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If you have a topic that is not addressed here, please email Communications@otpp.com.
- 1. How are environmental, social and governance factors incorporated into the investment decision making process?
As we state in our proxy voting guidelines we believe that careful consideration of environmental, social and governance (ESG) issues by companies and their boards will enhance long-term shareholder value. We encourage companies to develop policies and practices to address ESG issues that are relevant to their businesses, including:
- the environmental impact of the company’s products and operations and the costs of remediation
- the impact of the company’s strategies and decisions on the communities and constituencies directly affected by its products and operations
- fair labour practices for all segments of the population
- employee training and development.
We’ve found that companies that ignore these responsibilities are less likely to be successful in the long term.
- 2. With thousands of investments, why can’t you exclude specific investments that some members find offensive?
We understand that not all plan members will support every investment decision we make. We also know that members hold varying views of what’s acceptable, with concerns ranging from labour relations and the environment to health and job creation. As you may appreciate, taking into account the preferences of nearly 300,000 individuals would severely limit our investment choices and impact the plan’s overall performance, thereby preventing us from fulfilling our mandate. We must prudently invest, which for us means we endeavour to maximize returns for all plan members.
- 3. I understand Teachers’ is a signatory to the Principles for Responsible Investing (PRI). What exactly is this?
Yes, we are part of a network of international investors working together to put the six Principles for Responsible Investment into practice. These principles reflect the view that environmental, social and corporate governance (ESG) risks and opportunities can affect the performance of investment portfolios and therefore must be given appropriate consideration by investors if they are to fulfil their fiduciary duty. Learn more about PRI.
Our investing practices were already aligned with many of the Principles for Responsible Investing, and the PRI is consistent with our core values of championing accountability and risk consciousness. However, there are reporting and other administrative commitments associated with membership in this network, which we now have the capacity to meet across our investment portfolio.
Our association with the Principles for Responsible Investing underlines the importance we and our members attach to responsible investing. We expect that being part of this initiative will enhance discipline and commitment to our RI efforts, improve our knowledge and understanding of the financial implication of ESG factors, provide for greater depth and breadth of analysis, and ultimately help us to become better asset owners on behalf of our members. We also look forward to exchanging ideas and best practices with fellow signatories through the PRI organization.
Our investment practices are no different from other major Canadian pension plans. While we do not have a responsible investing policy per se, we have signed the Principles for Responsible Investing and we do consider environmental, social and governance (ESG) risk factors when making investment decisions, if we believe they will impact the long-term financial performance of a company.
Every pension plan is different and will act in the best financial interests of its members. We believe that one of the most effective ways to fulfill our fiduciary duty – to use all reasonable ways to find value to secure members’ retirement income – is to focus on promoting good corporate governance standards and practices.
- 7. Who should I talk to if I would like social investment screens to be applied to the pension plan’s investments?
If plan members want us to avoid specific sectors or investments and are willing to risk earning lower returns, they would need to work through the Ontario Teachers’ Federation (OTF) to agree on what investments are acceptable and then work with the Ontario government – the other plan sponsor – to change the Ontario Pension Benefits Act.
We have a responsibility to consider all investments that we believe will earn a reasonable return in order to pay teachers’ pensions. We look at all risk factors (including environmental, social and governance issues) to assess the impact they could have on a company’s long-term performance. If our assessment shows a company is an appropriate investment for the plan, we invest.
- 9. How do I know you are taking principled stands on governance matters? How are you voting?
We consider the right to vote to be one of our most effective tools for promoting good corporate governance and our votes are transparent.
Our objective is to vote every share of every company we own at every meeting of that company’s shareholders. We assess all proxy issues by reviewing all relevant company filings and other available materials. We document our reasons for voting for or against almost all non-routine proposals and disclose this information well in advance of company meetings. We invite you to review our governance commentaries and voting positions.
The pension plan’s investing activities are governed by the Ontario Pension Benefits Act. The law says that as employees of a pension plan we have a fiduciary duty to take greater care with the fund’s investments than we would with our own personal investments. Every investment decision we make must be in the best financial interests of all plan members. The law doesn’t allow us to select or exclude investments based solely on social or environmental factors or any other non-financial criteria.
However, we can and do consider environmental, social and governance factors when making investment decisions if we believe they will impact the long-term financial performance of a company.
Ontario teachers who work for a participating employer must participate in the pension plan and can’t withdraw their contributions. The pension plan invests all member and government contributions on behalf of nearly 300,000 people who have differing views on what constitutes an acceptable investment. If plan members want us to avoid specific investments, then they (through the OTF) would have to first agree on what investments are acceptable, and then convince the Ontario government – the other plan sponsor – to change the law. Individuals can make their own investment decisions with their own savings or RRSPs.
One of the best ways is through this website. We welcome comments and questions about the Ontario Teachers’ Pension Plan’s responsible investing practices. Please contact Communications@otpp.com
If you are a member of the plan, you can also contact the Ontario Teachers’ Federation on responsible investing issues through http://www.otffeo.on.ca/english/pensions_investment.php.