Canadian institutional investors embrace climate impact funds

Survey reveals 43% of Canadian institutions plan to launch funds for climate solutions in 2024

Canadian institutional investors embrace climate impact funds

In a survey conducted by the sustainability consultancy Millani, it was revealed that a significant portion of large Canadian institutional investors are gearing up to launch impact funds focused on climate-change solutions this year.

This move underscores a growing confidence in the financial viability of investments that address environmental challenges.

According to the findings, 43 percent of the 32 surveyed institutions, including prominent names such as AGF Management, Addenda Capital, AlphaFixe Capital, CIBC Asset Management, Jarislowsky Fraser Global Investment Management, and University Pension Plan Ontario, are planning to introduce impact products in 2024.

Milla Craig, CEO of Millani, expressed surprise at the high level of interest in such funds, noting the swift and substantial shift towards impact investment strategies. This shift is indicative of a broader trend within the ESG sector, where there is an increasing emphasis on generating not only financial returns but also tangible environmental and societal benefits.

Impact funds, known for their focus on areas like renewable energy, sustainable agriculture, and microfinance, are gaining traction among investors seeking to combine long-term profitability with positive outcomes.

The survey also highlights the success of industry giants like Brookfield Asset Management, which recently raised US$10bn for its Global Transition Fund aimed at facilitating the move towards a net-zero economy. This follows a period of skepticism towards ESG investments, fueled by high interest rates and criticism from certain political quarters, particularly in the United States.

However, challenges remain, particularly in terms of measurement and disclosure standards. Craig emphasizes the importance of accurate and transparent reporting to prevent greenwashing and ensure that investors are genuinely contributing to environmental sustainability.

The survey suggests a keen investor interest in climate change and biodiversity, aligning with broader trends identified by the Toronto-based Responsible Investment Association (RIA).

The RIA's CEO, Patricia Fletcher, pointed out that demand for impact investing, driven by climate concerns and the desire to combat greenwashing, is spurring growth in sustainable investing.

Moreover, most RIA members engaged in impact investing aim for returns at or above market rates, challenging the notion that such investments are inherently concessionary.

Despite the enthusiasm, there is some frustration among investors over the Canadian government's slow progress in establishing a green taxonomy. This delay is seen as a potential hindrance to Canada's competitive position in attracting capital.

Nonetheless, seven out of 10 respondents are actively investing in green technologies, demonstrating a commitment to environmental sustainability despite regulatory uncertainties.