With the second largest financial industry in Canada, Quebec has a key role to play financing the country’s transition to a more sustainable economy. This means both reducing facilitation of carbon-intensive companies not aligned with a 1.5 degree future, while increasing exposure to renewable energy and other climate solutions.
The question for Quebec-based financial institutions is whether to be leaders or laggards. Investors in Power Corporation will have a say on the issue at the company’s upcoming AGM on May 9th by voting on a shareholder proposal we filed regarding emissions disclosure.
This is the company’s first ever climate-related shareholder proposal. But, without Desmarais family support, it will be impossible for the resolution to achieve majority support due to the company’s antiquated share structure that lets the family out-vote all other shareholders.
Power Corporation has fallen behind in recognizing the urgency of the energy transition. Managing over $1.3 trillion, the Montréal-based holding company – with majority stakes in IGM and Great-West Lifeco, and their subsidiaries which include Mackenzie Investments, Wealthsimple, and Canada Life – has enormous potential to drive positive change on the climate front while offering its investors a piece of the ever-growing climate solutions sector.
Yet, to date, the parent company has taken little climate action, not even committing to achieve net zero in financed emissions, which is now standard practice among Canadian financial institutions.
The company has shown some interest in the energy transition via its subsidiary Power Sustainable. With direct investments in renewable energy projects and companies, the subsidiary shows the enterprise has some appetite for progress, recognizing the potential for financial returns on sustainable investments.
But, this pales in comparison to the fossil fuel investments that Power Corporation’s other subsidiaries make on behalf of their clients. Added up, these make the company Canada’s third-largest fossil fuel investor. Accordingly, we filed a shareholder proposal asking for it to disclose the emissions that it finances, which is the foundational step for climate planning.
Fully disclosing its exposure to fossil fuels would accomplish two things. First, it would allow the company to assess risk in the face of a volatile future of fossil fuel demand. Following the adage “what gets measured, gets managed,” the disclosure of Power Corporation’s emissions data is essential to the development of a transition plan. Such disclosure enables the setting of emissions reductions targets and the establishment of a transition strategy.
Equally important is the growing investor demand for climate transition risk transparency. Many investors have set their own net zero targets, and require disclosure from companies they hold stakes in – like Power Corporation – to ensure they are on track to meet their targets.
Unfortunately, Power Corporation’s management recommends voting against our shareholder proposal. In doing so, it is recommending against an opportunity to exert its influence to protect shareholder value, and ultimately to drive significant decarbonization. The company claims its status as a holding company limits its responsibility for the actions of its subsidiaries. Despite owning companies with substantial fossil fuel holdings, the company believes that accountability stops at its front door.
Yet, being a holding company enables just the opposite, since it has huge potential influence over its subsidiaries. Power Corporation’s own holding, Groupe Bruxelles-Lambert (GBL), could be a case study for the wider company’s transition planning. A holding company itself, GBL has made a net-zero commitment, has set science-based interim targets, and reports on the emissions of its subsidiaries. Other holding companies like Sweden’s Industrivärden or the UK’s NatWest Group are also climate leaders.
Moreover, there is a question of just how independent Power Corporation’s subsidiaries truly are – the Boards of IGM and Great-West Lifeco overlap with Power’s Board significantly. Claims of deferring to the subsidiaries ring somewhat hollow.
The Desmarais family faces a choice of whether to use its clout to turn Power Corporation into a climate leader or to let the company stagnate while others pass it by by taking advantage of the energy transition. We hope the family will embrace the future by voting for the shareholder proposal we have put forward.
