Principles put into practice

May 25, 2015

Our primary responsibility is to provide a secure pension for generations to come. We have more than 300 investment professionals, managing roughly 10,000 investments, to do just that. But, we also know there is an onus on us to invest responsibly. We seek to balance risk, return and reputation while contributing to the long-term sustainability of the plan. To achieve this, we've established a set of responsible investing principles to guide how we analyze environmental, social and governance (ESG) risks, and the impact those risks might have on our financial return.

Check out these examples of how we're putting our principles into practice.

Integrate ESG

We consider risks and the expected financial return when deciding whether or not to invest.

  • We considered investing in a U.S. healthcare provider. When we dug deeper, we weren't satisfied with the quality of care or the internal controls, so we walked away.
  • Our portfolio of wind and solar assets are attractive from a climate change perspective, but we still scrutinize its impact on water usage, surrounding communities and worker health and safety.

Engaged Ownership

We have long believed that good governance is good business. We also think it's necessary for sound management of environmental and social risks.

  • We vote 100% of the shares we own.
  • We speak with management of investee companies as needed.
  • We voted at nearly 2,000 company meetings in 2014.
  • When we initially invested in Hitachi, we worked with management to address a number of governance issues within the organization. As a result, the company completely overhauled its operations and strategy, reviewed its asset portfolio and rejuvenated its board of directors. When we sold our stake, we saw a 300% gain on our investment.

Continuous Learning

ESG risks are constantly evolving. To stay current, we've established an in-house education series featuring experts from around the world. We also review research and share knowledge across our team.

  • Michael Morell, the Central Intelligence Agency's former acting director and deputy director, shared his thoughts on terrorism, cybercrime and international hotspots with members of our investment team.
  • Jeff Gravenhorst, the CEO of ISS, one of our portfolio companies, shared how the facilities management company with more than 500,000 employees made gains through employee engagement. He explained how simple changes like new microfibre mops and water nozzles in its plants have reduced water usage by 22% and energy use by 15%.

Seeking Disclosure

Integrating ESG can only be done if you have the right information about the ESG risks faced by companies and how they manage them. ESG metrics are not part of the current standard of financial reporting in public companies. It's up to investors like us to ask these companies for the information. With our private companies, we have a lot more access to this information.

  • We conducted a thorough ESG analysis with a number of our portfolio companies, including Brussels Airport. The result? The airport now regularly reaches out to its surrounding community, improved employee engagement to help increase productivity and added corporate responsibility as a regular agenda item for the board committee.

Collaboration

We're a member of more than a dozen groups, all working to promote good governance, disclosure and responsible investing through education and advocacy. We also contribute to committees and research initiatives and exchange information about ever-changing best practices.

  • We collaborated with the UN and other institutional investors to craft a statement calling for support of investing in climate-resilient infrastructure projects. Pension funds representing $1.3 trillion in assets signed on and the letter was presented to the United Nations Secretary General Ban Ki-moon.