Montreal Carbon Pledge

Information presented in this profile is for reference only. The Climate Action in Financial Institutions Initiative does not guarantee as to the exhaustiveness of this information and invites you to contact the Secretariat (contact@mainstreamingclimate.org) if you wish to propose any modifications.

By including this profile, the Initiative, its Supporting Institutions and the Secretariat do not endorse the activities described below nor the guidance and information provided in this profile.

Last updated: July 2018

Website: montrealpledge.org/

Contact: montrealcarbonpledge@unpri.org

Summary: The Montreal Carbon Pledge was launched in 2014 “to attract commitment from portfolios totalling US$3 trillion in time for the United Nations Climate Change Conference (COP 21)”[1]. As of the COP21, over 120 signatories representing US$ 10 trillion of assets under management, had committed to “measure and publicly disclose the carbon footprint of their investment portfolios on an annual basis”[2].

What are the objectives of the initiative?

Signatories of the pledge recognize that “institutional investors […] have a duty to act in the best long-term interests of our beneficiaries. In this fiduciary role, we believe that there are long-term investment risks associated with greenhouse gas emissions, climate change and carbon regulation. In order to better understand, quantify and manage the carbon and climate change related impacts, risks and opportunities in our investments, it is integral to measure our carbon footprint. Therefore, we commit, as a first step, to measure and disclose the carbon footprint of our investments annually with the aim of using this information to develop an engagement strategy and/or identify and set carbon footprint reduction targets.”[3]

“The Montréal Carbon Pledge allows investors (asset owners and investment managers) to formalize their commitment to the goals of the Portfolio Decarbonization Coalition, which mobilises investors to measure, disclose and reduce their portfolio carbon footprints.”[4]

Who launched it? Who is participating?

“The Pledge was launched on 25 September 2014 at PRI in Person in Montréal, and is supported by the Principles for Responsible Investment (PRI) and the United Nations Environment Programme Finance Initiative (UNEP FI).

Overseen by the PRI, it has attracted commitment from over 120 investors with over US$10 trillion in assets under management, as of the United Nations Climate Change Conference (COP21) in December 2015 in Paris. Support for the Montréal Carbon Pledge comes from investors across Europe, the USA, Canada, Australia, Japan, Singapore and South Africa.”[5]

Why has this been put into place?

The initial goal of the Montréal Carbon Pledge was “to attract commitment from portfolios totaling US$3 trillion in time for the United Nations Climate Change Conference (COP 21) in December 2015 in Paris.” Since COP21, an independent review of the Montreal Carbon Pledge and investor implementation was completed and the Montréal Carbon Pledge remains open for investors to join to enable more investors to take action on climate change.

What are the main work streams/areas of work?

Signatories are asked to disclose “annually thereafter on [their] website, annual report, sustainability reports, responsible investment report or other publicly visible client/beneficiary reporting channel. [They] must also tell the PRI the proportion of [their] assets under management that have been measured. The PRI does not prescribe how a carbon footprint should be undertaken, including whether [they] do this in-house, through an external provider, or which provider you use. [The PRI] do recommend though that [they] are transparent about [their] methodology and [the PRI] provide practical guidance on the Pledge website.”[6]

Alignment with TCFD recommendations:

“In June 2017, the FSB Task Force on Climate-related Financial Disclosures (TCFD) published its final recommendations. The PRI encourages all investors to implement the TCFD’s disclosure guidance for asset owners and asset managers, with Montreal Carbon Pledge signatories well-positioned for this. In January 2018, the PRI will align its Reporting Framework for all PRI signatories with the TCFD’s guidance.”[7]

What are outcomes of the initiative linked with the 5 Principles?

In 2016, the Montreal Carbon Pledge conducted an independent review of the Montreal Carbon Pledge and investor implementation one year on after COP 21 and identified the following findings:

source: www.unpri.org/download?ac=1873

Have intermediate or final reports / guidance been issued?

The Pledge provides guidance (including UNEP FI’s 2013 Investor Briefing ) on the measurement of a portfolio’s carbon footprint, among others, outlining the “Five steps to measure your portfolio’s carbon footprint”: 1) Build support; 2) Choose how much and how often; 3) Decide who will undertake the measurement; 4) Review findings; 5) Communicate transparently. Furthermore, the pledge indicates on its website several services providers for an external review of a portfolio’s carbon footprint.

Calendar and milestones

Associated Supporting institutions of the Climate Action in Financial Institutions Initiative having signed the Montréal Carbon Pledge (“investors commit to measure and publicly disclose the carbon footprint of their investment portfolios on an annual basis”):

[1] montrealpledge.org/how-to/faq/

[2] montrealpledge.org/how-to/faq/

[3] montrealpledge.org/sign-the-pledge/

[4] montrealpledge.org/

[5] montrealpledge.org/

[6] montrealpledge.org/wp-content/uploads/2018/04/MontrealPledge_A4-Flyer-2017.pdf

[7] http://montrealpledge.org/

Links with the 5 Voluntary Principles for Mainstreaming Climate Action

This section aims to support discussions on the implementation of the 5 voluntary Principles for Mainstreaming Climate Action. Information provided in this section is for reference only; the Climate Action in Financial Institutions Initiative, its Supporting Institutions and the Secretariat do not endorse the activities nor the guidance and information provided in this section.

The five steps to measure your portfolio’s carbon footprint provide the following recommendations:

“Analysing the data: Be aware of any normalisation undertaken prior to the carbon footprint being measured, and of any factors that were specific to your portfolio (e.g. sector selection, stock selection, underweights, overweights, exclusions). Also be aware of where a lack of company data has caused providers to use estimates.

Depending on the method used, you will be able to see factors such as your portfolio’s carbon intensity compared to a benchmark, or the highest emitting company or sector within the portfolio.

A carbon footprint gives a quantitative view of emissions at a particular point in time; portfolio managers may want to consider additional qualitative factors, such as regulatory risks/opportunities and a company’s climate strategy.

Discuss internally: Consider your portfolio’s contribution to climate change and your climate change strategy. Consider expanding carbon footprints to measure all of your portfolios, or consider developing a plan to do this within a timeframe.

Discuss externally: If you are an asset owner, discuss with your investment manager how to factor climate change into financial analysis, active ownership and investment decisions. Discuss with companies their emissions, disclosure and climate strategy, either directly or through your portfolio manager. If you are an investment manager, discuss with your clients the findings and next steps.”

The five steps to measure your portfolio’s carbon footprint provide the following recommendations:

“We recommend publicly disclosing your carbon footprint annually, on your website and/or within regular reports to clients or beneficiaries. Stakeholders may also want to know your view of the findings, how you will address heavy emitters and how you will develop your overall approach to climate change.

Be clear on what has been measured, name any providers used and give a summary or links to the methodology. Add narrative text to provide context. If you have year-on-year data, explain progress and setbacks. Describe any initiatives you’re planning. You may want to include any other environmentally-themed investments you have made.

Offer stakeholders the opportunity to give feedback.