Businesses have an opportunity to help create a better future. We make investments in sustainable solutions and lend in a way that mitigates social and environmental risk.
Why we invest in Responsible Financing
Addressing the environmental issues that face our future will require financial resources. As a bank, our financial resources and expertise position us to help create a better future through responsible financing.
A Renewable Future in Colombia
Colombia is the third largest country in terms of population in Latin America and enjoys one of the strongest economies in the region. GDP is growing at a rate of 3% – 4% per year since 2010, and the middle class is increasing steadily.
Powering a growing economy
As Colombia’s economy has grown, demand for electricity has increased along with it. Similar to many emerging markets in Latin America, Colombia lacks the infrastructure necessary for generating electrical power. According to research by the World Bank, demand for power is expected to increase significantly throughout Colombia and the surrounding region by 2030.
Colombia can supply approximately 16,000 megawatts (“MWs”) of electricity serving about 48 million Colombians. To put that in context, Canada’s electricity supply is close to 133,000 MWs — which serves a population of only 36 million. When compared with Canada, Colombia serves a population that is about 1.3 times larger with an electricity generation base about 1/8th the size. To supply electricity to a growing economy in the coming decades, Colombia needs to dramatically scale up its generation infrastructure.
Hydropower as national renewable energy source in Colombia
Due to the country’s abundance of rivers, Colombia relies heavily on hydropower. The government is committed to reducing greenhouse gas emissions and hydropower accounts for about 70% of Colombia’s total annual electricity production — with potential to grow even more. A recent study found that if Colombia could fully realize the potential of hydropower, it could provide more than enough electricity to meet the needs of the country for many years to come.
Isagen’s role in Colombia’s hydropower sector
Colombian electricity company Isagen plays an important role in producing and providing renewable energy to Colombian customers. Isagen operates six modernized large-scale hydropower plants that account for about 17% of the country’s total installed generating capacity and they have projects in development that could generate an additional 3,300 MWs. Until very recently, the Colombian government owned and controlled the majority of Isagen. However, in late 2014, the government made a move to encourage foreign investment in Colombia’s hydropower sector.
Brookfield Renewable Partners enters the Colombian market
Brookfield Renewable Partners, L.P. (Brookfield) is a Canadian-based global renewable energy company with a focus on hydroelectric generation. The company owns and operates one of the largest independent renewable power businesses in the world. Over 85 percent of their portfolio is hydroelectric, including recently purchased Isagen, a transaction supported by Scotiabank in a number of ways.
Funding the transaction
For the past 15 years, Scotiabank has worked for Brookfield on numerous corporate and project financings. Scotiabank’s presence in and understanding of the Colombian market helped secure its position in 2016 to underwrite a US$750 million multi-tranche financing to assist Brookfield together with its institutional partners in the acquisition of Isagen.
Investing in renewable energy benefits everyone
Colombia’s government has been able to use proceeds from the privatization of Isagen to invest in other critical projects through its fourth generation (4G) public-private partnership infrastructure program, including roads, ports and airports – to improve the economy through trade and productivity growth. As the economy develops, Isagen will play a key role in realizing the full potential of renewable energy in Colombia, ensuring the country has access to the electricity to power its growth.
For Patrick Metzger the need for a tool to help make investment decisions based on responsible business practice predates this story by at least a decade:
"Personally, I wanted something like this 10 years ago, when I was just starting to invest. At that time there were already a few sustainable mutual funds on the market — which I wasn't super impressed with. So I wound up doing a ton of research by myself, but that wasn't very effective. I found that there really was no easy and efficient way to research the kinds of companies I wanted to invest in."
Fast forward to 2017. Patrick and his Scotia iTRADE® co-worker Reame Isaac-Daniel have spent the past 18 months working with Sustainalytics1 to offer a tool to provide customers with relevant, up-to-date information about the socially responsible practices of a number of companies.
The link between ESG and investing
Corporate environmental, social and governance practices (ESG) have the potential to impact a company's financial performance, both positively and negatively. Corporate data on ESG practices has also been used by institutional investors and fund companies as part of their investment management. According to the Global Sustainable Investment Alliance, in Canada alone, the number of sustainable investment assets jumped from CAD$589 billion in 2012 to CAD$945 billion in 2014 — a staggering 62% increase in just a few years.
Professional investors have had access to this data for several years
"This kind of information has been available to institutional investors and other portfolio managers for some time now," explains Reame. "Many fund companies look at ESG data." This makes sense, since environmental, social or governance risks could have an impact on corporate performance long-term.
However, until very recently ESG data has not been readily accessible for direct investing customers who want to choose which companies to invest in for themselves. As Patrick learned 10 years ago, if customers want to make an investment based on ESG considerations, they would usually purchase some type of managed fund — such as a mutual fund or exchange traded fund. While these types of investments certainly account for ESG factors, do-it-yourself investing customers may not have the independence to decide what kind of ESG data matters most to them.
Scotia iTRADE's new tool
With this in mind, Scotia iTRADE has partnered with Sustainalytics, an ESG research firm, to develop a first-of-its-kind tool in Canada that provides retail customers with real-time ESG data to guide investment decisions.
Rather than building a new ESG-based investment tool from the ground up, Patrick and Reame chose to integrate ESG information into a familiar platform that Scotia iTRADE customers already use - Scotia iTRADE's online trading platform.
Reame explains, "We already have a lot of research and tools on our trading site. We positioned this new tool as something that interacts with all of the other tools we have. We want customers to be able to use this in addition to all of the other resources at their disposal when making an investment or trading decision. It's one more layer of information that they can use to inform their investments."
Patrick and Reame's work has opened up entirely new ways for customers to inform their investment decisions. Using the ESG data available through the Scotia iTRADE tool, customers can now:
Incorporate ESG research into investment decision-making
Generate information about investments that consider positive societal impact
Make investment decisions consistent with personal values
Upholding the right to become better off
So far, the reception to the new tool has been overwhelmingly positive — from both customers and other employees at Scotiabank. And, as Patrick sees it, the connections between the new ESG tool, the Bank, and its customers are all based on the Bank's core beliefs: "Scotiabank believes that every customer has the right to become better off. But 'better off' often means a lot more than just extra dollars in a customer's pocket.
"'Better off' also means that customers are able to invest their own way — according to their values and wants. And whether you're doing that because you think there's a financial benefit, or because you want to invest in companies that share your values and you believe in the power of shareholder influence, or whether you're doing it for both reasons; we want to be able to provide customers with an opportunity they didn't have before.
Here’s how we demonstrate our commitment to responsible financing in ways that mitigate risk.
Sustainalytics is an ESG research provider and its role is limited to providing research and analysis in order to facilitate well-informed decision-making
Scotia iTRADE® (Order-Execution Only Accounts) is a division of Scotia Capital Inc. ("SCI"). SCI is a member of the Investment Industry Regulatory Organization of Canada and the Canadian Investor Protection Fund. Scotia iTRADE does not provide investment advice or recommendations and investors are responsible for their own investment decisions. ®Registered trademark of The Bank of Nova Scotia, used under license.