CDPQ's Mr. Batani said in an email that the C$10 billion "transition envelop" will be accounted for separately, as it's not representative of the total portfolio, for which CDPQ is targeting a 60% reduction in carbon intensity by 2030 from the base year of 2017. At the end of 2020, CDPQ had already succeeded in slashing its portfolio's carbon intensity by 38%, he noted.
Engagement, meanwhile, remains the bridge to ensuring that progress in portfolio-level carbon reductions translates to lower greenhouse gas emissions, analysts say.
The "main way we think we'll achieve that reduction in real world emissions is through engagement and our stewardship," using Fidelity's influence as a large institutional investor to promote a decarbonization pathway for companies in its portfolios, Mr. Tan said.
Stewardship activities, built around voting policies, escalation policies and engagement programs, are the real key to driving change in the economy, agreed Karen Wong, San Francisco-based global head of ESG and sustainable investing with State Street Global Advisors.
And the momentum now behind the growing consensus globally on the need to address the climate crisis is making engagement increasingly effective, noted BNP Paribas' Mr. Milon.
"Look at the trend we are seeing compared to one or two years ago," he said.
"Now we are at $130 trillion … committed to transitioning to net-zero" and the banks, asset managers and other financial companies making those commitments will increasingly look to work with companies that are on the same journey, Mr. Milon said. Companies that have yet to get on the net-zero bandwagon will likely find their access to financing, investment and underwriting becoming more and more constrained, he said.
Meanwhile, analysts contend that the engagement process can be a wellspring of financial returns for institutional investors as the global economy transitions to a net-zero world.
"A strong stewardship program can help unlock the economic value" of that transition and while green companies may dominate the news now, investors shouldn't lose sight of the significant potential gains to be had from transitioning a carbon-intensive business to cleaner energy sources, SSGA's Ms. Wong said.
CDPQ is a really interesting story to pick up on now because "the low-hanging fruit is just to sell carbon intensity," with the risk of failing to distinguish between high carbon emitters capable of transitioning to a net-zero world and laggards without that capacity — which will lead to capital being misallocated, said Mr. Reznick of Federated Hermes.
CDPQ's Mr. Cabanes predicted his fund's C$10 billion gambit should prove rewarding.
"Fundamentally, at the end of the day, we're also there to produce returns (and) I think it's going to be a great investment proposition, partially because a lot of people are exiting it and therefore returns are going up so … I think it's a great sort of convergence of objectives, he said.