b'New F rameworks for Incorporating Climate Change into Investment DecisionsNew Frameworks for Incorporating Climate Change into Investment DecisionsIt is a language for investors As of this writing, the carbon dio It is a language for investors and companies and companies to discuss to discuss climate climate As of this writing, the carbon dioxide concentration in xide concentration inchange,It change, to to weigh weigh its its risks risks and and to to explore explore its its opporopportunities. tunities. It the ear ths atmosphere has reached over 415 parts per ts per the earths atmosphere has reached over 415 par involves anumber ofofways waysevaluate governance, businessinvolvesa number totoevaluategovernance, business million, the highest level in over 800,000 years. strategy riskmanagement, metrics andtargets. It also million, the highest level in over 800,000 years. strategy,,riskmanagement,metricsandtargets.Itisisalso imporimportant tant to to note note that that the the TCFD TCFD considers considers the the impact impact of of climate change change on on aacompanysperperformance climatecompany sformance rather rather than than aa Investors of tenoften talk about climate risk asassomething that liescompanyInvestors talk about climate risksomething that lies companys impact s impact on on the the climate, climate, making making it a it framework a framework that that farfar ininthe the future. future.TheThe reality reality however however, is, is that we we are are already already that is isrelevant across sectors. OfOfcourse, fossil fuel and energy relevant across sectors. course, fossil fuel and energy starstarting ting to to see see signs signs of of it in in financial markmarkets. ets. Perhaps Perhaps one oneintensecompanies are are among among those those on on the the front front lines lines here. here. itfinancialintense companies of of the the most most acute acute example example is is the the California California wildfires, wildfires, which whichHoweverHowever, given , given the the wide-ranging wide-ranging and and difficult-todifficult-to-avoid -avoid potential potential burned over875,000inin2018.sizeimpacts burnedover875,000 acresacres2018. The The increasingincreasingsize impacts of of uncontrolled uncontrolled climate climate change, change, the the systemic systemic impact impact and and severity severity of of the the fires fires in in California California is is attributed attributed to to drought droughton onthe the broader broader economy economy and and society society acrossacross industries industries needsneeds to to conditions as as a result a result of of warmer warmer temperatures. temperatures. PG&E, PG&E, one one of of examined. ToTmako make bettere better informed informed investing investing decisions, decisions, we we conditionsbe beexamined.need complete the the two two main main California California electric electric utilities utilities associated associated with with the theneedcomplete robust robust perperformance formance data data across across all all industries industries that that fire, fire,incurred.measureincurred liabilities liabilities of of $30B $30B and and has hasfiledfiled for for bankruptcybankruptcy.measure how how well well businesses businesses are are adapting adapting their their technologies, technologies, As Asofthisof this writing, writing, the the carbon carbon dioxide dioxide concentration concentration in thein the ear earths thspractices practices and and strategies strategies to the to the wide wide range range of potential of potential outcomes.outcomes.atmosphere atmosphere has has reached reached over over 415 415 parparts per ts per millionmillion, the , the highest highest levellevel ininover over 800,000 years. The increased concentration ofofTCFD -aligned disclosure, disclosure, which which remains remains voluntarvoluntary for y for nownow, is , is800,000years. The increased concentrationTCFD-aligned greenhousegainingA greenhouse gases gases is causing is causing the the earearths ths temperature temperature to to warm, warm,gaining traction traction as as the the global global standard. standard. Here Here at at home, home, CPCPA and and global global temperatures temperatures are are on on a trajectora trajectory to y exceed to exceed +3 +3 degrees degreesCanadais encouraging members members of of the the accounting accounting profession profession Canada is encouraging Celsius of warming familiarize themselves themselves with with the the recommendations, recommendations, and and the the Celsiusof warming by by the the end end of this of this centurcentury, far y, far exceeding exceeding the the 2 2to tofamiliarizedegree target target that that scientistsscientists suggest suggest wouldwould likely likely limitlimit the the amountamountBank of of Canada Canada also also includedincludedclimate change change risk risk for for the the degreeBankclimate of of damage.Asignificantfirst first time time in in its its 2019 2019 Financial Financial System System ReviewReview,specifically damage. A significant ratcheting ratcheting up up of of policy policy and and action action,specifically is required .pointing is required totohasten hasten the the transition transition totoalow-carbona low-carbon economy economy. pointing to to the the TCFD TCFD and and its its merits. merits. hhhhhhhhhhhhggggggggghhhhhhhhhhhhgggggggggInvestor Considerations Jarislowsky FInvestor Considerations Jarislowsky Fraserrasers Approachs ApproachThis This backdrop backdrop creates creates unceruncertainty tainty for for investors investors in in the the form formAt At Jarislowsky Jarislowsky Fraser Fraser (JFL), (JFL), we we value value TCFDTCFD-aligned -aligned corporate corporate of of physical(e.g.reporphysical risks, risks, both both acute acute (e.g. natural natural disasters) disasters) and andreporting ting as paras part of t our of our investment investment process. process. We Ware e are also also committed committed chronicto engaging chronic (e.g. (e.g. water water scarcity), scarcity), as as well well as as in in the the questions questionsto engaging with with the the companies companies in our in our porportfolios tfolios to increasingly to increasingly surroundingtransition totoalow-carbon economy.What willalignJFL surroundingtransitiona low-carbon economy.What will align their their reporreporting ting with with TCFD TCFD recommendations. recommendations.JFL has has it take toetoget get totoa2adegree2 degree world? world?HowHow will will regulation regulation, such , such it tak beenbeen atrusteda trusted institutional institutional investor investor for for many many decades, decades, and and we we as as carbon carbon taxes, taxes, evolve? evolve?WhatbelievedutyWhat will will be be the the pace pace of of change changebelieve our our fiduciarfiduciaryy duty is is to to consider consider all all the the material material risks risks in in technologygridsassociatedtechnology (e.g. (e.g. smarsmarttgrids and and carbon carbon capture), capture), and andassociated with with investments investments that that we we mak make on e on behalf behalf of clients. of clients. consumer consumer preference preference(e.g.(e.g. electric electric vehicles vehicles and and greener greener fuels)? fuels)? WhatOur Our approach approach to to sustainable sustainable investing investing involves involves integrating integrating What policies policies and and social social changes changes will will be be necessarnecessary to y to ensure ensure a justenvironmental, a just climate climate transition transition that that tries tries to to avoid avoid the the economic economic and andenvironmental, social social and and governance governance (ESG(ESG) ) factors factors into into the the societaldramaticinvestment societal disruptidisruptions ons from from such such aa dramatic change?change?hhhhhhhhhhhhhhhh investment process. process. NowNow, T, CFD TCFD has has provided provided a new a new language language to frameto frame our our consideration consideration ofofclimateclimate change, change, which which brings brings with with a gamut of of risks risks and and opporopportunities tunities affecting affecting the the strategy strategy and and it a it gamut For investors and boards of directors, the primar yresilience For investors and boards of directors, the primaryresilience of of a business. a business.And,And, because because we we think think its its imporimportant tant question has become: Just how resilient are ourto to walk walk the the walk, walk, in in 2019, 2019, we we also also published published our our own own question has become: Just how resilient are our assets and value creation strategies in the face ofinaugural inaugural reporreport on t on how how were were monitoring monitoring and and managing managing climate climate assets and value creation strategies in the face of climate change? risk risk on on behalf behalf of of our our clients. clients. This This means means explaining explaining how how our our climate change?governance governance and and strategy strategy incorporate incorporate climate climate risk, risk, disclosing disclosing the the carbon carbon footprint footprint of of our our porportfolios, tfolios, and and examining examining the the resilience resilience More shareholders,of our porportfolios tfolios to to climate climate change change and and the the policies policies designed designed to to Moreshareholders, and and more more companies, companies, have have begun begun to to look lookof our closelycombat closely at at the the risks risks and and opporopportunities tunities of of climate climate change. change. For Forcombat it. it. The The reporreport will t will likely likely evolve evolve over over time, time, in accordance in accordance investorsquestionwithwith the the broader broader disclosure disclosure and and data data related related to climateto climate change. change. investors and and boards boards of of directors, directors, the the primarprimaryy question has has become: Just how resilient are are our assets and value creation We Wsee e seestarting ting point point in in what what will will be be a multi-year become: Just how resilient our assetsand value creationthis this as as aa star a multi-year strategiesFindingwayjourney . strategies in in the the face face of of climate climate change? change?Finding aa way to tojourney, and , and we we welcome welcome additional additional perspectives perspectives along along the the wayway. answer answer this this question question fell fell to to the the Task Task Force Force on on Climate-related Climate-related Financial Financial Disclosure Disclosure (TCFD), (TCFD), established established in in late late 2015 2015 by by the the Financial Financial Stability Stability Board, Board, the the organization organization responsible responsibleJFL has been a trusted institutional investor for JFL has been a trusted institutional investor for monitoring the the welfare welfare of of the the global global financial financial system. system.many decades, and we believe our fiduciarfor for monitoring many decades, and we believe our fiduciary duty y duty Drawing Drawing a wide a wide range range of of members members from from various various industries industries and andis to consider all the material risks associated with is to consider all the material risks associated with backgrounds, backgrounds, the the TCFD TCFD was was charged charged with with creating creating a framework a frameworkinvestments that we make on behalf of clients. investments that we make on behalf of clients. for for companies companies and and investors investors to to disclose disclose their their approach approach and and exposure exposure to to climate-related climate-related risks risks and and opporopportunities.tunities.If you If you wish wish to to discuss discuss how how you you can can incorporate incorporate sustainable sustainable Whatinvesting into your investments, contact Leanne Flett Kruger What the the TCFD TCFD brings brings is not is not just just a long-term a long-term focus, focus, but but also alsoinvesting into your investments, contact Leanne Flett Kruger at at a common.LFlLeFttleKtrtuKgreurg@erj@flgjlflogblaobl.acol.mco.mhh.hhhhhhhhhhhhhhhhhhhhhhhhhha common framework framework to to drive drive comparability comparability and and consistencyconsistency.'