As a major investor, OPTrust recognizes that environmental, social and governance (ESG) concerns have the potential to affect the Plan’s investment performance. We have therefore developed and implemented a number of specific measures to identify, address and manage ESG-related issues as part of our investment activities.
OPTrust’s responsible investment program includes:
- the development of policies addressing the potential impact of ESG issues on the Fund’s investment returns
- the integration of ESG considerations across our investment activities
- engaging with partners and the companies in which we invest to encourage strong management of ESG issues
- a proxy voting program designed to ensure that OPTrust’s voting rights are used to promote strong corporate governance, including the proactive management of environmental and social risks.
In 2007, our Board of Trustees approved changes to the Plan’s Statement of Investment Policies and Procedures recognizing ESG issues as factors to be addressed as part of our investment program. Since then, we have worked with our external investment managers to identify how ESG criteria are integrated into their investment decisions and added these criteria to our regular investment management monitoring processes. We are also working to incorporate ESG criteria into the investment decision-making processes of our internally managed real estate, infrastructure and private equity programs.
Responsible Investing Principles
In 2009, the Trustees approved a formal Statement of Responsible Investing Principles (SRIP). This statement articulates OPTrust’s general approach to responsible investing.
Building on the understanding that environmental, social and governance issues have the potential to affect the performance of the Plan’s investment portfolios, the SRIP identifies specific areas of concern. These include workers’ rights and working conditions, fundamental human rights, corporate governance issues and other social and environmental risks.
The SRIP, which applies to all of OPTrust’s assets, is an expression of our support for high standards of corporate governance, our strong record of shareholder voting and our continuing efforts to promote the integration of environmental, social and governance factors throughout our investments.
While the SRIP is applied in different ways across various asset classes, we expect that the processes used for making decisions about both internally and externally managed assets will incorporate the principles contained in the statement. For example, as part of the SRIP implementation process:
- OPTrust has conducted a review of our various public equity portfolios to identify companies that may have exposure to financial, reputational or other risks arising from ESG issues. We then used the results of this review to engage our external investment managers on how these issues are reflected in their decision-making process.
- We continue to pursue BESt (Building Environmental Standards) certification from the Building Owners and Managers Association of Canada (BOMA) for our real estate holdings. At the end of 2010, we had achieved certification for 54%, by value, of our directly-owned Canadian real estate portfolio, up from 36% in 2009.
- Our Private Markets Group has continued to expand the Plan’s investments in renewable energy projects as part of our infrastructure portfolio. Investments in these regulated assets support our SRIP, contributing to, and benefiting from, global efforts to reduce carbon emissions and other pollutants associated with many traditional sources of energy.
UN Principles for Responsible Investment
In May 2010, OPTrust become a signatory to the United Nations’ Principles for Responsible Investment (PRI). The PRI is an investor initiative in partnership with the United Nations Environment Program Finance Initiative (UNEP FI) and the UN Global Compact with more than 880 signatories worldwide, representing US$25 trillion in invested assets. As a signatory, OPTrust has committed to put the six Principles for Responsible Investment into practice.
- We will incorporate ESG issues into investment analysis and decision-making processes.
- We will be active owners and incorporate ESG issues into our ownership policies and practices.
- We will seek appropriate disclosure on ESG issues by the entities in which we invest.
- We will promote acceptance and implementation of the Principles within the investment industry.
- We will work together to enhance our effectiveness in implementing the Principles.
- We will each report on our activities and progress towards implementing the Principles.
These principles were developed by the investment community and provide a best practices framework for responsible investing. As a PRI signatory, we are also able to access a global network of institutional investors to share information and collaborate on engagement activities.
Carbon Disclosure Project
In 2010, OPTrust also joined the Carbon Disclosure Project (CDP). The CDP is an international responsible investing initiative that conducts an annual survey of thousands of the world’s largest companies regarding their greenhouse gas emissions and climate change strategies on behalf of more than 500 of the world’s leading asset owners and investment firms, with more than US$71 trillion in assets under management.
By signing onto the CDP, OPTrust has joined with other major global investors who are committed to enhancing corporate disclosure related to climate change, to ensure access to information that may be material to their investment decisions.
Proxy voting
As part of our efforts to ensure good corporate governance practices at the companies in which we invest, OPTrust actively exercises our shareholder voting rights. Stock ownership rights are financial assets that must be managed with the same care and diligence as any other asset. The Plan’s shares are voted according to OPTrust’s detailed Proxy Voting Guidelines approved by the Trustees. These guidelines address key governance issues such as the composition of boards of directors, executive compensation, shareholder rights, and the disclosure of material ESG information in such areas as labour rights and climate change.
OPTrust uses an external proxy voting service provider to research and vote our proxies according to our guidelines. OPTrust staff work closely with the voting fiduciary and monitor our voting record to ensure that the guidelines are applied consistently. When issues arise that fall outside the guidelines, they are referred to OPTrust for a decision on how to vote our shares.
Promoting responsible investment
As part of our commitment to addressing environmental, social and governance issues, OPTrust participates as an active member in organizations that carry out research and advocacy in this area. These organizations include:
