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Alberta Investment Management Corporation

PRI reporting framework 2020

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ESG issues in asset allocation

SG 13. ESG issues in strategic asset allocation

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

Describe AIMCo conducts a long-term capital markets forecast annually for use by our clients in joint asset liability discussions and their internal actuarial discussions.

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

          We work with our clients to develop appropriate investment portfolios that consider their unique risk and return parameters and specific obligations to their beneficiaries.
        

13.3. Additional information. [OPTIONAL]

Each of AIMCo’s clients operates within unique parameters and specific obligations. Our clients are responsible for establishing their respective investment policies and return targets. AIMCo works with them to develop appropriate investment portfolios that consider the risk and return characteristics so they can meet those targets.

AIMCo’s long-term capital markets forecast starts with a macroeconomic forecast of the global economy over the next 10 years. ESG factors relating to demographic trends, capital flows to ESG products/investments, technological developments and changes to the regulatory environment may inform some of our underlying risk-return assumptions across various markets and asset classes, amongst other considerations.

AIMCo's TCFD Working Group is tasked with identifying climate-related risks, opportunities and financial impacts, addressing carbon footprint methodologies and informing AIMCo's approach to the TCFD recommendations.


SG 13 CC.


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.

other description (1)

          Global Corporate Governance Developments
        

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

other description

          AIMCo is responsive to climate change risk and opportunity, as evidenced by the growth in our alternative energy and renewable resources investments.
        

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

14.4. If you selected disclosure on emissions risks, list any specific climate related disclosure tools or frameworks that you used.

The Financial Stability Board's Taskforce on Climate-related Financial Disclosures (TCFD) framework. CDP Climate Change Questionnaire. 2 Degrees Investing Initiative (2Dii) PACTA tool.

14.5. Additional information [Optional]


SG 14 CC.

14.6 CC. Provide further details on the key metric(s) used to assess climate-related risks and opportunities.

Metric Type
Coverage
Purpose
Metric Unit
Metric Methodology
Climate-related targets
          Target opportunities for eco-efficiency upgrades and retrofits and capital provisions to third-party property managers.
        
          Energy intensity; water use intensity; waste diversion
        
          Energy: ekWh/sq. ft.; Water: L/sq. ft.; Waste: % diversion
        
Weighted average carbon intensity
          To identify key drivers to portfolio emissions
        
          tonnes of CO2e per $M revenue
        
          Sum of Holding MV divided by Portfolio MV and multiplied by Issuer's Emissions divided by Issuer's $M Revenue
        
Carbon footprint (scope 1 and 2)
          To identify key drivers to portfolio emissions
        
          tonnes of CO2e
        
          Issuer's total Scope 1 & 2 emissions
        
Portfolio carbon footprint
          To identify key drivers to portfolio emissions
        
          tonnes of CO2e per $M invested
        
          Sum of Holding MV divided by Issuer's Market Capitalization multiplied by Issuer's total Scope 1 & 2 emissions then all divided by the MV of entire portfolio
        
Total carbon emissions
          To identify key drivers to portfolio emissions
        
          tonnes of CO2e
        
          Sum of Holding MV divided by Issuer's Market Capitalization multiplied by Issuer's total Scope 1 & 2 emissions
        
Carbon intensity
          To identify key drivers to portfolio emissions
        
          tonnes of CO2e per $M revenue
        
          Sum of Holding MV divided by Portfolio MV and multiplied by Issuer's Emissions divided by Issuer's $M Revenue
        

14.7 CC. Describe in further detail the key targets.

Target type
Baseline year
Target year
Description
Attachments
          2014
        
          2021
        
          Energy performance of domestic office, retail and mixed-use real estate assets
        

          2014
        
          2021
        
          Water performance of domestic office, retail and mixed-use real estate assets
        

          2014
        
          2021
        
          Waste performance of domestic office, retail and mixed-use real estate assets
        

          
        
          
        
          
        

          
        
          
        
          
        

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

Please describe

AIMCo has recently implemented FactSet as a new risk platform which integrates ESG, financial and risk data, and has assigned product risk managers to each asset class. The Responsible Investment group, in collaboration with the TCFD Working Group will use the risk platform to inform climate-related risk analysis and to identify plausible approaches to climate change scenario analysis. Scenario analysis is highly complex, relying on varying inputs for discrete factors such as the probability of natural catastrophic weather events, chronic weather pattern changes, changes in consumer demand, technological advances and regulatory responses, all with varying sensitivities across the portfolio, across geographies and across time. We found the 2 Degrees Investing Initiative (2Dii) PACTA tool useful as a starting point. It demonstrates whether a portfolio’s sector allocation and distribution are aligned with a range of global warming scenarios, including a 2-degree warming scenario. However, the PACTA tool's limitations are that it is specific to public equities and focuses only on the most carbon intensive sectors relative to its own proprietary benchmark. Given our highly diversified investment strategy and increasing exposure to renewables beyond public equities, it will be important to focus on total fund positioning rather than on relative fund exposure to carbon-intensive sectors in public equities alone.

14.9 CC. Indicate whether your organisation, and/or external investment manager or service providers acting on your behalf, undertake active ownership activities to encourage TCFD adoption.

Please describe

The investor community is still in the early stages of addressing climate change risks and opportunities, given significant data limitations and the forward-looking nature of climate-related risk assessments. We believe that companies exhibiting better disclosure of their climate change mitigation strategies, emissions performance, and related material environmental metrics are likely to demonstrate better risk-adjusted performance over the long run.

Considering the current climate-related disclosure landscape, we are committed to the following active management strategies in alignment with our commitments as a PRI signatory:

  1. To exercise shareholder voice by voting to promote climate-related disclosure
  2. To engage with investee companies and promote climate-related disclosure
  3. To advocate with policymakers, regulators and stock exchanges to encourage climate-related disclosure guidance
  4. To take an active role in collaborative research regarding appropriate management of key elements such as carbon, plastics, methane and water, and promote best practices and benchmark firms’ performance on these metrics over time

For public issuers, we identify firms that do not disclose carbon emissions and proceed to engage with a select group of them to promote climate resilience strategies and related disclosure. We assess public equities external managers regarding whether their active ownership practices encourage climate-related disclosure, as featured in their proxy voting guidelines and engagements with companies.

For illiquid investments, we factor climate-related risks into our due diligence processes which includes consideration of the asset or fund’s overall climate resiliency and its management of material environmental risks.


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


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