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:
- Supporting sound governance through proxy voting
- 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
- 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.
Julie Cays, CAAT’s Chief Investment Officer, is a past Chair and current Vice-Chair of the CCGG Board of Directors, and Chair of its Governance Committee. She regularly participates in engagement meetings with directors of Canadian public corporations.
Shaping change through collaboration
Principles for Responsible Investment (PRI)
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.
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.
Click here to read the Responsible Investing Policy in its entirety
The objective of the Responsible Investing Policy is to communicate the principles behind and the approach to the CAAT Pension Plan’s initiatives relating to the incorporation of environmental, social and governance (ESG) factors into its investment program.
The CAAT Plan’s Board of Trustees believes that, as part of its fiduciary duty to Plan beneficiaries, consideration of risks related to the investment of the Plan’s assets includes consideration of non-financial risks such as ESG factors.
In particular, the Board 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 the sustainability of a corporation includes the awareness and management of the environmental and social impacts of the 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.
Principles for Responsible Investment (PRI)
The CAAT Plan is a signatory to the PRI, which is a global organization that is a leading proponent of responsible investment. It 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 join with other institutional investors in engaging with the boards and management of corporations in which it invests to encourage better environmental, social and governance practices. Organizations that facilitate collaboration include:
- The Canadian Coalition for Good Governance (CCGG)
- The Pension Investment Association of Canada (PIAC)
- CDP (carbon emissions disclosure and water use)
- Shareholder Association for Research and Education (SHARE)
- Other initiatives that are consistent with the principles of this Policy and approved by the Managing Fiduciaries
Investment Managers and General Partners
In due diligence 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 due diligence and risk (including reputational risk) analysis.
Each year a report is 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 last reviewed this policy on May 31, 2016.
The Board of Trustees approved an amended policy on May 28, 2019.