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.
The CAAT Pension Plan takes very seriously its fiduciary responsibility to the more than 61,000 Plan members who depend on us for secure, lifetime pension benefits. The principal investment goal of the Plan is to maximize long-term, risk-adjusted returns to secure pensions.
In carrying out the Plan’s investment decisions, we are guided by the three core principles of our Responsible Investing Policy:
1. Supporting sound governance through proxy voting
2. Corporate engagement, which entails the Plan working with other institutional investors to encourage regulators and Canadian corporations to strive for more comprehensive disclosure of ESG (environmental, social, and governance) risks
3. Encouraging the integration of ESG factors in investment processes.
Ultimately, CAAT believes that companies that have sound corporate governance structures and practices will outperform those that do not, and 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.
1. Proxy Voting
The CAAT Plan’s Responsible Investing Policy states that the Plan will vote the proxies attached to its shareholdings thoughtfully and responsibly, and that shareholder proposals dealing with ESG factors will be examined considering the effects of the proposals on shareholder value.
Votes are generally cast in favour of proposals that corporations adopt policies that embrace the International Labour Organization’s Conventions, the Ceres Principles on the Environment, and the Organisation for Economic Co-operation and Development Guidelines for Multinational Enterprises.
2. Corporate Engagement
The Plan joins with other institutional investors to encourage Canadian regulators and the management of Canadian public corporations to strive for better governance practices and more comprehensive disclosure of ESG risks. The Plan actively encourages corporations to improve disclosure on ESG factors and risks so that investors are better able to take such factors into account when looking at the risk and return prospects of investments in their portfolios.
The Plan has been a member of the Canadian Coalition for Good Governance (CCGG) since 2005. The CCGG was formed to represent the interests of institutional investors in promoting good governance practices in Canadian public companies, and to improve the regulatory environment to best align the interests of boards and management with those of their shareholders. The members of the CCGG include a range of institutional investors, such as pension plans, mutual funds, and other third-party money managers that manage approximately $4 trillion in assets.
Shaping change through collaboration
Principles for Responsible Investment
The CAAT Plan is a signatory to the United Nations-supported Principles for Responsible Investment (PRI), together with more than 2,200 institutional investors from more than 50 countries. The signatories to the PRI believe that an economically efficient, sustainable global financial system will reward long-term, responsible investment and benefit the environment and society.
The CAAT Plan is a signatory to the CDP (formerly known as the Carbon Disclosure Project). The CDP acts on behalf of hundreds of institutional investors in encouraging companies around the world to disclose information on greenhouse gas emissions, water usage, and their strategies for managing climate change and deforestation risks.
The CAAT Plan is an affiliate of SHARE – the Shareholder Association for Research & Education. SHARE is a Canadian organization that works with institutional investors to promote responsible investment practices through active ownership, research, and education. In 2019, SHARE became one of the Plan’s participating employers.
Pension Investment Association of Canada (PIAC)
Members of the CAAT Plan’s investment team are active in the Pension Investment Association of Canada (PIAC), an organization focused on promoting sound investment practices and good governance for the benefit of pension plan sponsors and beneficiaries. CAAT’s Chief Investment Officer Julie Cays and Kevin Fahey, Managing Director, Investments, are both past Chairs of the PIAC Board of Directors.
Institutional Limited Partners Association (ILPA)
The Institutional Limited Partners Association (ILPA) is a global industry association composed of limited partner investors in private equity funds. CAAT is an active member of ILPA and has endorsed the association’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.
3. Integrating ESG factors into investment processes
As a long-term investor, the Plan encourages its investment and fund managers to integrate the consideration of ESG factors into investment decisions. 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 Plan has tracked these responses for more than a decade and has found that investment and fund managers are increasingly considering the impact of ESG factors when making investment decisions.
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.