The CAAT Pension Plan believes that, over the long term, companies that have sound corporate governance structures and practices will outperform those that do not.
The Plan believes that managing the risk to long-term shareholder return includes the awareness and management of the environmental and social impacts of a corporation’s business activities. Inattention to these impacts can result in, among other things, reputational harm that in turn can lead to financial underperformance.
In carrying out investment activities, the Plan follows its Responsible Investing Policy that covers:
- proxy voting
- corporate engagement
- encouraging the integration of environmental, social, and governance (ESG) factors in investment processes.
The primary objective of the CAAT Pension Plan’s responsible investing activities is to assist in maximizing the Fund’s risk adjusted returns.
The CAAT Plan’s Board of Trustees believes that, over the long term, companies that have sound corporate governance structures and practices will outperform those that do not.
The Board believes that managing the risk to long-term shareholder return includes the awareness and management of the environmental and social impacts of a corporation’s business activities. Inattention to these impacts can result in, among other things, reputational harm that in turn can lead to financial underperformance.
The Board supports and encourages fair wages, benefits and working conditions for workers employed by our assets. In particular, we point to the ILO Principles addressing the right to form and join trade unions and bargain collectively and freedom for workers’ representatives from discrimination and their right to access all workplaces necessary to enable them to carry out their representation functions.
The Board recognizes the important role and contribution of public employees – and a public sector with sufficient capacity and resources – in ensuring the long-term prosperity of our society and economy.
United Nations-supported Principles for Responsible Investment (PRI) Initiative
The CAAT Plan is a signatory to the PRI Initiative, which is made up of an international network of institutional investors that are committed to incorporating responsible investment issues into their decision making and ownership practices.
One of the most important ways for the Plan to encourage corporations to be environmentally and socially responsible and to adopt sound governance practices is by using its proxy vote. The Plan or its voting service provider will:
- Vote proxies in a thoughtful, responsible manner. Shareholder proposals on environmental, social and governance (ESG) issues will be examined on a case-by-case basis taking into account the possible effects that any proposed actions would have on the long-term shareholder value of the corporation.
- Encourage disclosure by corporations on ESG factors and risks so that investors can be better informed as they do their financial and fundamental analysis.
- Vote for proposals that corporations adopt policies that embrace the following third party guidelines/ principles:
- The International Labour Organization’s Conventions
- The Ceres Principles on the Environment
- OECD Guidelines for Multinational Enterprises - General Principles
The CAAT Plan will also join with other institutional investors in engaging with the management of corporations in which it invests to encourage better environmental, social and governance practices.
- Membership in the Canadian Coalition for Good Governance
- Participation in the Pension Investment Association of Canada (PIAC)’s investor stewardship and advocacy endeavours
- Sign on to:
- CDP (carbon disclosure and water use) o Extractive Industries Transparency Initiative o Other initiatives that are consistent with the principles of this Policy and approved by the Managing Fiduciaries
Investment Managers and General Partners
In meetings with the Fund’s Investment Managers and General Partners, where appropriate to the type of mandate, the CAAT Plan will encourage the incorporation of environmental, social and governance factors into the investment management processes.
On an annual basis, Investment Managers and General Partners are asked to respond to a series of questions about how ESG issues are integrated into their investment processes.
Direct and Co-investments
In due diligence processes relating to private market direct and co-investment opportunities, the CAAT Plan will consider ESG factors in risk analysis.
Each year a report will be provided to the Investment Committee on how this Policy is incorporated into the CAAT Plan’s investment activities.
The Board of Trustees will review this policy at least once every three years to ensure that it remains relevant and appropriate.
The Board of Trustees approved this Policy on March 27, 2007.
The Board of Trustees approved an amended Policy on May 31, 2016.
Principles for Responsible Investment (PRI)
The CAAT Plan is a signatory to the United Nations supported Principles for Responsible Investment, together with over 1,800 institutional investors from more than 50 countries. The signatories to the six Principles for Responsible Investment believe that: “an economically efficient, sustainable global financial system is a necessity for long-term value creation. Such a system will reward long-term, responsible investment and benefit the environment and society as a whole.”
The Plan will vote the proxies attached to its shareholdings thoughtfully and responsibly. Shareholder proposals dealing with ESG factors will be examined on a case-by-case basis, taking into account the effects of the proposals on shareholder value.
The CAAT Pension Plan joins with other institutional investors in Canada to encourage regulators and the management of corporations to strive for better governance practices and more comprehensive disclosure of environmental, social, and governance risks.
The Plan participates in or is a signatory to the following responsible investing initiatives:
Canadian Coalition for Good Governance (CCGG)
The Plan is a member of the CCGG, which represents the interests of institutional investors in promoting good governance practices in Canadian public companies and the improvement of the regulatory environment.
Pension Investment Association of Canada (PIAC)
Members of the CAAT Plan investment team are active members of PIAC, which sets out to develop, monitor, and promote sound standards of corporate governance in Canada.
Institutional Limited Partners Association (ILPA)
The Plan is an active member of ILPA and has endorsed ILPA's Private Equity Principles, which promote the alignment of interest, good governance, and transparency that form the basis of effective relationships between limited and general partners.
CDP (Carbon Disclosure Project)
The Plan is a signatory to the CDP and the related CDP Water Disclosure initiatives. CDP initiatives encourage companies globally to disclose information related to environmental impacts, enabling investors to evaluate the risks in their portfolios relating to these factors.
Incorporating ESG considerations into the Investment Process
As a long-term investor, the CAAT Plan encourages its investment and fund managers to integrate the consideration of ESG factors into their processes. This is done through the due diligence process for existing and potential managers as well as through an annual questionnaire that is sent out to the investment managers and general partners asking a series of questions about how sustainability factors are integrated into their investment processes. The responses to the ESG survey indicate that the Plan’s investment managers are increasingly considering the impact of ESG factors when making investment decisions.