1) What are some of the benefits of NEI’s approach of directly engaging with companies like Enbridge on sustainability issues such as climate change?

There are three aspects to this question.

The first aspect relates to the underlying aim of building a more sustainable and just society, with the low-carbon energy transition being a key pillar in that future. As a shareholder, we believe strongly that we are best able to achieve these outcomes through meaningful engagement with companies like Enbridge to: a) show that investors not only support proactive sustainability efforts, but that those efforts are critical to bottom-line performance; and b) where possible, provide input to help guide company strategy in this area. In our opinion, meaningful engagement creates better outcomes than simply avoiding a company or sector. Fundamentally, it is hard to change a company you don’t own.

Second, emerging responsible investing standards often highlight the importance of using investor engagement to address material environmental, social and governance (ESG) risks in their portfolio. There is a growing recognition that being a responsible investor demands some form of engagement.

And third, the low-carbon energy transition is massively complex and fraught with uncertainty. Engagement is a two-way street. While NEI aims to bring our insights and experience to bear, we learn as much from the company, if not more, about its challenges and opportunities, which opens up avenues to finding real solutions collaboratively. We need more, not less, genuine engagement on topics such as climate change.

2) NEI has been engaging with Enbridge on our climate disclosure for some time. How has that dialogue informed NEI’s understanding of Enbridge’s approach to addressing climate change and the transition to a low-carbon future?

Our ongoing dialogue with Enbridge on its approach to the low-carbon energy transition is a good example of why we see such value in engaging with companies. It allows us to ascertain how engaged senior management is on the issue of climate change, and as important, to gain a broader understanding of the company’s strategy for low-carbon resilience. Specifically, the engagement provides us with a window into the mechanics of how the company is actively trying to adapt its strategy—from setting emissions reduction targets, to building the climate expertise of the board, through to engaging operation-level staff. As a result, we have been able to contribute investor-related insights that have adjusted the company’s internal strategy and approach to long-term planning.

While we may not always agree with the final strategy decisions or policy outcomes, we do walk away with assurance that the company is treating the low-carbon energy transition as a material risk—and opportunity—that requires a substantive response. For an investor who is concerned about performance beyond the next quarter, this is a necessary level of comfort to have.

3) As an investor, what are your thoughts on the recommendations of the Task Force on Climate-Related Financial Disclosures (TCFD) as a framework for reporting on the management of climate-related risks and opportunities?

We have been following the development of the TCFD framework (the Framework) closely and have been an active participant in the consultations that led to the final recommendations. We are very supportive of the final outcome and believe that the recommendations mark a very important milestone in the area of climate-related disclosure. In our opinion, the Framework will only continue to grow in importance for the investor community and may eventually become a de facto standard, despite its voluntary nature. While it is still early days, the Framework will continue to adapt and improve as companies and investors start implementation.

What is truly game-changing about the Framework is not necessarily the recommended disclosures, rather, the identification of climate change as a systemic risk to the financial system; and the explicit focus of the Framework on investors and financial institutions themselves is a monumental shift. It is a significant development that the body tasked with ensuring the stability of the global financial system is asking the financial community to assess and disclose its exposure to climate-related risks and opportunities. Investors will in turn be demanding climate-related disclosure from companies in order to be able to properly assess these risks, and the demand for enhanced corporate disclosure and low-carbon resilient strategies will increase. This marks a step-change in investor focus on corporate climate-related disclosure, which in the end will be a net positive for everyone.