Institutional investors face several challenges in proving the value of sustainable investments, said Arijit Banik, treasurer at York University, during a session at the Canadian Investment Review’s 2024 Endowment & Foundation Investment Forum in June.
It’s difficult to measure the impact of an investment, even the cleanest ones, with the current measurement framework available to institutional investors. He cited an infrastructure fund in which York University is a limited partner. While the fund’s scores for Scope 1 and 2 carbon emissions are extremely low, its score for Scope 3 emissions remains high.
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The U.S. Environmental Protection Agency defines Scope 3 emissions as the result of activities from assets not owned or controlled by the reporting organization, but that are a part of the organization’s value chain.
“There is no such thing as ‘fossil-free.’ When you look at the supply chains, when you look at suppliers and everything that goes in, we are still a very, very long way away. We do have to reframe the conversation [because] we can go a long way in reducing our Scope 1 or 2 emissions [but for] Scope 3 emissions, it’s still a pipe dream at this time.”
In his role, Banik has met with activists demanding that the university withdraw financial support from sectors they oppose, such as oil. “I said, ‘We’re trusting the manager on this one.’ I intimated that these things are about providing investment opportunities so that we can provide the returns for the future.”
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For York University, one of the keys to achieving its sustainability goals is to align with the right investment partners. Although there are some renewable energy assets that remain out of reach for the organization, such as wind, solar or geothermal, the university is interested in alternatives like carbon captures and storage as well as increased opportunities in electrification and nuclear services.
Despite his criticisms on the lack of methods available to institutional investors that are seeking to measure sustainability, Banik said the investment organization has made serious efforts to decrease the total carbon emissions in its portfolio, which has dropped by more than 80 per cent since 2016.
“As asset allocators, what we’re betting on is the ingenuity of humanity and some would say the kind of eco-modernism where you will find solutions and we will shift capital to those solutions.”
Read more coverage of the 2024 Endowment & Foundation Investment Forum.