Sustainability on the agenda: Desjardins 12 May 2022 219

Gildas Poissonnier, Senior Director Sustainability and Responsible Finance at Desjardins, talks about the institution’s climate change priorities, risks, and opportunities. 

Leading Desjardins's sustainability and responsible finance experts team, Gildas Poissonnier supports the functions of Desjardins Group as a whole, including banking, P&C and life insurance, and investing, in two areas: 1) Moving forward Desjardins’s commitment to integrate environmental, social, and governance criteria into its decision making and its operations, and 2) Supporting the development of responsible finance products, in line with Desjardins’s commitment to tackle climate change issues and to foster a fair energy transition, focusing on the long term socio-economic development of members and clients. 

Before Desjardins, Gildas worked for 11 years at Deloitte, where he led the Sustainability and Climate Change team in Québec. In that position, he supported dozens of public or private organizations through consulting engagements dealing with social and environmental topics. We spoke with Gildas for our report with Avanade. His thoughts are below.

What priority steps have you taken to manage climate risk effectively? 

At Desjardins, we are aware of the environmental, economic, social, and health costs that climate change will have on the lives of our members and clients. The long-term impact of climate change is unpredictable and complex. We recognize that our members and clients put their trust in us, and we have a fiduciary responsibility to protect their assets and well-being and to advocate on their behalf. As a result, we are increasingly improving our climate change risk governance and management practices and expanding our capabilities in climate risk management. 

From the top of our organization, the Board of Directors supervises climate-related risks with the support of our Governance and Responsible Finance Commission and our Risk Management Commission. We incorporated climate change in our risk analyses and for the past three years, our methodology and scope have been constantly expanding. We currently perform an annual qualitative organization-wide climate risk analysis, to identify vulnerabilities to both transition and physical risks. We have also conducted several initial quantitative analyses on physical risk for various hazards and portfolios throughout the year. 

To maintain transparency and accountability to our members, Desjardins is committed to leading reporting frameworks of climate change, including TCFD and CDP. 2021 marked our third report based on TCFD recommendations. This year also marked the announcement of our climate action plan to achieve net zero emissions by 2040 in our extended operations and in our lending activities and own investments in three key carbon-intensive sectors: energy, transportation and real estate. Our coal exclusion policy announced in 2020 is also a component of our climate action plan. 

What are the biggest risks and challenges facing your organization in managing climate change? 

While we are confident that we are taking the necessary steps as an organization to achieve our climate change goals and priorities, we know that we cannot solve this challenge alone and that is our biggest risk. The entire financial sector needs to work together to help shape the global economy towards a low-carbon future. This is why we make efforts to collaborate with our peers in the sector through sustainability working groups, climate conferences and in daily communications. Beyond the financial sector, the private and the public sector need to do their part in mitigating the impacts of climate change by developing science-based targets and implementing strategies to achieve them. 

What do you consider to be the major opportunities? 

The transition to a low-carbon economy is fostering innovation and efficiency in multiple industries including the financial sector and this will result in business opportunities. Moreover, cost reduction from lower energy use and material consumption is making businesses more profitable. For the financial sector, the increased demand for sustainable products and services is creating a multi-billion-dollar opportunity worldwide. Thus, we are challenged to offer our members the most sustainable products to be faithful to our stated mission but also to meet this demand in the market. 

How do you see regulatory challenges evolving over the next 18-24 months, especially around scenario planning and reporting? 

The shift towards mandatory climate risk analysis and disclosure in our sector has definitely gained momentum in the past year. Internationally, the backing of the G7 on this matter and the recent announcements from multiple countries are a good indication of where we are heading. Domestically, the Bank of Canada and the Office of the Superintendent of Financial Institutions (OSFI) have conducted a lot of analysis on the topic. We have closely followed the progress on their pilot project on climate risk scenarios and the OSFI’s climate risks consultation. The Canadian Securities Administrators (CSA) is also conducting a consultation process on climate-related disclosure requirements consistent with the TCFD recommendations. While we are looking forward to reading the communication and guidance that will be published in the coming months, it is currently hard to assess when new regulations will be implemented in Canada. 

Would you say you have a green portfolio? Can you give examples of specific areas where you have developed green products and services (e.g. bonds, SLLs, mortgages, ESG investment options)? 

Our climate ambition is definitely reflected in our products, services, and business approaches. Since last year, all 17 of our Desjardins SocieTerra funds and portfolios are 100% free of oil production and pipeline holdings. Earlier this year, we launched an initial offering of $500 million aggregate principal amount of sustainable bonds. On the financing, we have our Green Homes Program which provides advantages to sustainable properties and eco-renovations. We also offer reduced interest rates for hybrid and electric vehicles. Our insurance products also offer discounted rates for green homes and vehicles.

How much progress are you making in terms of Scope 1, 2 and 3 GHG emissions? What are the main barriers, especially around Scope 3? 

We have made consistent progress in reducing our operational emissions annually and we compensate our operational footprint since 2017. As a financial institution, our scope 3 financed emissions are significantly higher than our scope 1 and 2 emissions. A milestone in the past year was the beginning of our commitment to the Partnership for Carbon Accounting Financials (PCAF) which has enabled us to quantify our scope 3 financed emissions following an international recognized standard. One of the main challenges is the lack of emissions data particularly from private companies and SMEs which we have to estimate. Emissions reporting from all organizations is critical to the financial sector. 

What is your policy towards certain sectors (e.g. coal mining, Arctic oil and gas, oil sands etc.)? Have you discontinued business with any clients? 

In 2020, Desjardins joined the Powering Past Coal Alliance (PPCA) coalition and we announced our exclusion policy on coal. As a result, we no longer invest our own funds in companies that operate or develop coal mines or have greater than 10% or 5GW installed coal power generation capacity. We may only work with companies in this sector if they have announced a coal phase-out strategy in line with the Paris Agreement. As a result of this updated policy, Desjardins had to divest from several companies that did not meet the requirements internationally. Reclaim Finance has rated our coal policy among the most robust in the world. 

How are your customers’ expectations changing and how are you responding? 

Our members and clients are more and more aware of the impacts of climate change in the world and the risks to their assets and businesses. Thus, the expectations for transparency are higher than ever. They want to have the confidence that what we are doing is having a real impact and is not merely green marketing. As a result, we abide by several global reporting frameworks and most recently we became the first Canadian financial institution to sign the Business Ambition for 1.5 degrees of the Science Based Targets initiative (SBTi) and the United Nations Global Compact. 

How are you using technology to enable you to execute on your ESG goals? 

We use technologies to achieve our ESG goals in multiple ways in our operations, financing, and investments. First, we are looking to strengthen our climate decisions on our financing and investments through the implementation of dedicated climate analytics platforms. Second, we are increasing the share of renewable energy technology in our lending, and we are building a $2 billion investment portfolio in that sector. Third, we are supporting technology startups in Canada with climate-related solutions through our Startup in Residence program.

Learn more and read more of these interviews: download our report

Related Content