Carney joining Brookfield to lead ESG funds
The mystery of Mark Carney’s next job is solved.
Brookfield Asset Management Inc., the global investment firm with about US$550 billion in assets under management, has hired the former Bank of England governor to lead an ambitious expansion into environmental and social investing.
The Toronto-based company plans to develop a group of funds that try to marry positive social and environmental outcomes with strong investment returns. Carney will join Brookfield as vice chairman and steer its environmental, social and governance (ESG) investment strategy.
Bruce Flatt, Brookfield’s chief executive officer, said in an interview he expects the new ESG group could eventually grow to the size of its real estate, infrastructure, and private equity businesses. Carney will be instrumental in that expansion because of his strong relationships with sovereign wealth funds and his range of business experience, Flatt said.
“Every time we can bring in someone smarter than us and better than us, it’s going to be additive to the organization,” Flatt said.
Carney, a former Goldman Sachs banker, ran 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 moved over to the same role at the Bank of England in 2013, before leaving that post in March and returning to Canada.
While it’s still early days, Brookfield contemplates that its ESG funds could acquire whole businesses as well as participate in investments in the firm’s other portfolios, Flatt said.
“Based on our fundraising capacity, the operating businesses and background that we have, and Mark’s relationships and strategic knowledge of this area, I think we can become a category killer in ESG investing,” Flatt said. Brookfield will be targeting annual average returns in the mid-teens on the ESG funds.
Are you more likely to consider ESG-based investing because of Mark Carney’s new role at Brookfield?
The fund management industry’s growing focus on investments that take into account ESG issues has expanded into a US$30 trillion-plus business. The US SIF Foundation said in its 2018 report on sustainable, responsible and impact investing trends that more than one of every US$4 under professional management is invested utilizing ESG criteria.
Brookfield was attractive to Carney because the firm is established in related businesses and understands the desire by institutional investors for ESG investments, the former central banker said.
“The question particularly for asset owners, pension funds, sovereign wealth funds and others is: How are you oriented? Are you on the right side, or the wrong side, of history?” Carney said in an interview.
Over the past three decades, Brookfield has built one of the world’s largest pure-play renewable energy businesses. It now has nearly 20,000 megawatts in operation and another 18,000 megawatts in development globally. It has other businesses, such as water treatment facilities in Brazil, that could fit with the new funds, Flatt said.
“The discipline around the impact these investments will have on climate and the portfolio is going to become a mainstream skill, just like managing credit risk and duration,” Carney said. “The platform that can do that, and is out in front, is going to be more attractive for allocation than one that doesn’t.”
The growth in Brookfield’s renewable energy business has come alongside a massive expansion of its portfolio. Since 2012, Brookfield’s assets have grown to about US$550 billion from US$150 billion, trailing only Blackstone Group Inc. among alternative asset managers.
Speculation about Carney’s next move went into overdrive earlier this month after Bloomberg reported that Canadian Prime Minister Justin Trudeau enlisted him for advice on an economic plan to pull the country out of recession. That led to talk that he might even enter the government as finance minister, but last week Trudeau gave that job to Chrystia Freeland, his deputy prime minister.
In courting Carney, Brookfield pressed its home field advantage during a series of calls over the past several months. Carney will continue living in Ottawa and work out of Brookfield’s nearby office in Gatineau, Quebec.
Carney’s new role fits firmly into his interest in climate change. He is the United Nations special envoy for climate action and finance and will continue in that role. He has also been an outspoken critic of businesses that failed to invest in measures to combat climate change. He’s planning to release a book next spring on ways to build a more inclusive society in the wake of the Covid-19 pandemic.
Carney said the Brookfield role was attractive because it blends his personal passions with his professional skills.
“I didn’t want to just go back into the private sector, to straight commercial life,” Carney said. “Having something where I could see the potential impact and the marrying of the commercial with the purpose was pretty important to me.”