CPPIB formally sets out ESG expectations for portfolio companies

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Trees growing on coins with the green graph / business with CSR © Kiatdumrong /123RF Stock PhotosThe Canada Pension Plan Investment Board has formally outlined its expectations for portfolio companies when it comes to environmental, social and governance issues in a new section of its latest annual report on sustainable investing.

“To build trust with portfolio companies, we find it helpful to share our expectation of them with respect to considering ESG factors, as they exercise their fiduciary responsibilities to both preserve and grow shareholder value,” the report said.

In particular, the CPPIB highlighted it expects companies have effective boards, align incentives, adhere to its proxy voting principles and guidelines, disclose material climate change impacts, clearly articulate how integrating ESG factors has informed strategy and enhanced returns or reduced risk and have a culture that proactively identifies emerging risks and opportunities and seeks solutions to reduce or capture their potential.

The CPPIB also noted it supports companies aligning their reporting with recommendations from the Sustainability Accounting Standards Board and the Financial Stability Board’s task force on climate-related financial disclosures.

In addition, the sustainability report said the CPPIB more than doubled its investment in renewable energy companies to a total of $6.6 billion as of June 30, 2020, updated its policy on sustainable investing and raised $2.2 billion through two green bonds in fiscal year 2020. As well, it engaged in numerous collaborations and partnerships, including as a signatory of the BlackNorth Initiative.

“Leveraging partnerships and collaborations significantly increases CPP Investments’ impact on matters that improve ESG-related practices,” the report said. “Our collaborative efforts include, but are not limited to, seeking to improve transparency and standards on ESG, conducting research, participating in ESG-related regulation consultations, promoting governance practices and advocating for long-term thinking in the investment and corporate worlds.”

The sustainable investing report also shared a glimpse into the CPPIB’s ESG priorities for the coming year, including continuing to develop a sustainable equities pilot program and further developing its ESG due diligence and climate change security selection framework.

“This new century has fundamentally changed the nature of business, with the heightened expectations of stakeholders helping to bring ESG issues to the forefront,” said Mark Machin, president and chief executive officer of the CPPIB, in a press release. “We believe that by fully considering ESG risks and opportunities, we become better investors and are able to enhance returns and reduce risk for the fund’s more than 20 million contributors and beneficiaries. Addressing sustainability is not just pressing for society and the planet — it is a business imperative.”

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jj gibbons

Unfortunately, given the recent article on The Globe & Mail (Sep.27/20 "CPPIB’s fracking operation in U.S. raises questions") this seems like green-washing.

Contex Group