Mcgill's path to more responsible investing

We've heeded the calls and made key commitments, Maryse Bertrand says.

In our collective efforts to fight climate change and assure the sustainability of the world we live in, it's essential to focus on what really matters.

At Mcgill University, we've made some key commitments: attaining carbon-neutrality by 2040 in our operations; going zero-waste by 2035; and decarbonizing our endowment's investment portfolio as part of our socially responsible investing (SRI) strategy.

In our investments, we've taken a pragmatic, resultsbased approach. We prioritized the reduction of our holdings in big consumers of fossil fuels, such as steel and cement companies, and have only recently committed to divesting from direct investments in the Carbon Underground 200 (CU200) fossil-fuel companies.

It's a different path — one that doesn't grab the headlines — but our strategy allowed us to reduce the carbon footprint of Mcgill Investment Pool (MIP) equities by 49 per cent between 2019 and 2022.

In the university's journey toward more socially responsible investments, members of the Mcgill community campaigning for divestment challenged us to be more ambitious. We didn't always agree on the means, but their advocacy inspired us to push ourselves further to mitigate climate change.

We entered 2024 with a new eight-point plan that aims to build on our successes.

This year, we will begin divesting from our remaining direct holdings in the CU200, a process we expect to complete next year. Given that these holdings are now so small, it makes sense simply to divest.

As for our indirect holdings in CU200 companies, divestment there would be like using a sledgehammer to swat a fly. Those indirect investments are small but are scattered within larger pools of investment funds that are managed on behalf of perhaps 1,000 clients, many of whom don't share our priorities. Divesting from these holdings would entail selling about one-third of the entire MIP.

In our new plan, adopted by the university's board of governors in December, we also commit to sustaining, by 2029, a carbon footprint of our investments in listed equities and corporate bonds that is at least 33 per cent below emissions generated by companies in the university's listed equity and fixed income benchmarks.

Because the benchmarks are expected to decline over time as the broader economy decarbonizes, that commitment will push us to achieve even greater reductions in real terms.

It would be a mistake to focus exclusively on what we are not investing in, however. Our new SRI plan shines a spotlight on what we will increasingly be investing in: investments that advance the United Nations Sustainable Development Goals. These address not only climate change, but such goals as alleviating poverty and advancing sustainability. We'll be increasing the share of those investments in our portfolio from five to 10 per cent.

We will be broadening and deepening our approach to socially responsible investing in other ways, too. Our engagement activities as shareholders will increasingly encompass environmental, social and governance considerations, while continuing to address climate change.

As well, we're committed to improving Mcgill's United Nations Principles for Responsible Investment score, the first such commitment for a major Canadian university endowment.

Mcgill aims to be an institutional model of sustainability as we pursue an academic mission that includes creating and communicating the knowledge required for humans to live sustainably.

Is divestment from the CU200 important? Yes. It sends a largely symbolic message, but nonetheless an important one. However, for organizations looking to reduce the carbon footprint of their investments, it is only one tool in the tool kit. Divestment may get the headlines, but in the fight against climate change, we need to prioritize results.

Maryse Bertrand is chair of Mcgill University's board of governors. Co-authors are Cynthia Price Verreault, chair of the board's committee on sustainability and social responsibility, and Sophie Leblanc, the university's chief investment officer and treasurer.