When Canada’s provincial and federal governments created CPP Investments, they legislated the organization to seek a maximum rate of return without undue risk of loss. We are explicitly required to act in the best interests of contributors and beneficiaries and to take into account the factors that affect the financial obligations of the CPP. The clarity of our mandate supports the important investment challenge we face to achieve sufficient growth to sustain the Fund.
We believe that considering environmental, social and governance (ESG) factors in our investment decisions and asset management activities will lead to better long-term investment performance across the Fund. A company’s approach to ESG often serves as a good indicator of the quality of the business, its management and board oversight, and how it will perform over the long term.
In keeping with our commitment to disclose our sustainable investing activities, our annual Report on Sustainable Investing provides a detailed review of our activities and achievements. For more information about our approach to sustainable investing, please visit the Sustainable Investing section of our website.
Our sustainable investing efforts focus on three main areas: integration, engagement and collaboration.
- ESG risks and opportunities are incorporated into our investment decision-making and asset management activities, as standard practice. Given CPP Investments’ mandate to pursue maximum investment returns without undue risk of loss, we integrate ESG factors into our investment analysis alongside other investment considerations, rather than screening investments or, conversely, targeting investments, based on ESG factors alone.
- We are an active, engaged owner and work to enhance long-term performance of companies in which we invest by engaging, either individually or collaboratively, with other investors. We encourage companies to provide better disclosure and adopt better practices on ESG factors that we believe are material to the long-term performance of the company. We pursue the full spectrum of engagement that ranges from thoughtful exercise of our proxy voting rights to direct discussions with the Board Chairperson. We currently have five focus areas for our engagement program: climate change, water, human rights, executive compensation and board effectiveness.
- We collaborate with organizations seeking improvements in transparency and standards on ESG, conduct research and participate in ESG-related regulation consultations and advocacy. We join and actively contribute to initiatives focusing on specific subject matters, such as governance practices and others that advocate for broader factors, such as fostering long-term thinking in the investment and corporate worlds. These efforts further our ability as an investor to enhance long-term performance of the Fund.
At CPP Investments, we view climate change as one of the world’s most significant physical, social, technological and economic challenges. Given our exceptionally long investment horizon, we actively address climate change to increase and preserve economic value, in accordance with our purpose. We make decisions in the best interests of current and future beneficiaries – including what and when we buy, hold or sell. To do so, we access and carefully evaluate data, science and prudent forecasts. As world energy markets transition to lower-carbon sources, the implications for investors will be far reaching.
CPP Investments’ efforts to understand these implications and to take diligent action started more than a decade ago and will accelerate in the coming years. We have taken a leading role in encouraging companies to improve climate change disclosure and practices, helping develop the standards for how they do this. We believe companies have a responsibility to their stakeholders to be transparent about the challenges posed by climate change. We seek to be a leader among asset owners and managers in understanding the investment risks and opportunities presented by climate change. To help address risks and opportunities, CPP Investments has established a Climate Change Program with six work streams. Since 2017, CPP Investments has invested more than $2 billion in renewable energy projects. This helps diversify the portfolio as the world transitions to a lower-carbon energy supply, production and use.
What is CPP Investments’ approach to sustainable investing?
How does CPP Investments view climate change risks and opportunities?