This report shows public data only. Is this your organisation? If so, login here to view your full report.

British Columbia Investment Management Corporation

PRI reporting framework 2019

Export Public Responses
Pdf-img

You are in Strategy and Governance » ESG issues in asset allocation

ESG issues in asset allocation

SG 13. ESG issues in strategic asset allocation

13.1. Indicate whether the organisation undertakes scenario analysis and/or modelling and provide a description of the scenario analysis (by asset class, sector, strategic asset allocation, etc.).

Describe BCI analyzed three climate change scenarios and the resulting impact on the long-term expected returns at a total fund level and by asset class. We also used the climate change scenarios as an input into the asset liability modelling conducted on clients' portfolios.

13.2. Indicate if your organisation considers ESG issues in strategic asset allocation and/or allocation of assets between sectors or geographic markets.

We do the following

13.3. Additional information. [OPTIONAL]

We work within the framework of applicable legislation as well as the legal contracts negotiated with our clients. BCI is required to act in the best financial interests of our clients at all times.


SG 13 CC.

13.4 CC. Describe how the organisation is using scenario analysis to manage climate-related risks and opportunities, including how the analysis has been interpreted, the results and any future plans.

Describe

BCI assesses potential expected returns under multiple climate scenarios using a model based on Mercer’s Climate Change Risk Assessment Research Package.

Outside of the three-degree global warming scenario where impacts were not expected to be material on an aggregate total fund level, we evaluate our clients’ potential long-term return impacts under both a:

  • Two-degree global warming scenario, where the transition to a lower carbon economy occurs faster than expected and creates elevated levels of transition risk for certain assets, while resulting in less risk of the physical impacts brought on by climate change;
  • Four-degree global warming scenario, where climate action policies, technological advancements, and sentiment are largely insufficient, resulting in less transition risk but experiencing significant increases in physical impacts on certain assets.

Using client long-term strategic asset allocation targets, we found that the two- and four-degree climate scenarios would create an expected drag of 0.14 per cent and 0.16 per cent in average annual returns respectively over the 15-year forecast horizon, relative to the base case scenario.

Beneath the total fund aggregate impacts, asset class performance varies significantly depending on which scenario unfolds. In the four-degree scenario, real assets are more likely to suffer from the rising risk of physical impacts. In contrast, in a two-degree scenario, the performance of developed market public equities is expected to be impacted as companies exposed to traditional energy assets, such as oil, would likely experience valuation adjustment.

Describe

BCI is currently using climate change scenario analysis to identify macro-economic climate-related risks and opportunities that could impact our clients’ investment returns. The scenarios provide a directional indication of areas in the portfolios that require more detailed assessment.

Each asset class currently identifies material climate change risks on a deal-by-deal basis. We are developing processes to assess climate change materiality and performance in a consistent way across the firm.

Describe

Climate change has been a top engagement priority for BCI for over ten years. We engage with company management, regulators, and standard-setting bodies via four main activities:

  1. Proxy Voting, in which we have supported about 70 per cent of all climate-related shareholder proposals and recently introduced a policy to vote against appropriate board directors at companies that fail to disclose adequate climate-related data.
  2. Direct Engagement, in which we focus on achieving better climate change disclosure from invested companies.
  3. Collaborative Engagement, in which we work with our peers globally to improve practices related to hydraulic fracturing and methane, as well as asking companies to take action to reduce greenhouse gas emissions.
  4. Policy Advocacy, in which we advocate for policy changes that will improve the investing environment for long-term investors, including at least 13 climate- related policy submissions with provincial, federal, and international policymakers between 2007–2017.

13.5 CC. Indicate who uses this analysis.

13.6 CC. Indicate whether the organisation has evaluated the impacts of climate-related risk, beyond the investment time-horizon, on the organisations investment strategy.

Describe

Climate change scenarios were evaluated beyond the investment time horizon out to the modelling horizon of 2050. Longer term impacts related to climate change risk are a focus of additional physical climate change risk assessment that this currently underway.

13.7 CC. Indicate whether a range of climate scenarios is used.

Indicate the climate scenarios the organisation uses.
Provider
Scenario used
IEA
IEA
IEA
IEA
IEA
IRENA
Greenpeace
Institute for Sustainable Development
Bloomberg
IPCC
IPCC
IPCC
IPCC
Other

Other (1) please specify:

          Mercer Climate Change Scenario Tool
        
Other
Other

SG 14. Long term investment risks and opportunity

14.1. Some investment risks and opportunities arise as a result of long term trends. Indicate which of the following are considered.

14.2. Indicate which of the following activities you have undertaken to respond to climate change risk and opportunity

14.3. Indicate which of the following tools the organisation uses to manage climate-related risks and opportunities.

14.5. Additional information [Optional]


SG 14 CC.

14.6 CC. Please provide further details on these key metric(s) used to assess climate related risks and opportunities.

Metric Type
Coverage
Purpose
Metric Unit
Metric Methodology
Portfolio carbon footprint
          Portfolio monitoring
        
          Portfolio Carbon Footprint
        
          Financed emissions
        

14.8 CC. Indicate whether climate-related risks are integrated into overall risk management and explain the risks management processes for identifying, assessing, and managing climate-related risks.

Please describe

BCI is currently using climate change scenario analysis to identify macro-economic climate-related risks and opportunities that could impact our clients’ investment returns. The scenarios provide a directional indication of areas in the portfolios that require more detailed assessment.

Each asset class currently identifies material climate change risks on a deal-by-deal basis. We are developing processes to assess climate change materiality and performance in a consistent way across the firm.

Additionally, we are developing processes to effectively measure and determine material climate change risks and opportunities across the total portfolio. These tools will build on insights generated by carbon footprint metrics by introducing further fundamental research and analysis; as well as developing evaluations of the resiliency of specific assets to climate-related risks in the long term. The tools are intended to help us understand specific investments in our portfolio that may be at risk or will benefit in the context of climate change.

14.9 CC. Indicate whether the organisation undertakes active ownership activities to encourage TCFD adoption.

Please describe

Through direct engagement in 2018, BCI continued to reference the TCFD recommendations which puts focus on achieving better climate change disclosure from invested companies.

 

 


SG 15. Allocation of assets to environmental and social themed areas

15.1. Indicate if your organisation allocates assets to, or manages, funds based on specific environmental and social themed areas.

15.2. Indicate the percentage of your total AUM invested in environmental and social themed areas.

11.24 %

15.3. Specify which thematic area(s) you invest in, indicate the percentage of your AUM in the particular asset class and provide a brief description.

Area

Asset class invested

20.6 % of AUM

Brief description and measures of investment

BCI’s Thematic Public Equity Fund, launched in 2013, includes investments in companies involved in alternative energy and providing energy efficiency solutions.

Asset class invested

65.0 % of AUM

Brief description and measures of investment

Approximately 90 per cent of our Canadian real estate portfolio is BOMA BESt and / or LEED certified -- 65 per cent including international investments.  

Asset class invested

22.6 % of AUM

Brief description and measures of investment

BCI's Thematic Public Equity Fund, launched in 2013, includes investments in health care facilities and services.

Asset class invested

5.5 % of AUM

Brief description and measures of investment

BCI is invested in regulated water and wastewater utilities that operate in the U.S., U.K., and Canada.

15.4. Please attach any supporting information you wish to include. [OPTIONAL]



Top