McGill’s Board of Governors approves action plan to reduce carbon footprint of investments

April 23, 2020

Dear members of the McGill community,

Scientists have established beyond doubt that climate change poses a serious threat to life on earth. McGill’s Board of Governors, the University’s highest governing body, recognizes the severity of this global threat, and the urgency to help society move toward alternative energy sources.

On the recommendation of its Committee to Advise on Matters of Social Responsibility (CAMSR) – stemming from the report adopted in December of last year – the Board has approved at its April 23, 2020 meeting an ambitious action plan to reduce significantly the carbon footprint of its endowment investments. This series of actions and timelines is designed to accelerate the University’s responsible decarbonisation of the McGill Investment Pool (MIP), a collection of more than 60 investment mandates and fund investments.

As a result, the University will remove investments from highly carbon intensive companies, in particular those in the fossil fuel industry, cement and steel producers, and coal and gas-fired power plants. This aggressive approach will translate in a 33% reduction of carbon emissions of the University’s endowment listed equity portfolio, relative to the MIP public equities benchmark.

Considering the portfolio’s value as of September 30, 2019, the plan calls for a reduction of its carbon emissions by 38 tons of CO2 per million dollars invested annually, compared to the 18-ton reduction that would result from eliminating investments in the Carbon Underground 200™. This will curtail carbon emissions by more than twice what would be otherwise achieved by eliminating investments in the Carbon Underground 200™ alone. As a point of comparison, this effort represents the equivalent of over 300,000 round-trip flights between Montreal and Toronto, or almost four times the emissions generated by the McGill community’s air travel in a single year.

Moreover, the plan is also calling for a significant increase in the portfolio’s impact investments by committing over $75 million of the MIP to renewable energy, clean technologies, energy efficiency, green building, pollution prevention, sustainable water and other low-carbon funds. These actions and targets are the results of in-depth analysis and due diligence of potential options and scenarios.

As a steward of a higher education institution, the Board takes very seriously its fiduciary duty to ensure the sound governance and trusteeship of the University’s financial, property and human resource assets. At the same time, the Board acknowledges its equal duty to manage the MIP according to principles and practices that mitigate the negative impact of human activities on the environment. As per CAMSR’s recommendations, the University is committed to:

  • Reducing the carbon footprint of the MIP public equity portfolio by 33 per cent relative to the MIP public equities benchmark. This will lead to removing investments from highly carbon intensive companies, in particular those in the fossil fuel industry, cement and steel producers, and coal and gas-fired power plants. The majority of this sustained reduction is to be achieved in the first two years of implementation, with the balance completed by 2025.
  • Increasing its impact investing by committing over $75 million to low-carbon funds and funds that contribute to decarbonisation—representing 5% of the MIP’s current assets—by 2025. The University will focus on funds that incorporate sustainability principles into their value creation strategies—including real estate funds, infrastructure funds and listed impact equity funds that are highly exposed to decarbonisation—and companies that contribute to potential climate change solutions, such as renewable energy, clean technologies, energy efficiency, green building, pollution prevention, and sustainable water.
  • Proposing a target allocation for increasing the amounts invested in the fossil-fuel-free fund, and an appropriate mechanism for implementation, within the next two years. The fossil-fuel-free fund was established in 2017 with a $5-million commitment.
  • Continuing to increase the number of University fund managers who adhere to an environmental, social and corporate governance (ESG) policy and/or are signatories of the United Nations’ Principles for Responsible Investment (UNPRI). Currently, 93% of the University’s assets managed by investment managers meet this criterion, from just above 70% in 2016.
  • Proposing amendments to the Statement of Investment Policy (SIP), including modifying the Investment Objective section to consider ESG commitments.
  • Annually reporting on its socially responsible investment (SRI) activities and advances. Beginning in spring 2021, the Investment Committee will report to CAMSR and the Board on the percentage of assets managed by managers who are signatories of the UNPRI and/or have an ESG policy, the MIP carbon emission absolute and relative measures, the impact investment exposure, and other initiatives relevant to SRI activities related to the MIP.
  • Reviewing its SRI practices every five years. Beginning in spring 2025, the Board will determine the need for any adjustments or further SRI actions as may be advisable, in relation to the University’s endowment fund.
  • Furthering its leadership role in evaluating and promoting, in collaboration with its peer U15 universities, policies and best practices in the area of SRI.

 

We invite you to read CAMSR’s full report online.

McGill recognizes and embraces the unique responsibility of universities to support societies in their transition toward sustainability, by generating the knowledge needed to create a more sustainable future, as well as cultivating citizens and leaders who have the skills and commitment to put that knowledge into practice. Adopting a more carbon-conscious investment approach complements McGill’s far-reaching climate change and sustainability goals, including institution-wide efforts to achieve carbon neutrality across the University’s operations by 2040.

We would like to thank the members of CAMSR for their ongoing work in this most critical area, as well as the McGill community for its important role in helping the University deepen its commitment to sustainability in all its activities.

Sincerely,

Suzanne Fortier, Principal and Vice-Chancellor

Ram Panda, Chair, McGill Board of Governors

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