Watch Groups

IMCO's Grand Designs on Battery Storage?

Pension Pulse -

Richard Lowe of IPE Real Assets reports on IMCO, the Canadian investor with grand designs on battery storage: 

Tim Formuziewich tells Richard Lowe why IMCO is vying to become a major global player in the energy-transition technology

The rise of renewables in institutional allocations over the past decade has been clear to see, luring investors with the dual potential of income returns and positive contributions to ESG and net-zero objectives.

But such has been the demand for renewables assets that the market has become incredibly competitive and aggressively priced.

Today, to really play a significant part in the global ‘energy transition’ – the concept that is focusing the minds of most infrastructure investors today – institutions need to look beyond wind and solar farms.

This is a theme that the Investment Management Corporation of Ontario (IMCO) quickly recognised. IMCO was only established in 2016 and began managing investments on behalf of a growing list of Ontario institutions a year later, but it has built up a C$6bn (€4.2bn) infrastructure portfolio and last year entered an “exclusive partnership” with energy experts from Valence Energy Capital Corporation, led by principals Matthew Mendes and Trevor Wills.

That partnership ultimately led to IMCO’s recent investment in Green Frog Power, a UK-based flexible energy-generation company and the first firm to be fully taken over by IMCO. Mendes and Wills have been installed as chief executive and chief operating officer, respectively, of Green Frog Power.

“When we started this journey with Matt and Trevor, we were obviously looking at a whole bunch of different things, and we ended up zooming in on batteries,” says Tim Formuziewich, who joined in 2019 to lead IMCO’s infrastructure investments. At a time when the market for traditional renewables assets was being dominated by investors with the lowest cost of capital, IMCO was looking for a way to invest in energy transition “where cost of capital wasn’t necessarily the determining factor and where we could continue investing in for the next 30 years”.

Although wind and solar are making up a growing proportion of the world’s energy mix, they suffer from intermittency. Technologies like batteries can help address that shortcoming by storing energy when supply is high and delivering energy when it is low. 

Formuziewich, who was previously a senior Principal at Canada Pension Plan Investment Board and a managing director at Brookfield Asset Management, says: “We quickly zeroed in on which technologies would be most successful in the short, medium or long term to help manage persistent intermittency [and] that offered electricity-market solutions when the wind isn’t blowing or the sun isn’t shining, effectively – and found batteries quite intriguing.” While batteries still represent “early-stage” technology, in some markets – notably, the UK – they are “already economic”, he says. 

And IMCO is doing more than just investing in an established operator. When it announced the takeover of Green Frog Power in August, IMCO said it would invest £500m (€585m) in the company over several years to transform it into a utility-scale battery specialist, moving it away from diesel-powered machines. It would also use the UK company as the starting point to build a global platform.

The business owned 13 short-term-operating-reserve (STOR) stations, nine of which IMCO acquired with the intention of converting to battery technology. “The plan is to unplug those diesel assets, and plug in batteries and begin operating those batteries on a longer-term basis,” Formuziewich says, adding: “It is a true energy-transition business for two reasons. One, you’re unplugging diesel assets and plugging in batteries. But the second reason is batteries enable further renewable penetration – as energy markets grow, you need about one gigawatt of batteries for four gigawatts of renewables.”

Formuziewich remembers early conversations about Green Frog Power with Mendes and Wills, that went along the lines of, if “we get this transaction done, we’re going to end up seeing every battery opportunity in the world, because people are going to say here’s a business that has capital available to execute on battery transactions”.

He adds: “And that’s absolutely the case. So  we’re seeing stuff coming in all around the world. And it is our intention to utilise this business to grow beyond the UK. There’s a lot to do in the UK right now – we do need to transition the existing assets, we do have a fairly substantial development pipeline – but, certainly, the objective will be to look into other markets in the future.”

IMCO is starting in the UK for the simple reason that it is one of the more mature markets for battery storage. “When we looked around the world for opportunities to invest in the energy transition, the practical reality is that the UK… is a world leader in their progressive views of the energy transition, from a policy perspective,” Formuziewich says, citing government ambitions for the country’s electricity to be entirely sourced from clean sources by 2035.

“You are starting to see that now in terms of their renewable penetration… of their electricity market being at 25%, 30%. That, alongside a couple other markets, Texas and California being two of them, is right at the front end of the energy transition. And, as a result, the opportunities available to support the energy transition, in terms of things like utility-scale batteries, are actually available in that market today and there are progressive regulatory frameworks and market incentives to make batteries economic in the UK.

But there are other markets that are right behind it,” he adds. “And we think that other markets will look to the UK and say, well, how did you incentivise… the deployment of batteries in your market? And we’ll see that get redeployed in other markets. And there will be markets that choose different incentives, of course. At the end of the day, we’re looking to deploy capital on a good risk-adjusted-return basis, so we’re certainly open to different types of revenue streams. But that’s effectively why we started in the UK.”

IMCO had to do some work upfront to structure the investment in Green Frog Power to make it work for the institutional investor. “We needed to come up with an innovative structure to make it an infrastructure business,” he says. This was needed to change it from something more akin to a “private equity-type transaction”.

As part of the transaction, the vendor – the wider Green Frog group – is committed to delivering future battery developments, while IMCO is also free to expand the business in other ways. “In nine months we’re going to start having battery assets actually operating. And then we’re also going to be bringing into the business this development pipeline from the vendors, in addition to being able to go out and do other stuff,” Formuziewich says.

“This business effectively enables us to establish what we hope to become a global utility-scale, battery-storage platform. So we’re actively seeking new, innovative ways to participate in the global energy transition, while driving compelling returns for clients.”

Hydrogen is another technology that has been attracting attention from infrastructure investors and has the potential to be used for energy storage. “Hydrogen is also something that’s definitely on our radar. We’ve looked at a number of hydrogen opportunities; we think the potential for hydrogen is substantial,” Formuziewich says. “It has the potential to have a significant impact of greening the electricity grid… but there’s also a significant application for hydrogen outside of electricity markets and the gas markets.”

One option in the future could be to expand into hydrogen through the Green Frog Power platform. “That’s something we would look at either in this business or outside of it. But that’s not the focus of the business today.”

For the moment, Formuziewich has two overarching aims in building IMCO’s infrastructure programme. “One, future proof the portfolio by deploying active asset management of the existing assets that we have, and getting the businesses on Paris-aligned business plans,” he says. “The second thing is, we’re trying to build… the infrastructure portfolio of the future, today. So, one of the reasons we like batteries is because we’re at the early stage of what we think is going to be a very significant growth profile in the battery market.”

The investment in Green Frog Power is part of IMCO’s wide infrastructure investment programme, for which it has about C$12bn allocated from its clients – the largest of which include the Ontario Investment Board and the Workplace Safety & Insurance Board – and about C$6bn invested.

“We’re trying to get fully invested over the course of five years,” Formuziewich says. “We’re trying to do so responsibly, obviously. We’re trying to do so cost effectively.

The big challenge for IMCO – and all major institutional investors – is how to “deploy capital going forward” while being “truly an ESG investor” and “delivering strong risk-adjusted returns”, Formuziewich says. “We’ve been able to identify batteries today as a really exciting opportunity that we’re going to be able to deploy capital into for years [and] we think is going to continue to offer strong, risk-adjusted returns.”

This is a great interview with Tim Formuziewich, Managing Director of Infrastructure at IMCO.

Tim is obviously a very smart guy, I wanted to talk to him about this interview and gain some more insights. 

Unfortunately, it didn't pan out today but I did get to speak to an infrastructure expert who explained to me that solar and wind farms are fully valued, if not overvalued, and it makes sense to look at battery storage to tackle the intermittency issues with solar and wind energy. 

Interestingly, I told this person that OTPP's CEO, Jo Taylor, was the first to point out to me that returns in solar and wind farms have come down considerably over the last five years from low double digits to mid single digits.

"Sounds about right, they are underwriting these assets for a 7% return using very optimistic assumptions of the merchant curve."

I asked him what he means by "merchant curve":

Let's say you buy a solar or wind farm and the life of the asset is 30 years. The first 15 years is the contract period where the price is regulated and known and the next 15 years is the merchant period where you don't know what price you'll be getting, you need to make assumptions on the merchant curve. And some of these assumptions are wildly optimistic.

So, I asked him if there is uncertainty with these assets after the first 15 years, don't the smart investors sell before the contract period is over?

"Yes, they do, typically they wait till there is 7 years left on the contract period to sell and get a reasonable valuation for the asset."

I also asked him what about other risks of these assets?

He told me the main one is technological innovation. "It doesn't impact power generation or subsidy prices during the contract period but technology is evolving fast, new wind and solar farms are far more efficient because the technology is much better."

And that brings me to IMCO's Green Frog power deal which I covered here.  

I told this person: "They seem to be betting big on this company and battery storage, aren't there risks there too?"

He told me: "It makes far more sense to go into battery storage than wind and solar farms now" but he admitted competition is high and there are risks with storage too.

"Again, you'll have a contract period and a merchant period where you need to make assumptions on what prices you can get on storage in the future."

Still, he emphasized with valuations on wind and solar farms being at nosebleed levels, you really need to look at all deals from a risk-adjusted perspective. "That's true for infrastructure, real estate and private equity right now."

If you notice in the interview above, Tim Formuziewich says they invested $6 billion and are going to deploy the remaining $6 billion over the next 5 years but he's very cautious and states this at the end:

The big challenge for IMCO – and all major institutional investors – is how to “deploy capital going forward” while being “truly an ESG investor” and “delivering strong risk-adjusted returns”, Formuziewich says. “We’ve been able to identify batteries today as a really exciting opportunity that we’re going to be able to deploy capital into for years [and] we think is going to continue to offer strong, risk-adjusted returns.” 

In other words, batteries are attractive here from a risk-adjusted perspective.

I also agree with him, there's a ton of capital chasing the same deals, you really need to stay focused and be able to walk away if the deal is too rich. You also need to reflect on long-term trends and invest in other areas which will support the ongoing energy transition. 

Anyway, I didn't get a chance to speak to Tim Formuziewich but this was an excellent interview and I thank the infrastructure expert I did get to speak to as he clarified a lot for me.

I also hope IMCO scales this activity globally and grows Green Frog Power far beyond the UK.

Below, with renewable energy production on the up, the need for dependable energy storage solutions has never been greater. Recently, new technologies have driven that storage to new levels of efficiency but the future of renewable energy depends on whether or not they take off.

Also, over the past decade, prices for solar panels and wind farms have reached all-time lows. However, the price for lithium ion batteries, the leading energy storage technology, has remained too high. So researchers are exploring other alternatives, including flow batteries, thermal batteries, and gravity-based systems.

OTPP's Jonathan Hausman on the Newly Established GIS Team

Pension Pulse -

Last week, Ontario Teachers' Pension Plan put out a press release stating it established a Global Investment Strategy to be led by industry veteran Jonathan Hausman:

Ontario Teachers' Pension Plan Board (Ontario Teachers') today announced the creation of the Global Investment Strategy Department, which will be led by Jonathan Hausman, who has been promoted to Senior Managing Director, Global Investment Strategy, effective immediately.

Global Investment Strategy will enhance Ontario Teachers' global competitive advantage by developing and building conviction on strategic responses to emerging global themes that traverse asset classes and regions, working closely with the investment team to support innovation, and continuing to develop and leverage differentiated strategic relationships. 

"Having an informed and integrated view of strategic trends has always been core to our approach to delivering superior returns and impact over the long term.  The Global Investment Strategy team will deepen our capacity to identify and tackle multifaceted themes as we grow our investments around the world," said Ziad Hindo, Chief Investment Officer, Ontario Teachers'. "We look forward to Jonathan and his team continuing to identify and help the Investments Division execute on key themes to drive performance for the long-term benefit of the Fund and our members."

Mr. Hausman joined Ontario Teachers' in 2004. He has held senior roles in Capital Markets, and, since 2017, has been Managing Director, Global Strategic Relationships. Prior to joining Ontario Teachers', Mr. Hausman was an Executive Director at Goldman Sachs. He holds a BA (Hons.) from McGill University, an MSc. (Econ.) from the London School of Economics, and an MPA from the School of International and Public Affairs at Columbia University. He also has an ICD.D certification from the Institute of Corporate Directors.  He is a Senior Fellow and Lecturer at the University of Toronto's Munk School of Global Affairs and Public Policy, Chair of the Canadian Council for the Americas, and a member of the Advisory Board of Capitalize for Kids.  

About Ontario Teachers'

Ontario Teachers' Pension Plan Board (Ontario Teachers') is the administrator of Canada's largest single-profession pension plan, with C$227.7 billion in net assets (all figures at June 30, 2021 unless noted). It holds a diverse global portfolio of assets, approximately 80% of which is managed in-house, and has earned an annual total-fund net return of 9.6% since the plan's founding in 1990. Ontario Teachers' is an independent organization headquartered in Toronto. Its Asia-Pacific region offices are located in Hong Kong and Singapore, and its Europe, Middle East & Africa region office is in London. The defined-benefit plan, which is fully funded as at January 1, 2021, invests and administers the pensions of the province of Ontario's 331,000 active and retired teachers. For more information, visit otpp.com.

Late this afternoon, I had a chance to talk to Jonathan Hausman, Senior Managing Director, Global Investment Strategy.

Let me begin by thanking him for taking some time to talk to me and also congratulate him for being promoted to this important position.

I also want to thank Dan Madge, Director, External Communications for setting up this call.

Before we got into, Jonathan told me he was in Montreal over the weekend visiting his daughter and we reminisced a bit of our McGill days.

Jonathan completed the Honours program in Political Science before going over to LSE.

I told him that I took so many electives in political theory with Charles Taylor, James Tully, Sam Noumoff and John Shingler.

He told me he took a lot of economics courses as electives. 

We both got into LSE, he wisely chose to go and I stayed back at McGill because they paid me to T.A. while I completed my Masters.

What else? We talked about Montreal's great restaurants and he told me he always goes to Beauty's, Gibby's and Moishes which unfortunately closed after 83 years (a victim of the pandemic). 

Great restaurants but nothing beats the Milos lunch special in Montreal. Jonathan agreed and he was pleased to learn they are planning on opening a Milos in Toronto very soon (it will boom there once they finally open it).

I also told him the next time he's visiting his daughter at McGill, take her to Sho-Dan on Metcalfe near de Maisonneuve and enjoy the best sushi in the city. [Tip for Jonathan: order Gyoza and Haru Maki as entrees but some of the best specials aren't even on the menu, like Anais, Phoenix, Ichiban rolls and Kiss rolls (specify rolls)].

Yummy! I'm getting hungry just thinking about it.

Anyway, back to my chat with Jonathan. I really enjoyed our conversation because we got into it and he explained the genesis of this newly created Global Investment Strategy team.

As he explained it: "The world is a lot more complex and much more competitive. We need to think long-term and adapt to a world that is changing very rapidly. To maintain our competitiveness, we need a long-term view to adapt to the changing environment, always focusing on the commercial opportunities of these changes." 

He went on: "In the summer of 2020, we analyzed what the post-COVID world will look like, looking ten years ahead. We looked at a range of possible trends and then looked at how we can stay focused and whether we have the strategic capacity to capitalize on these trends to generate the long-term required returns we need to generate for our members and sustain the plan over generations."

He told me a key aspect of this new team is to leverage off existing relationships with banks, GPs, portfolio companies and internal teams to "really get the best ideas" from all external and internal sources.

He gave me the example of Henry Kravis of KKR who came up with metrics to analyze elements that don't show up in financial models like geopolitical risks, climate risks, ESG, etc. (Kravis always worries about downside risks).

I asked Jonathan if this new team is like the Global Thematic team at CPP Investments and he told me: "not exactly, we are looking for content and commercial application and are supporting our internal investment teams."

I asked him where does Olivia Steedman's TIP (Teachers' Innovation Platform) team figure into this?

Interestingly, he told me before they established GIS (Global Investment Strategy), he, Olivia, Stephen McLennan (Head of Total Fund Management) worked analyzing asset classes, geographies and how disruptive technologies impact real estate, infrastructure, equities and more. And out of this research came Teachers' Innovation Platform which Olivia heads up.

He was very clear that Stephen's TFM team handles all asset mix decisions, Olivia focuses on investing in disruptive technologies and that they are more focused on geographic presence and building on Teachers' presence in local markets by working with regional senior managing directors and by building the right partnerships.

All three teams report to Ziad Hindo, the CIO, and they are basically an extension of the CIO office. 

I pressed Jonathan on how exactly they leverage all this information from banks, GPs, portfolio companies and internal sources to decipher the best ideas?

He told me there are three key elements:

  • The Teachers' brand which is recognized throughout the world. 
  • Cultivating the right partnerships with the best possible partners
  • And most importantly, "always communicating what our needs are and entering robust dialogues at the top, middle and lower levels."

I told Jonathan partnerships are critically important for markets in Asia and elsewhere and that goes for OTPP and all of Canada's large pensions, it needs to be a mutually beneficial relationship.

"Absolutely, that's the only way you can move forward and gain important insights, access to deals and more."

As far as a concrete example for how his team has shaped strategy and thinking at OTPP, he gave me the example of how OTPP came up with new interim targets to cut the carbon emissions intensity of its portfolio by reducing emissions intensity by 45% by 2025 and 67% by 2030, from 2019 levels.

Jonathan and his team were instrumental in helping shape the strategy behind these new interim targets. 

What else? Jonathan told me his team is working with Duncan Osborne, EVP and Head of Investments at Cadillac Fairview on their global strategy (again, geographic focus) so there is some dialogue on that level with the real estate subsidiary.

They also helped Cadillac Fairview with their Americas strategy.

Alright, let me wrap it up there.

Once again, I want to thank Jonathan for a great discussion and wish him and his 10-person team at OTPP much success.

What they are doing isn't easy work, far from it, but it's critically important work to help the CIO and pension over the long run.

I asked him how they will measure success and he said they need to achieve objectives and ultimately, it's about implementing a strategy that delivers the long-term required returns.

Again, this isn't easy work but I'm sure Jonathan and his team are up for the challenge and I do wish them much success.

Every pension in Canada needs to be thinking very similarly, the stakes are too high not to implement similar groups and thinking hard about generating long-term returns in a complex and competitive world that is constantly evolving.

Below, two years ago, Jonathan Hausman took part in a panel discussion on the economic and political outlook for the Americas sponsored by the Canadian Council for the Americas. 

Smart man, very knowledgeable and if I missed anything in our discussion above, I will correct and edit it as soon as possible.

State and local enforcers standing up to protect workers: Misclassifying workers ‘a pattern of deceit’

EPI -

Series: The New Labor Law Enforcers

State attorneys general, district attorneys, and localities like cities are increasingly key players in protecting workers’ rights. This new series by Terri Gerstein provides snapshots of enforcement and other actions to protect workers’ rights by these new and emerging labor law enforcers at the state and local level. Gerstein is an EPI senior fellow and director of the state and local enforcement project at the Harvard Labor and Worklife Program, who has chronicled the growing influence of these new enforcers.  

Recent cases brought by state and local enforcers include a host of violations: construction companies engaging in “a pattern of deceit” to misclassify and underpay workers; unsafe working conditions at Amazon; failure to provide paid sick leave; and the chronic problem of employers misusing interns and not paying for their work.

Here’s an snapshot of some enforcement actions across the country:

The D.C. and Virginia Attorneys General suing and prosecuting drywall contractors for misclassifying workers: The DC Attorney General’s Office on October 18 sued a drywall construction contractor, two general contractors, and four subcontractors for misclassifying and underpaying workers on projects including a Georgetown University dormitory and an academic building at George Washington University. The case was unusual in that the AG didn’t just focus on one contractor but went up and down the “chain” of contractors. In a statement, DC Attorney General Karl Racine noted, “Since 2018, these construction companies have engaged in a pattern of deceit, cheating their employees out of their hard-earned wages, and violating their rights. These workers have children to raise, families to feed, and bills to pay, and they deserve the wages and benefits they rightfully earned.” Meanwhile, the new worker protection unit in the Virginia Attorney General’s Office on October 6 announced its first criminal labor case, involving subcontractors who allegedly misclassified workers performing drywall installation in construction of the state General Assembly building.

Minneapolis, Seattle, and the New York State Attorney General enforcing paid sick leave laws: While there is no national paid sick leave law, workers in many parts of the country do have this right, thanks to state and local statutes. For many workers, especially low-wage workers, though, these rights are theoretical unless they are meaningfully enforced, which is why state and local paid sick leave enforcement is critical. In Minneapolis, over two dozen employees of a Jimmy John’s franchise were paid $17,000 in back wages and penalties in September under the city’s paid sick leave law after the city’s Labor Standards Enforcement Division got involved. The agency found that workers at the location had almost no access to paid sick days. The Seattle Office of Labor Standards on September 15 announced that it had recovered more than $290,000 from a cleaning company for paid sick leave and other violations, including not paying for all hours worked, paying subminimum wages, and making unauthorized deductions from workers’ pay for training and other costs. And the New York Attorney General’s Office announced on September 22 that it had recovered $400,000 from a Long Island industrial laundry that illegally fired seven workers and denied paid sick leave to others; the settlement also included reinstatement of five workers who wished to return to the company.

The New York Attorney General and Seattle protecting workers’ rights during the COVID pandemic: Earlier this year, the New York Attorney General sued Amazon in state court over COVID workplace safety issues at a Staten Island warehouse. Days before, Amazon had filed its own lawsuit in federal court against the New York AG, trying to preempt the state’s lawsuit. In October, the New York AG received favorable decisions in both cases: The state court rejected Amazon’s attempt to get the AG’s case dismissed, and the federal court dismissed Amazon’s lawsuit against New York. Meanwhile, the Seattle Office of Labor Standards recovered over $330,000 for around a hundred workers at a wine and alcohol shop who were not paid pandemic-related hazard pay as required by the city’s Grocery Employee Hazard Pay Ordinance. 

Illinois combating race discrimination by temporary agencies. The Illinois Attorney General on October 14 entered into consent decrees with a temp agency and a meatpacking plant where temp workers were placed. The complaint alleged that the agency and plant had engaged in extensive race discrimination, resulting in hundreds of Black workers and job applicants being denied jobs. The AG’s settlement includes payment of $450,000 by the companies, as well as injunctive relief requiring the companies to make efforts to increase the number of Black workers assigned to the plant.

Unpaid interns are owed $400,000 in Massachusetts. The Massachusetts Attorney General’s office announced on September 16 that it issued a citation, finding that a Boston recording studio owed $400,000 for not paying interns. Massachusetts has rules about the limited circumstances in which interns can be unpaid; there are federal rules on this, too. In this case, the students “principally performed administrative, promotional, and cleaning duties which are ordinarily performed by paid employees.”

Market Worried About New Covid or Inflation Variant?

Pension Pulse -

Eustance Huang and Jesse Pound of CNBC report the Dow tumbles 900 points for worst day of year on fears of new Covid variant, S&P 500 drops 2%:

U.S. stocks dropped sharply on Friday as a new Covid variant found in South Africa triggered a global shift away from risk assets.

The Dow Jones Industrial Average dropped 905.04 points, or 2.53%, for its worst day of the year, closing at 34,899.34. The S&P 500 lost 2.27% to close at 4,594.62, while the Nasdaq Composite slipped 2.23% to finish at 15,491.66. The Dow was down more than 1,000 points at session lows.

The downward moves came after WHO officials on Thursday warned of a new Covid-19 variant that’s been detected in South Africa. The new variant contains more mutations to the spike protein, the component of the virus that binds to cells, than the highly contagious delta variant. Because of these mutations, scientists fear it could have increased resistance to vaccines, though WHO said further investigation is needed. On Friday, the WHO deemed the new strain a variant of concern and named it omicron.

The United Kingdom temporarily suspended flights from six African countries due to the variant. Israel barred travel to several nations after reporting one case in a traveler. Two cases were identified in Hong Kong. Belgium also confirmed a case.

“When I read that there’s one [case] in Belgium and one in Botswana, we’re going to wake up next week and find one in this country. And I’m not going to recommend anyone buy anything today until we’re sure that isn’t going to happen, and I can’t be sure that it won’t,” CNBC’s Jim Cramer said.

Bond prices rose and yields tumbled amid a flight to safety. The yield on the benchmark U.S. 10-year Treasury note fell 15 basis points to 1.49% (1 basis point equals 0.01%). This was a sharp reversal, as yields jumped earlier in the week to above 1.68% at one point. Bond yields move inversely to prices.

Asia markets were hit hard in Friday trade, with Japan’s Nikkei 225 and Hong Kong’s Hang Seng index both falling more than 2%. Germany’s Dax index slid more than 4%. Bitcoin fell 8%.

The Cboe Volatility Index, often referred to as Wall Street’s “fear gauge,” rose to 28, its highest level in two months. Oil prices also tumbled, with U.S. crude futures down 12% and breaking below $70 per barrel.

Travel-related stocks were hit hardest with Carnival Corp. and Royal Caribbean down 11% and 13.2%, respectively. United Airlines dropped more than 9%, while American Airlines dropped 8.8%. Boeing lost more than 5% and Marriott International fell nearly 6.5%.

Bank shares retreated on fears of the slowdown in economic activity and the retreat in rates. Bank of America dropped 3.9% and Citigroup slid 2.7%.

Industrials linked to the global economy declined led by Caterpillar off by 4%. Chevron dropped 2.3% as energy stocks reacted to the rollover in crude prices.

On the flip side, investors huddled into the vaccine makers. Moderna shares surged more than 20%. Pfizer shares added 6.1%.

Some of the stay-at-home plays that gained in the earlier months of the pandemic were higher again. Zoom Video and Peloton each added more than 5%.

Friday was a shortened trading day because of the Thanksgiving holiday with U.S. markets closing at 1 p.m. ET. Holiday weeks often have relatively light trading volume, which can amplify moves in the market.

“It’s important to stress that very little is known at this point about this latest strain, including whether it can evade vaccines or how severe it is relative to other mutations. Therefore, it’s hard to make any informed investment decisions at this point,” Bespoke Investment Group’s Paul Hickey said in a note to clients. “Historically speaking, chasing a rally or selling into a sharp decline (especially on a very illiquid trading day) rarely ends up being profitable, but that isn’t stopping a lot of people this morning.”

Several investment professionals told CNBC on Friday that the sell-off could be a buying opportunity.

“Friday is the day after Thanksgiving, probably not as many traders on the desks with an early close today. So potentially lower liquidity is causing some of the pullback,” Ajene Oden of BNY Mellon Investor Solutions said on CNBC’s “Squawk Box.” “But the reaction we’re seeing is a buying opportunity for investors. We have to think long-term.”

A Black Friday to remember, or should I say red Friday.

Nothing like news of a heavily mutated Covid variant emerging from southern Africa to raise everyone's anxiety level up:

What I find somewhat perplexing is how aloof people became about Covid.

I'm not just talking about the unvaccinated, I'm also talking about the vaccinated who wrongly thought "everything is fine, I might just need a booster shot but life is resuming back to normal."

Think again. If this Covid pandemic taught us anything, it's that this virus is very dangerous, it's constantly mutating and the world is a lot smaller than we think.

Travel bans won't stop the spread of any mutations, this much I can assure you.

By the time they implement them, it's already too late.

Yes, testing is critically important and we need to beef up testing.

But there are parts of this world that are literally breeding grounds for Covid viruses, especially in southern Africa where income inequality is endemic and there are a lot of immuno-comprimised AIDS patients.

This is why scientists have been pounding the table, it's a global virus and that will entail a global response.

Anyway, here's what we know so far about this new variant:

  • The World Health Organization said a heavily mutated version of the virus that causes Covid-19 poses a possible increased risk of reinfection.
  • The WHO labeled the strain as omicron and said it’s a variant of concern.
  • South African scientist Tulio de Oliveira said in a media briefing that the variant contains more than 30 mutations to the spike protein, the component of the virus that binds to cells.

Of course, the knee-jerk reaction in markets is a massive RISK-OFF move, sell everything, buy US Treasuries and hunker down waiting for Armageddon. 

Add to this it's a short trading week because it's US Thanksgiving and the only people trading on Wall Street are algorithmic robots and presto, you have massive panic and huge volatility.

By this time next week, I expect things will calm down considerably.

Having said this, we don't know what this new variant will mean. Will there be more lockdowns? Will we need new boosters? Will there be a much deadlier wave coming this winter?

I certainly hope not but you can't exclude any of this right now as we simply don't know enough about the new variant and how fast it will spread throughout the world.

The knee-jerk reaction on Wall Street was predictable and somewhat exaggerated.

At one point, Moderna's shares were up almost 30%. 30%!! 

Don't get me wrong, on Friday November 5, I discussed whether the US recovery will kill the market and recommended buying Moderna shares because I thought the selloff was overdone.

But today's action on Moderna and other vaccine stocks was just plain algorithmic silliness:

Like I said, this is what happens when algorithmic trading dominates markets and everything is based on news flow.

Once humans get back to work next week, things will calm down, as long as news about this new Covid variant doesn't go from bad to disastrous.

Not surprisingly, travel stocks took a beating, with cruise lines, casinos, hotels and airlines all getting hammered hard today:


 What else got hit? Energy stocks as oil dropped 11% to below $70 in one of the worst days of 2021:


However, while energy was the worst performing sector today, all sectors got hit hard except Healthcare which was down marginally:

As far as the overall market, always know your levels to gauge risks. I do this by looking at daily and weekly levels on the S&P 500 ETF (SPY) very closely:

Experienced traders also use monthly levels but the main point I am going to make is while today's price action was ugly, this is just another correction, the trend in stocks remains solidly up.

The TINA effect (there is no alternative) is what's behind the uptrend in stocks.

Jennifer Beaty posted the chart below on Linkedin stating this: "Almost $900 billion has been invested into equity exchange-traded and long-only funds in 2021 - exceeding the combined total from the past 19 years!"

I couldn't resist to add my two cents on Linkedin, stating this:

The Fed has convinced everyone that stocks can ONLY go up, up and away and that bonds are worthless. Follow the masses, for now, but be prepared for a MAJOR reversal of fortune..

Now, this exchange occurred yesterday and  of course, I had no idea stocks were going to sell off hard today.

My point is when everyone is dancing on one side of the dance floor and the foundations are weak, something will give way and the results will be tragic.

Yes, the Fed is accommodative and stands ready for any emergency but don't kid yourself, the Fed will taper and only delay rate increases if this new Covid variant proves really nasty.

In case you haven't been paying attention, there's another variant worth worrying about, the new inflation variant.

Everyone is trying to determine whether this new inflation variant is sticky or transitory.

Brian Raabe of Trahan Macro Research posted this on Linkedin which Francois Trahan shared:

Inflation is biting al over the world and many central banks are raising rates:

In the US, the surge in inflation is forcing big investors to recalibrate their strategies

How will the new Covid variant impact inflation? If it's bad, it will hit economic activity, lowering inflation pressures but it might then add to supply chain woes and we can have a nastier bout of inflation.

All this remains to be seen.

I leave you with some more food for thought on this Black Friday.

Catalin Zimbresteanu, a former colleague of mine at PSP, told me to have a look at the price index (not total return) of the iShares High Yield Corporate Bond ETF (_HYG) which is breaking down here:

Trouble in credit land typically precedes trouble in stocks.

In fact, Pierre-Philippe St-Marie, co-CIO at Optimum Asset Management, shared this with me on credit risk three days ago (before new variant hit):

The pandemic situation in Europe is for the moment degrading, unexpectedly and degrading fast. Given how vaccinated the population is, it is somewhat concerning.

European spreads we follow moved from 82 to 97 in the last few days. This is a significant widening after an extended period of calm at the tight of the range.

In the United States, with Jerome Powell being re-nominated when the alternative (Lael Brainard), was in our opinion perceived by the market as being more dovish, market sentiment might also be turning in North America.

We are according to our analysis globally at tight spreads if you are looking at historical levels. We could have a retracement, perhaps a significant one, without seeing an all out rout.

It’s never a good time to be asleep at the wheel in institutional investment, now even less than usual.

I thank Pierre-Philippe for his astute market insights and he definitely knows what he's talking about and has a long track record to back up his comments (at one point, he and his team were generating all the trading revenues at the National Bank of Canada, trust me, he's really good and very modest).

Alright, let me wrap it up there but before I do, please take the time to read this article on monetary and inflationary traps by Raghuram G. Rajan, former governor of the Reserve Bank of India, and Professor of Finance at the University of Chicago Booth School of Business (h/t: Jean-Francois Sabourin).

It is packed with food for thought but this passage rings true:

But it is not just the new framework that limits the effectiveness of the Fed’s actions. Anticipating loose monetary-policy and financial conditions for the indefinite future, asset markets have been on a tear, supported by heavy borrowing. Market participants, rightly or wrongly, believe that the Fed has their back and will retreat from a path of rate increases if asset prices fall. 

This means that when the Fed does decide to move, it may have to raise rates higher in order to normalize financial conditions, implying a higher risk of an adverse market reaction when market participants finally realize that the Fed means business. Once again, the downside risks of a path of rate hikes, both to the economy and to the Fed’s reputation, are considerable.

Will the Fed bungle it up? Maybe, that remains to be seen. 

Mohamed El-Erian seems to think the Fed's inflation screwup will 'go down in history'.

I'm not convinced and still fear the risks of deflation are much, much bigger now than the risks of permanent inflation.  

How so? If the Fed does start raising rates aggressively and markets crash, we will see a financial shock ripple across the world creating economic devastation, much like we saw during the 2008 GFC.

There are a lot of moving parts to these markets, but one thing I did notice this week is apart from today, the greenback is gaining strength:

There are a lot of reasons why including the Fed tapering and that global investors are buying US public and private assets and want to hold more US dollars in case of a crisis erupts.

But also keep in mind, a strengthening US dollar is disinflationary because it will lead to lower import prices as Americans buy a lot of foreign goods. 

All this to say, yes, we have inflation, no doubt about it, but unless I see it sticky wage inflation, I'm far from convinced it is a serious bout of inflation. 

Then again, professor Cam Harvey posted this on Linkedin:

We are in an inflation surge. If you follow me, you know that I have been very critical of the “don’t worry, it is transitory” spin on the recent inflation reports. Even today’s media coverage mainly focuses on the transitory items. Sure, some of the inflation is transitory – that is obvious – but not all. Yes, used cars are up 26.4% YoY but that is only 3.3% of the CPI basket. I have focused on the important shelter component which constitutes one third of the CPI. The latest CPI report shows rent and owners’ equivalent rent up only 2.7% and 3.1% YoY. Yet, Case-Shiller 20 City house price index is up 19.7% and Apartment List median rent is up 16.4% (Jan-Oct). Unfortunately, there is likely more inflation to come. This is the 9th surge in 95 years of US data.

 

I will leave it at that but Cam Harvey is a really smart guy. I know, I almost invested in his CTA fund 20 years ago and the man really impressed me.

Alright, let me wrap it up there.

Below, Michael Yee from Jefferies and Jared Holz from Oppenheimer join 'Closing Bell' to discuss the impact of the new Covid variant and what that means for markets.

Second, Dr. Scott Gottlieb, former FDA commissioner, joins 'Closing Bell' to discuss the new Covid-19 variant. He says if the majority of the population is vaccinated it can be effective in protecting people from the new Covid variant.

Third, Tom Lee, Fundstrat global advisors, joins 'Closing Bell' to discuss where investors should put their money amid the markets sell-off.

Lastly, please take the time to listen to a great discussion between Glenn Loury and Laurence Kotlikoff on the Glenn Show discussing fending off inflation (h/t: Fred Lecoq).

OPTrust Surpasses the 100,000-Member Milestone

Pension Pulse -

Yesterday, OPTrust announced it has surpassed the 100,000-member milestone:

OPTrust, one of Canada’s largest defined benefit pension plans, has welcomed the 100,000th member to the Plan. Since inception, OPTrust’s membership has increased by more than 40 per cent from just under 70,000 in 1995. Today, OPTrust delivers retirement security to retirees in over 300 communities across Ontario and remits more than $1 billion in annual pension payments.

OPTrust has a strong belief in the value of the defined benefit pension model and delivering a secure retirement to our more than 100,000 members is both a privilege and a great responsibility,” said Peter Lindley, President and CEO of OPTrust. “Our members know they can count on exceptional service and secure, predictable retirement income, and as our membership continues to grow, we remain relentlessly focused on that mission."

Recent growth in membership can in part be attributed to the growth of OPTrust Select, OPTrust’s defined benefit offering for organizations in Ontario’s nonprofit, charitable and broader public sectors. OPTrust Select began welcoming members in 2019 and has now enrolled 50 organizations, with roughly 1,700 members currently in the Plan.

For the vast majority of OPTrust Select members, this is the first time they have had access to the stability and security of a defined benefit pension,” said Audrey Forbes, OPTrust’s Senior Vice President, Member Experience. “The fact that OPTrust Select has continued to grow so significantly throughout the COVID-19 pandemic speaks to the desire for that security, and we look forward to our overall membership continuing to grow in the years and decades to come."

To learn more about how OPTrust Select is expanding access to retirement security in Ontario, visit optrustselect.com.

ABOUT OPTRUST

With net assets of over $23 billion, OPTrust invests and manages one of Canada’s largest pension funds and administers the OPSEU Pension Plan (including OPTrust Select), a defined benefit plan with over 100,000 members. OPTrust was established to give plan members and the Government of Ontario an equal voice in the administration of the Plan and the investment of its assets through joint trusteeship. OPTrust is governed by a 10-member Board of Trustees, five of whom are appointed by OPSEU and five by the Government of Ontario.

This afternoon, I had a chance to talk with Audrey Forbes, OPTrust’s Senior Vice President, Member Experience. 

I want to begin by thanking her for taking the time to speak to me and also thank Jason White for setting this call up and sending me material.

Audrey is a very intelligent and articulate lady, I really enjoyed getting her perspective on OPTrust's members and how they service and value them.

First, Jason White made it clear to me the 100,000-member milestone is the "entirety of the plan," not OPTrust Select which now counts 1,700 members but is growing fast.  

There are over 1 million workers in Ontario's non-profit sector so there's a huger market to tap into there. 

As you will read below, there's also huge demand for safe, predictable retirement income which is why despite the pandemic, OPTrust Select didn't skip a beat and is still growing fast.

Anyway, I began by asking Audrey about her background and the services her team provides members.

Audrey joined OPTrust 20 years ago and has held increasingly senior leadership roles and is an active participant on many committees, including the OPTrust Diversity and Inclusion Council:


In 2020, she was named among Diversity Journal's Black Leaders Worth Watching recognizing those who are advancing diversity and inclusion in the workplace and community.

We didn't broach this topic but she knows very well I'm a huge stickler on diversity & inclusion and had an interesting chat earlier this week with an expert who told me "Canada is about 10 years behind the US on this front." I believe her. 

Anyway, Audrey told me when she first arrived at OPTrust, there were about 70,000 members and membership has grown nicely since then. 

I told her, most of my comments are about pension investments. 

I had great discussions with Kevin Zhu on innovation, culture and risk mitigation, with James Davis after he was named CIO of the year and more recently with Dani Goraichy after OPTrust Select achieved an important milestone

These were all great discussions, I love talking investments and pension policy but it's rare I get to talk to someone in charge of member services.

And let me be blunt, working at OPTrust, CPP Investments, OMERS, PSP Investments, AIMCo, BCI, OTPP, CDPQ, CAAT, IMCO, you name it, isn't about beating some benchmark to make a big bonus, it's all about members!

At the core of every pension is someone working hard, contributing a share of their income every paycheck so they can retire in dignity and security. 

That's really what pensions are all about and at OPTrust, they explain in great detail their member-driven investment strategy

That's great as it pertains to investments but what about servicing those members?

This is where Audey Forbes and her team play a critical role. 

I asked her specifically how they service these members and Audrey told me through different ways:

  • Phone calls: They make roughly 50,000 calls a year to members to answer questions and to reassure them their pensions offer safe, predictable retirement income.
  • Traditional paper route: They answer letters from members with concerns or questions.
  • Via the web: They promote their website where members can go 24/7 to get answers to their questions or write in an get quick responses.
  • Via group presentations: They do group presentations to inform members and answer questions.

Again, this might not sound sexy or interesting to many of you who are structuring swap trades, investing in hedge funds and private equity funds, but this is the bread and butter of a well-managed defined benefit plan, ie. servicing its members

If your members are not happy, you're failing miserably as a pension plan, period.

Audrey told me interactions with members are very important and they survey all members shortly after each communication to see if they are satisfied with the service.

OPTrust's members are very satisfied and Audrey pointed out that their member service also scored very high at CEM Benchmarking, an independent firm that rates all pensions on many fronts. 

"We scored 85, well above the peer average of 76, and I'm very proud of this."

What else? She told me the pandemic hasn't stopped OPTrust Select from gaining new members with 19 of the 50 new employers joining since March 2020.  

She rightly pointed out that many new members working in Ontario's non-profit sector are women "who have traditionally not had a DB plan and made significantly less than their male counterparts."

She added: "we are there to guide them and reassure them every step of the way as we do with all our members."

I asked Audrey is OPTrust plans on opening up it services to other sectors in Ontario.

She told me: "That decision lies with our sponsors but I can tell you that along with HOOPP, we are increasingly advocating for defined benefit pensions."

She mentioned a recent collaboration among Canadian defined benefit (DB) pension plans on a retirement security video to mark financial literacy month. I covered it here.

She also mentioned how Canada's DB plans are good for the economy and good for business and she agreed with my observation that  even though Canada has the best pensions, we need to increase coverage to bolster our retirement system which doesn't rank number one in the world. 

Lastly, on specific policy advocacy, Audrey referred me to Jason White who discussed a new initiative called People for Pensions:

People for Pensions is an information program from OPTrust, the administrator of the Ontario Public Service Employees Union (OPSEU) Pension Plan and OPTrust Select. Our mission: Paying pensions today, preserving pensions for tomorrow.

People for Pensions was designed to share information about the value that DB pensions provide to retirees, workers, employers, Ontario's communities and the economy.

The People for Pensions website includes key resources about the value of DB pensions and features perspectives from you: defined benefit pension plan members and retirees.

They even have their own Twitter handle here and Jason told me they will be posting more videos and more resources to properly inform members and non-members. 

I want to once again thank Audrey Forbes and Jason White for an interesting discussion and look forward to celebrating more milestones with them in the future.

Below, take the time to watch the What's Important video. 

I wish everyone in the US a Happy Thanksgiving weekend!

OMERS Commits to Net Zero by 2050

Pension Pulse -

Today, OMERS announced a commitment to its Net Zero 2050 emissions goal, building on its Sustainable Investing program:

OMERS continues to advance its Sustainable Investing efforts by announcing today its commitment to achieve net-zero greenhouse gas emissions across its total portfolio by 2050.

Climate change is one of the most pressing issues of our time. As a responsible asset owner and manager, OMERS has a program in place to sustainably grow its assets over the long term.

Blake Hutcheson, Chief Executive Officer and President, OMERS commented: “Our near-term carbon reduction goals are tangible, actionable, and ensure our leadership team is accountable today. With our Net Zero 2050 goal, we believe we are charting the right course for our future. We are also confident that we can do this by working with governments and other conscientious Canadian and global businesses in the months and years ahead.”

As at June 30, 2021, OMERS had $114 billion in net assets globally, across public and private markets, and has the potential to make a significant contribution in the transition to a low-carbon economy. Efforts across asset classes are well underway to allow OMERS to achieve its near- and longer-term carbon reduction goals. OMERS currently holds more than $18 billion in green assets, based on the International Capital Market Association (ICMA) Green Bond Principles, including those engaged in renewable energy, energy efficiency and green-certified buildings.

Satish Rai, Chief Investment Officer, OMERS, commented: “As investors, we play an important role in working with our portfolio companies and making capital allocation decisions during the transition to a lower carbon economy. We believe that integrating ESG factors into our investment approach is a more holistic way of assessing both value drivers and risk to deliver long-term, stable returns to our members.”

OMERS has already pledged to reduce the carbon intensity of its total portfolio by 20% by 2025, in line with the Paris Agreement. Five-year successive interim reduction goals will follow in support of our longer-term commitment.

The path to Net-Zero will be informed by the annual calculation and public disclosure of OMERS total portfolio carbon footprint, in line with the recommendations of the Task Force on Climate-related Financial Disclosures (TCFD). Carbon footprinting allows OMERS to more deeply understand the Plan’s climate-related risks and opportunities, both immediately and in the future. 

About OMERS
Founded in 1962, OMERS is a jointly sponsored, defined benefit pension plan, with 1,000 participating employers ranging from large cities to local agencies, and over half a million active, deferred and retired members. Our members include union and non-union employees of municipalities, school boards, local boards, transit systems, electrical utilities, emergency services and children’s aid societies across Ontario. OMERS teams work in Toronto, London, New York, Amsterdam, Luxembourg, Singapore, Sydney and other major cities across North America and Europe – serving members and employers and originating and managing a diversified portfolio of high-quality investments in public markets, private equity, infrastructure and real estate. OMERS had net assets of $114 billion as at June 30, 2021.

I thank Neil Hrab of OMERS for sending me this press release earlier today.

OMERS also provides a PDF file going over its approach to climate change:

As stated in the press release above, OMERS has already pledged to reduce the carbon intensity of its total portfolio by 20% by 2025, in line with the Paris Agreement. . 

I covered that announcement back in April here and OMERS' CEO Blake Hutcheson shared these insights with me back then:

  • Last year, OMERS undertook its first total portfolio carbon footprinting exercise based on the recommendations of the Task Force on Climate-related Financial Disclosures (TCFD). "We set out target reduction date at 2025 to make it tangible for all our employees."
  • But even before they undertook their carbon footprinting exercise, OMERS was already spearheading change in its portfolio. Blake told me he spent 10 years as head of Oxford Properties and under his watch, they became a leader in sustainable investing. "We had a dedicated team that was set up 10 years ago focusing on sustainable investing and we quickly became leaders consistently ranking high on the Global Real Estate Sustainability Benchmark (GRESB) and 90% of our buildings have achieved an industry-leading green building certification for their region and asset class." (see Oxford's Sustainability Report here).
  • Importantly, Blake added this: "It's a win, win, win. A win for our clients, a win for our investors and a win for our employees and it pays dividends over the long run."
  • In Infrastructure, he mentioned Bruce Power which they own 50% of and it provides 35% of the energy to Ontario (clean energy). He also mentioned OMERS important investment in Leeward Renewable Energy (see my coverage here).
  • I asked him about Private Equity where they have investments in 20 portfolio companies and he explained their sustainable investment policy applies to all their public and private investments. 
  • He told me Michael Kelly who is OMERS Chief Legal & Corporate Affairs Officer also chairs the Sustainable Investing Committee which oversees OMERS approach to matters such as environmental, social and governance (ESG) integration in its investing activities. Katharine Preston who joined OMERS two years ago as Vice President, Sustainable Investing reports to Mr. Kelly. In her role, she assists OMERS with evolving its sustainable investing practices and liaises with OMERS investment, risk and communications teams on matters such as ESG integration, climate risk, and stakeholder communications and reporting (she's great, met her two years ago at a conference in Mont-Tremblant). 
  • Blake also told me OMERS is part of the the Investor’s Leadership Network (ILN) which is taking the lead on sustainable investing. He spoke highly of Charles Emond, CDPQ's CEO who is the co-chair at the ILN CEO Council (along with Jean Raby) and said this is an important organization to bring about critical change to sustainable investing (see my recent conversation with Charles Emond  here).

On that last point, yesterday I learned Blake Hutcheson and CDPQ's Marc-André Blanchard were named the new co-Chairs of the ILN CEO Council:

The Investor Leadership Network (ILN), a leading network of investors taking action for people, planet, and prosperity, is announcing two new leaders of its CEO Council.

Blake Hutcheson, President and CEO of OMERS, and Marc-André Blanchard, Executive Vice-President and Head of CDPQ Global, have been appointed Co-Chairs of the ILN CEO Council, effective January 1, 2022. Mr. Hutcheson and Mr. Blanchard will succeed Charles Emond, President and CEO of CDPQ who will be exiting his role as Chair.


The ILN is a CEO-led group of global institutional investors dedicated to advancing sustainability and long-term growth, with a particular focus on diversity in investment, climate change, and sustainable infrastructure. Launched at the 2018 G7, ILN now has 14 members representing six countries and more than US$9 trillion in assets.

“The continued success of the ILN depends on dynamic leadership from our CEOs, and I couldn’t be more excited to welcome Blake and Marc-André as Co-Chairs of the CEO Council. Under Charles’s leadership over the past two years, the ILN has grown to be an influential voice on the world stage and made tremendous strides to advance investors’ best practices in Diversity, Climate Change, and Sustainable Infrastructure. The success of these three initiatives have helped fill crucial gaps in the investment space. Blake and Marc-André will continue to support and build on this work, and I look forward to leveraging our impact over the next two years in partnership,” said Amy Hepburn, CEO, ILN Secretariat.

“I am proud to take on this role working alongside Marc-André, Amy and all of ILN as we strive to make a meaningful impact – including through developing useful resources and initiatives that are evidence-based, measurable, and capable of driving big-picture change,” said Mr. Hutcheson. “When it comes to advancing sustainable investing practices, institutional investors have an important role to play as both influencers and partners.  OMERS support of ILN is consistent with our belief that well-run companies with sound ESG practices will perform better over time, something that is critical to us as a long-term investor acting on behalf of our 525,000 members,” he added.

“Since the inception of the ILN, we have shown that collaboration is key to advancing solutions to meet global challenges. Our network has prioritized concrete actions and delivered tangible results on its three areas of focus”, said Mr. Blanchard. “I am thrilled to join Blake as Co-Chair of the CEO Council. Together, we will continue down the path established by our predecessors. I am confident that, with our colleagues’ vision and Amy’s leadership, we will deepen our impact as we contribute to building a fairer and more sustainable world that can benefit all,” he added.

Earlier this year, the ILN welcomed a new member, held the second edition of its annual Sustainable Infrastructure Fellowship Program and launched a resource library to host a growing collection of thought leadership developed by investors for investors. Some of ILN’s key accomplishments to date include the development of a Blended Finance Blueprint, and investor resources on Climate Change Mitigation, TCFD Implementation, and Physical Risks from Climate Change. As part of its Inclusive Finance Initiative, ILN will introduce metrics and guidance for engaging with portfolio companies around their inclusion efforts in 2022.

About the Investor Leadership Network

The Investor Leadership Network was launched at the 2018 G7 to facilitate and accelerate collaboration by leading global investors on key issues related to sustainability and long-term growth. As the leading network of investors taking action for people, planet and prosperity, the CEO-led group is composed of 14 global institutional investors representative of all continents and assets classes, with over US$9 trillion in assets under management. Learn more about the Investor Leadership Network by visiting our website and following us on Twitter @ILNinfo

I am certain both Blake and Marc-André will succeed Charles Emond very nicely and make sure the ILN continues its important work in advancing sustainability and long-term growth, with a particular focus on diversity in investment, climate change, and sustainable infrastructure.

As far as the latest press release from OMERS committing to achieving net-zero by 2050, it follows others like OTPP and my hunch is they will all achieve net zero long before 2050 (a case of under-promising, over-delivering).

Notice the press release states interim goals will be set every five years and I expect by 2026 we will have a much better idea if OMERS and others will achieve net zero sooner rather than later.

Also, five-year successive interim reduction goals will follow in support of their longer-term commitment. 

Moreover, the press release states: "OMERS currently holds more than $18 billion in green assets, based on the International Capital Market Association (ICMA) Green Bond Principles, including those engaged in renewable energy, energy efficiency and green-certified buildings."

That $18 billion in green assets represents 16% of total assets and I expect that percentage will also grow significantly over the next decade. 

Don't forget, OMERS already owns Bruce Power, an important nuclear reactor plant, and many other assets specifically focused on renewable energy.

They will be growing these renewable energy investments, including energy efficient buildings as well as investing in emerging technologies that will play a critical role in the transition to a net zero economy.

For example, I've covered OMERS investment in Leeward Renewable Energy as well as its investment in Northvolt. There are countless other examples.

One thing OMERS will not be doing is divesting from oil & gas. It doesn't believe in divesting which is makes perfect sense to me.

 Lastly, I note what OMERS CIO Satish Rai states in the press release above: "We believe that integrating ESG factors into our investment approach is a more holistic way of assessing both value drivers and risk to deliver long-term, stable returns to our members.”

Integrating ESG factors across public and private markets is the only way forward for OMERS and other large institutional investors.

It's about playing offense and defense, something Blake Hutcheson knows all too well since he's a die hard Toronto Maple Leafs fan. 

I shouldn't talk, I'm a die hard Habs fans and they've completely disappointed me so far this year. 

Below, PRI data gathered from a broad and geographically diverse asset owner base reveal that asset owners increasingly incorporate ESG policy expectations into contractual documentation, with investment mandates proving to be an exception. Watch the clip and read more here.

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