CIBC’s Power Generation target

Dominique Barker: Welcome to The Sustainability Agenda, a podcast series focusing on the evolving complexities of the sustainability landscape with a view on addressing current issues in a concise format to help you navigate and take action. I’m your host, Dominique Barker. Please join me as we explore today’s most pressing matters with special guests that will give you some new perspective and help you make sense of what really matters.

Bindu Dhaliwal: And so the targets will definitely move us in a direction and have us, you know, work with our clients in transitioning. But the business, that’s been part of the business plan, so I feel like the targets, particularly for this one, give us a metric to assess it against. But we already have a number of activities moving in that direction.

Dominique Barker: Today we welcome Bindu Dhaliwal, VP of Environmental Social Governance at CIBC, and she’s been a great partner to me personally, so I’m really glad to have her here today. On today’s episode, we’re going to walk through CIBC’s Power Generation target and how it advances CIBC’s commitment to net zero emissions by 2050. Bindu, thank you for joining us today on today’s episode of The Sustainability Agenda.

Bindu Dhaliwal: Thank you for having me.

Dominique Barker: So let’s start broad. Can you outline CIBC’s current climate related targets like its net zero and oil and gas targets? And then if you could get into how these targets align with CIBC’s commitments, that would be great.

Bindu Dhaliwal: Yeah. Sure. Thank you. So, you know, if we look back at sort of CIBC’s role in the broader ESG space, we’ve had a number of commitments and initiatives that have been focused on ESG generally. But our climate focus in the last few years has really been driven by the business and a lot of the work that they’ve done. At an enterprise level, we took all that and we announced a net zero ambition in August of 2021 where we said we were going to work towards looking at our finance emissions and our portfolios and driving them to net zero, as well as soon after that, I think a few months later we joined the Net-Zero Banking Alliance, along with our Canadian peers. And by joining NZBA, if I can use that acronym because it’s a mouthful, it really committed us. We had already set a net zero ambition, but it moved us forward in terms of a guideline and a framework to work towards, to aligning to net zero, but also setting science based targets. And so the NZBA has a number of categories, a number of sectors, they have nine priority sectors. And the first two that they ask you to set interim targets for are oil and gas and power. And so we tackle the oil and gas portfolio first. In March of 2022, we set our first interim targets in that sector. So for oil and gas sector, we addressed all three scopes of emissions. So we have for scope one, we have a goal of reducing a reduction of, for scope one and two, it’s 35%. And for scope three, it’s 27%. And the target was really, that was obviously to address one of the highest emitting sectors in our portfolios that we’ve got exposure to. And then second to that was our Power Generation portfolio and that’s why we’ve now set interim targets for that and recently released them.

Dominique Barker: Great. So let’s dig into that. We’ve just put out our Power Generation target. So let’s just put that it in context for our audience. In 2020, the power sector accounted for about 25% of total US emissions, so that’s quite a large part of the economy. And in Canada, represented about 10% of Canada’s total greenhouse gas emissions. So as you discussed, CIBC released a Power Generation target for its portfolio which include companies with owned Power Generation such as Independent Power Producers, as well as the Power Generation share combination. So those are the utilities that include both power and gas. And then integrated utilities, so those are utilities that include power and some of the wires businesses like them, distribution and transmission. And then other companies that own generation. So could you speak to this new target?

Bindu Dhaliwal: Yep. So our target has been set to have a 32% reduction by 2030 and includes direct ones scope one emissions for Power Generation activities, which really represents the majority of emissions in the sector and in our portfolio book. There’s a number of nuances. I don’t want to get too technical, but I think one of the interesting aspects of our methodology is we decided to work towards a convergence target, which really means that the scenario that we follow, the IEA net zero 2050 scenario has a data point that characterizes that the direct scope one CO2 emissions for the intensity of Power Generation in 2030 should be at a particular number, which is 156 kilograms per megawatt hour. And so one of the other aspects of it is, is we don’t include scope three emissions for our target purchase power. However, you know, we know clients are increasingly incorporating purchased electricity into their climate targets and transition plans. So we know that as we move forward and look at reporting on this, we’ll look to possibly include these as well.

Dominique Barker: OK. And then those targets, CIBC’s targets are based on emissions intensity rather than absolute emissions reduction. You use the term kilograms per megawatt hour. So that’s an intensity metric. Could you explain to our listeners the difference between the two and why CIBC chose emissions intensity, please?

Bindu Dhaliwal: Sure. So absolute targets really aim to reduce the GHG emissions by a set amount. Intensity based metrics are really suited to track emissions for an expanding Power Generation portfolio, which really normalizes based on electricity production. And we can compare clients to each other. You know, what’s important is we are still tracking our absolute emissions. We’re reporting as per PCAF. And so while our targets are intensity based, we are also measuring our portfolios from a PCAF portfolio methodology so we’ll be reporting on both.

Dominique Barker: For those who don’t know, PCF stands for?

Bindu Dhaliwal: Partnership for Carbon Accounting Financials.

Dominique Barker: Thank you. Which is kind of a standard, I suppose, and others that are adopting in order to account for greenhouse gas emissions. So CIBC’s targets also start from a low base year of 2020, and we all remember why 2020 would have had a low base year. I think that’s too close to everyone’s life with COVID. Can you explain why that is? And then our emission intensity, which was 220 kilograms per megawatt hour. You know, that’s seen as fairly low. Is there an explanation as to why it could be lower compared to our peers?

Bindu Dhaliwal: So, Dominique, you’re right. When you look at our baseline number, it is lower than our Canadian peers. And there’s a reason for that. We have a large renewable energy business. So when we were calculating the emissions for our portfolio clients, you know, there’s a large number of renewable non emitting clients in that baseline and that is really evidence of all the work that the business has been focused on in the last number of years. I mentioned when I was talking about our net zero ambition that that was really just an articulation of work that we’d been doing for a number of years. And as a result of our large renewable energy franchise, we’ve already reduced emissions greatly in that area. We’ve still got more work to do, but that’s why the numbers, our starting point is lower. And then when you take that baseline and you map it to when I said the convergence target, the 156 kilogram per megawatt hour, that gives us a reduction rate of 32%. And some of our peers are starting at a higher baseline.

Dominique Barker: Right. And that makes sense. We did our recording with our partners in the US on the renewables franchise. It has always been a big part of CIBC’s business and absolutely a growing area. How does setting these targets distinguish CIBC from our peers?

Bindu Dhaliwal: Yeah, certainly. And you know, when we think about these targets, I always and I know I’ve just said this again, I don’t mean to repeating this, but I always think about it in the context of what are we doing with our business and is it aligned to our business strategy? And so the targets will definitely move us in a direction and have us work with our clients in transitioning. But the business, that’s been part of the business plan, so I feel like the targets, particularly for this one, give us a metric to assess it against, but we already have a number of activities moving in that direction. So it’s complementary to the business plan. And in terms of distinguishing us, I think it’s that our target is reflective of a real high exposure emitting area where we’ve done work for a number of years. And so I think that it shows our continued commitment to reducing our financed emissions across the portfolio. And so tackling the first two big sectors I think is an important part of our overall enterprise narrative and our positioning on this issue.

Dominique Barker: Lastly, what does the Power Generation target mean for CIBC’s clients?

Bindu Dhaliwal: So we are seeing and I’ve worked really closely and Dominique, you and I were both in the working group on this. And so we worked really closely with both risk and the businesses. And it’s interesting as we were going through the measurement and methodology perspective to see how many clients already had net zero targets and strategies towards that. But it does mean that in order for us to achieve our target, that portfolio companies will have to implement a variety of strategies to reduce the emissions. So we know people are on that path. We need to assist and work with them on that path and to make sure that everybody moves in that direction at a pace to get us there by 2030 and then beyond. At a portfolio level, we also actively have discussions with our clients in terms of how we can support them, but also sort of learning from them in terms of the ways that they’re moving forward and how that might affect our target. And as mentioned earlier, like in the renewable space, that’s likely a space that’s going to continue to grow because that’s an important part of our business.

Dominique Barker: Thank you, Bindu and I really look forward to the next sector that we tackle with regards to the NZBA guideline. Thank you for taking the time to join us on today’s show. And as usual, thank you to our listeners for tuning in.

Dominique Barker: Please join us next time as we tackle some of sustainability’s biggest questions, providing different perspectives to help you move forward. I’m your host, Dominique Barker and this is The Sustainability Agenda.

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