OPTrust, CAAT: Coming Clean on ESG

Ontario plans tout ESG progress at responsible investment conference

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green shootsWhile discussions continue over new requirements around environmental, social and governance factors in Ontario, OPTrust has had provisions in place since 2007, says an official at the plan that manages the pensions of Ontario government employees.

Katharine Preston, senior manager of responsible investing at OPTrust, noted that besides integrating language around the issue into its disclosure in 2007, the pension fund took a second major step in 2015 when a new chief executive officer and chief investment officer came on board. They inspired the organization to take a cross-functional team from several departments to look at its fundamental investment strategy that led to it making environmental, social and corporate governance a part of its foundational beliefs, said Preston during a session on institutional investors at the Responsible Investment Association conference in Toronto yesterday.

The College of Applied Arts and Technology Pension Plan has taken similar steps to improve its governance policies, said chief investment officer Julie Cays during the conference session at the Hyatt Regency hotel.

The plan focuses on three pillars of good governance, according to Cays.

“The three pillars of our policy involve our proxy voting practices, corporate engagement and encouraging our external investment management firms to consider environmental, social and governance risks as they’re doing their financial analysis,” said Cays.

It encourages analysis of environmental, social and governance risks through annual surveys that ask investment firms how they integrate “ESG issues into their processes,” said Cays.

The pension plan also encourages disclosure from the firms and signs on to good governance efforts, she noted during the conference session. “We sign on the carbon disclosure project, the extractive industries transparency intiative, and our policy says any other initiatives that are consistent with the principles of our policy,” said Cays.

However, the plans face challenges in fully incorporating the principles. For OPTrust, with almost as many employees paying into the plan as those who are getting payments, the organization is constantly in a “precarious” position, Preston noted.

The College of Applied Arts and Technology Pension Plan faces similar issues.

“Our objective is financial,” said Cays, noting that while the organization may encourage good governance, it ultimately still hires firms based on their return and performance.

Nonetheless, the plans have goals for the future.

“Our commitment is really to work on due-diligence processes in each of our investment strategies in terms of ESG integration, being a bit more rigorous in how we do it and how we document it and record it, as well as trying to work more closely with our investment risk teams,” said Preston.

Cays said her organization plans to maintain and improve its policies after signing on to the principles for responsible investment this past year.

“Our goal is to make sure trustees remain engaged and informed and that our members are also happy with our approach and happy with their pensions.”

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