Assessment of management firms | Your investments pollute as much as an SUV

Did you know that your investments contribute as much to global warming as an SUV? And that, therefore, your investment decisions have a major impact on our planet?

This question has been bothering me since my column of December 30, where I explained that it is the rich who warm the planet, and again, the rich who earn only $92,000 a year in Quebec. And that it is their investments, among others, that make the difference.

Why is that ? Because these investments on the stock market, in mutual funds or other, allow companies to produce, to create jobs, but also to pollute. Ultimately, the greenhouse gases (GHGs) emitted by these companies are attributed to the shareholders who are the investors. All of us.

So I went around to some investment firms to find out the carbon footprint of their funds, which I compared to the emissions of an SUV. The comparisons aren’t perfect, but they provide a good overview.

So how much GHG does a $100,000 portfolio emit each year, for example?

First, the benchmark: an SUV emits around 4 tonnes of GHGs per year when it travels 20,000 km. I’m talking about a Toyota RAV4 or a Nissan Rogue, for example. With a Mercedes SUV, we approach 5 tons. And for the largest Ford F-150 truck, it’s 7.1 tons.

And your investments? At the Fonds FTQ, for example, it’s between 3.9 and 4.4 tonnes per $100,000 invested, as much as an SUV. And again, the Fonds FTQ is at the forefront of environmental standards. The carbon footprint of its portfolios has also decreased by more than 25% between 2020 and 2021.

In comparison, companies in the Canadian S&P TSX index had a carbon footprint of 7.3 tonnes per $100,000 for the same period, which is as much as a Ford F-150, and therefore much more than the Fonds. FTQ (whose Quebec businesses are powered by hydroelectricity).

Desjardins, Caisse de depot…

I insisted with Desjardins Group, National Bank and Fiera Capital to have the carbon footprint of the funds offered to clients, but the first two organizations refused. They claim to be refining their methods and promise to deliver high quality indicators “over the next year”. We’ll see.

I was still able to have the carbon footprint of one of the Desjardins funds of the most popular family of environmentalists estimated, externally: SocieTerra. However, as of September 30, 2021, the SocieTerra Canadian Equity fund had a GHG level of approximately 4.1 tonnes per $100,000, according to our calculations, as much as an SUV.

Desjardins did not want to validate our estimate. The spokesperson, Chantal Corbeil, however, says that the SocieTerra American equity or diversity funds, for example, have a footprint half that of Canadian equities, according to the initial calculations of her organization.

“The geographical scope of the mandates of these funds has a significant influence on this indicator,” says spokesperson Chantal Corbeil.

The Caisse de depot et placement du Québec and the Ontario Teachers’ Pension Plan (Teachers) have been publishing their carbon footprint in their sustainable investing reports for two or three years.

As of December 31, 2020, Caisse was at 4.9 tonnes per $100,000 and Teachers was at 4.2 tonnes. These two funds manage teachers’ money for their retirement, among other things. The Caisse is also responsible for the retirement funds of Quebec government officials, among others.

This means that even middle-class people, like certain government employees who make $65,000 a year, must ask themselves about the carbon footprint of the funds they receive. The Caisse, it should be noted, has set itself the goal of reducing this footprint to 3.2 tonnes per $100,000 by 2030.

Terrible PSP

The worst of the lot, by far, is PSP Investments (Federal Public Service Retirement Fund). Its footprint as of March 31, 2021 was 10.1 tons per $100,000, the equivalent of two large SUVs!

PSP did not provide me with a coherent explanation to justify such a level of emissions. But on Tuesday, February 16, at the federal public accounts committee, PSP CEO Neil Cunningham answered a question from the Bloc Québécois on the environment.

“So we’re going to invest to help companies migrate to greener ways of doing things. We are not talking about oil only, but other industries where capital is needed to make this transition,” he said.

Fondaction CSN and Fiera stand out

Among the managers analyzed, some stand out clearly, such as Fondaction CSN.

Every $100,000 invested by Fondaction CSN produced 2.3 tonnes of GHGs during the year ended May 31, 2021. This is about half of the other funds mentioned, but also three times less than the index S&P/TSX 500 benchmark to which Fondaction compares (7.3 tonnes per $100,000).

Translated into “tank” language, Fondaction CSN is the equivalent of a Toyota Corolla for emissions (2.1 tonnes over 20,000 km).

“At Fondaction, our goal is to give meaning to money and to invest sustainably,” explains Vice-President, Social Engagement, Daniel Charron. His work is notably supported by the advisor Gabriel Brice, an expert in the GHG assessment of portfolios.

The other firm that stands out, surprisingly, is Fiera Capital. This manager has nothing to do with a public or union fund. The organization devotes all its resources to maximizing returns for its clients, in the purest tradition of capitalism.

However, Fiera appears to be the greenest of the firms compared, according to the data collected. As of December 31, 2021, its Canadian equity team had a portfolio of companies that produced the equivalent of 1.7 tonnes of GHGs per $100,000, well behind the comparable S&P TSX index for the same date (8 ,1 tons).

For global equities (StonePine), it’s even lower, at 0.6 tons, 7 times less than an SUV! Impressive, right?¹

His secret?

For many years, Fiera teams have been underweight oil stocks in their portfolios. Why ? Because they believe that these companies are dependent on the price of the commodity, and that they do not have good governance.

In short, the investment teams, whose strategy is to bet on quality securities, have naturally reduced their portfolios of oil companies, explains the head of responsible investment, Vincent Beaulieu.

Unfortunately, funds managed by Fiera are not readily available to individuals. Fiera primarily manages money from institutional funds (corporate pension plans) or wealthy clients. And these customers, it must be said, may have specific requests that increase the carbon footprint.

There is still a long way to go to properly measure the GHGs of companies and investment firms. What to do with certain tech companies like Apple, for example, which outsources the manufacture of its exclusive phones, with the associated GHGs?²

Still, investors can really make a difference and, through their choices, force mutual funds and companies to be greener so they don’t lose access to valuable capital. Your capital.

1. Note that Fiera uses data from the firm MSCI (ESG) to calculate the carbon footprints of its portfolios. This data leads to results about 10-15% lower, which, for example, would take Fiera Canadian Equity data from 1.7 tonnes per $100,000 to up to about 2.0 tonnes, possibly .

2. These questions are all the more urgent as Canadians invest massively in ESG funds without knowing to what extent the firms of the funds purchased are really concerned about environmental, social and governance (ESG) issues. At the end of March 2021, the value of Canadian sustainable funds stood at 18 billion, an increase of 160% year-on-year. The subject is a concern of the Canadian Securities Administrators (CSA), who fear “greenwashing”.