The Toronto-based company plans to develop a group of funds that attempt to marry positive social and environmental outcomes with strong returns on investment. Carney will join Brookfield as vice president and lead its environmental, social and governance (ESG) investment strategy.
Brookfield CEO Bruce Flatt said in an interview that he expects the new ESG group to eventually grow to the size of its real estate, infrastructure and private equity businesses. Carney will be instrumental in this expansion due to his close relationship with sovereign wealth funds and his extensive business experience, said Flatt.
“Anytime we can bring in someone smarter than us and better than us, it’s going to add to the organization,” Flatt said.
Carney, a former Goldman Sachs banker, led central banks from the global financial crisis to the early days of the Covid-19 pandemic. He became Governor of the Bank of Canada in 2008 and held the same position at the Bank of England in 2013, before stepping down in March and returning to Canada.
Although still in its early stages, Brookfield envisions its ESG funds could acquire entire companies and participate in investments in the company’s other portfolios, Flatt said.
“Based on our fundraising ability, operational activities and the experience we have, as well as Mark’s strategic connections and knowledge in this area, I think we can become a category killer in the field. ‘ESG investing,’ said Flatt. Brookfield will aim for average annual returns in mid-teens on ESG funds.
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The growing focus of the fund management industry on investments that consider ESG issues has grown into a company worth over US $ 30 trillion. The American SIF Foundation said in its 2018 report on sustainable, responsible and impact investing trends that more than one in four dollars under professional management is invested using ESG criteria.
Brookfield was attractive to Carney because the company is established in related businesses and understands the desire of institutional investors to invest in ESG, the former central banker said.
“The question especially for asset owners, pension funds, sovereign wealth funds and the like is, how are you headed? Are you on the right side or the wrong side of the story? Carney said in an interview.
Over the past three decades, Brookfield has built one of the world’s largest pure-play renewable energy companies. It now has nearly 20,000 megawatts in operation and 18,000 megawatts in development around the world. It has other activities, such as water treatment facilities in Brazil, that could fit in with the new funds, Flatt said.
“The discipline around the impact that these investments will have on the climate and the portfolio will become a common skill, as will the management of credit risk and duration,” said Carney. “The platform that can do this, and which is in the lead, will be more attractive for allocation than the one that does not.”
The growth of Brookfield’s renewable energy business has been accompanied by a massive expansion of its portfolio. Since 2012, Brookfield’s assets have grown to around US $ 550 billion from US $ 150 billion, behind only Blackstone Group Inc. among alternative asset managers.
Speculation about Carney’s next move exploded earlier this month after Bloomberg announced that Canadian Prime Minister Justin Trudeau had asked him for advice on an economic plan aimed at pulling the country out of recession. This has led to claims that he might even enter government as finance minister, but last week Trudeau gave the job to Chrystia Freeland, his deputy prime minister.
By courting Carney, Brookfield has bolstered its field advantage in a series of calls over the past few months. Carney will continue to live in Ottawa and work in the nearby Brookfield office in Gatineau, Quebec.
Carney’s new role fits firmly with his interest in climate change. He is the United Nations special envoy for climate action and finance and will continue to fulfill this role. He also openly criticized companies that failed to invest in climate change measures. He plans to publish a book next spring on how to build a more inclusive society in the wake of the Covid-19 pandemic.
Carney said Brookfield’s role was appealing as it blends his personal passions with his professional skills.
“I didn’t want to just go back to the private sector, to direct commercial life,” Carney said. “Having something where I could see the potential impact and the marriage of advertising with purpose was pretty important to me. “