There is no long-run growth that is high carbon [emissions]. It self-destructs.''

The economic researcher said the world's infrastructure is projected to double in 15 years while carbon emissions must fall 30 per cent to hold temperature increases to safe levels.

"Those two numbers tell us we must do something radically different, and we have to do it fast,'' he said.

Meanwhile, he said the alternative of preserving ecosystems, creating more public transit, and building solar energy, are all part of a positive story for the economy and for humanity, he said.

The meeting of G7 ministers starts on Wednesday with a gathering of G7 environment ministers.

Michael Sabia addressed a sustainable finance roundtable as the G7 environment, oceans and energy ministers meet in Halifax on Tuesday. (Andrew Vaughan/Canadian Press)

Catherine McKenna, Canada's federal minister of the environment, has said she will be talking about the rules around the Paris climate agreement.

She's also promoting a non-binding ocean plastics charter, which five of the seven G7 nation leaders signed at the Charlevoix summit with the goal of reducing plastic waste in the world's oceans.

McKenna told The Canadian Press in an interview that she plans to bring the charter to the United Nations next week as well during a trip to New York.

A spokeswoman for her department said the charter will be raised in talks with various nations outside of formal proceedings of the United Nations General Assembly.

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