As a major Canadian institutional investor, OPTrust recognizes that environmental, social and governance (ESG) concerns have the potential to affect the Plan’s investment performance. We have therefore established a responsible investing program and implemented a range of specific measures to identify, monitor and mitigate ESG-related issues where practical, as part of our investment activities. This approach reflects our fiduciary responsibility to the Plan’s members and sponsors, which includes identifying and addressing factors that could affect the Fund’s investment returns.
In 2011, OPTrust’s Board of Trustees approved changes to our Statement of Investment Policies and Procedures (SIP&P) to formalize our commitment to responsible investing. The SIP&P now clearly commits OPTrust and our investment managers to consider ESG issues, where material, when choosing investments on behalf of the Plan.
The policy also requires all of our investment managers to make investment decisions in accordance with OPTrust’s Statement of Responsible Investing Principles (SRIP). The SRIP, which applies to all of OPTrust’s assets, is an expression of our support for the assurance of labour and human rights and the recognition of our duty to be aware of all risks when making investment decisions, including ESG factors.
UN Principles for Responsible Investment
As part of this commitment, OPTrust became a signatory to the UN-backed Principles for Responsible Investment (PRI) in 2010. Developed by major international investors, the PRI provides a best practices framework for responsible investing initiatives and brings together a network of more than 1,000 signatories worldwide, representing US$30 trillion in invested assets. As a signatory, OPTrust has committed to put the following 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.
As part of our responsible investment program, OPTrust is works independently and in partnership with other investors to engage directly with individual corporations that we have invested in to address specific ESG issues.
As part of this corporate engagement strategy, OPTrust has:
- worked with other PRI signatories to contact UN Global Compact signatory companies to either applaud their exemplary reporting or encourage those companies that had not completed their reporting requirements to do so
- joined investors, including PRI members, in a letter writing campaign asking companies to adopt labour and human rights policies throughout their supply chains
- written directly to companies in our Canadian equity portfolio asking them to disclose their approach to mitigating the risks associated with climate change by participating in the Carbon Disclosure Project (CDP).
In addition to the PRI, OPTrust participates in a number of organizations that seek to promote sound corporate governance, shareholder advocacy and responsible investing activities in Canada and around the globe. These organizations also provide OPTrust and our partners with a forum for coordinating corporate engagement activities on a range of governance and responsible investment issues.
Through the Canadian Coalition for Good Governance (CCGG) and the Pension Industry Association of Canada (PIAC), for example, OPTrust supported and encouraged the Ontario Securities Commission to move ahead on regulatory proposals to improve corporate governance practices. These included proposals on majority voting for uncontested director elections, shareholder advisory votes on executive compensation and changes to improve the effectiveness of the proxy voting system.
These organizations have also submitted comments to regulators encouraging them to consider requiring enhanced disclosure from companies on voting results and factors relating to their executive compensation plans.
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. Our staff works closely with the service provider to monitor our voting record and ensure the guidelines are applied consistently. Issues that fall outside the guidelines are referred to OPTrust for direction on how the vote should be exercised.
View our proxy voting record >
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: