Investing green, in a socially responsible way and in companies whose governance is irreproachable not only pays off, but it is also what will allow the leaders of the Caisse de dépôt et placement du Québec (CDPQ) to look at their descendants with the feeling of duty accomplished.
The CEO of the CDPQ, Charles Emond, gave Tuesday a real lesson in sustainable portfolio management to some 500 guests gathered at the invitation of the Council for International Relations of Montreal (CORIM) to discuss the global economy.
“There are those who speak and there are those who act. The reality is that we decided to be on the side of those who acted. We, in 30 years, we want to be able to look in the mirror when the new generation will say to us: “Where were you, what were you doing when you could make a difference? Were you just on the edge of the sidelines hoping you would do as little as possible or were you trying to do something that would change things?” »
Charles Emond does not hide the fact that the international expansion of the Caisse de depot, of which three quarters of the 400 billion dollars in assets are invested abroad, is largely based on its reputation. The CDPQ was also named fund of the year out of more than 400 pension funds worldwide by Global SWF, and number one worldwide in sustainable investment by the World Benchmark Alliance.
The false debate of ESG criteria
He also deplores the incomprehension — and even the hostility — caused by the question of ESG (environmental, social and governance) criteria in certain circles: “There is a polarization in relation to the concept of ESG. It is a bit overused, manipulated. There are no more shades. In the United States, there is about a little more than a third of the American states that have some kind of law, some anti-ESG legislation with regard to investment by public funds,” he says. .
The result is that there are militant groups “who want to put everything in there, use it to push their agenda, and, on the other side, there are those who don’t want to touch it with a pole 12 feet”.
However, this is a false debate for an institution like the CDPQ, which must instead link these criteria “to our fiduciary mandate, that is to say to obtain optimal returns for our clients and also to sustainable economic development in Quebec”.
He argues that companies that pay attention to these criteria have been shown to have higher returns or manage their risks better. He points out that the environmental side puts off investors, who fear high costs and low returns — which he says is wrong — but who often forget the social side, which means that a company that does not care safety of its product or not paying its fair share of tax will see its reputation severely damaged in 2023. In addition, poor governance will also lead to an erosion of trust over time.
“People like binary things. One company is ESG, the other is not ESG, and there is nothing in between,” he says, adding that nothing could be further from the truth.
“What we are trying to bring is an element of transformation,” he explains, pointing out that the Caisse de dépôt has a $10 billion transition fund. It is this money that allows him, for example, to buy a company in India that runs on coal at a low price, then to finance its transition to increase its value exponentially. “There is a way of doing what is good for the planet, good for society, at the same time as what is good for our customers and good for businesses. Is it demanding? Yes, it’s demanding, but it can be done, and we prove that it can be done, ”he explained.
Following Charles Emond’s speech, presented in the form of an interview led by CGI Vice-President Julie Godin, former Prime Minister Pierre-Marc Johnson welcomed the remarks, calling them of a “master class” for the audience who came to hear it.