CPP Investment Board (CPPIB) has added human rights as one of our focus areas for engaging with companies in which we invest.
As the trusted manager of pension money for 19 million individuals, we have an obligation to protect and enhance the value of their fund. One of the ways that we do this is by advocating for changes that we believe will build value at companies during the long horizon over which we invest. This is what we refer to as engagement. We select companies for engagement based on the materiality of their environmental, social and governance (ESG) risks, the gap between current ESG practices and best practices, the size of our holdings and our key focus areas. We seek to develop constructive dialogues with senior executives, board members, regulators, industry associations and other key stakeholders.
We believe that strong human rights practices contribute to long-term value and engaging with companies in our portfolio on this topic is therefore an important part of our strategy to maximize long-term returns.
Our four focus areas had previously been climate change, water, executive compensation and the extractive industries (otherwise known as the oil & gas and mining sectors). This new human rights focus area will replace the extractive industries focus area, but it’s important to note that despite this change, engagements with the oil & gas and mining sector on a variety of ESG matters will remain a key priority for CPPIB. They will now be captured under the human rights focus area, as well as the focus areas of climate change and water. At the same time, the new human rights focus area will also enable CPPIB to broaden our engagements in other sectors that we consider prone to human rights-related risks, such as consumer goods and information technology.
How do we engage with companies on human rights issues?
· We are a member of a collaborative engagement led by the United Nations-supported Principles for Responsible Investment aimed at encouraging companies in the extractives sector to implement the UN Guiding Principles on Business and Human Rights and improve disclosure of human rights-related policies and processes. As part of this engagement, we hosted a roundtable at our office in Toronto with global oil & gas and mining companies to discuss human rights-related best practices. CPPIB continues to take an active role on this collaborative engagement and has chosen to lead a number of engagements and work closely with peers on others.
· We are part of a collaborative engagement related to child labour and human rights concerns regarding cobalt originating from the Democratic Republic of the Congo. This engagement aims to encourage electronics, automotive and battery manufacturing companies to improve their cobalt supply chain management systems, as well as engage with the Electronics Industry Citizenship Coalition (EICC) to understand the related industry-level activities.
· CPPIB’s Sustainable Investing group is part of Hermes Equity Ownership Services (EOS)’ global engagement platform. This supplements and expands our capability to engage with companies in which we invest globally. Human rights is a priority theme for engagements conducted by Hermes EOS, which focus on topics such as poor working conditions, child labour and local community relations. Companies are also encouraged to adhere to or align with initiatives such as the Global Business Initiative on Human Rights and the UN Guiding Principles on Business and Human Rights.
CPPIB also expresses its views on a number of issues, including human rights, by way of proxy voting. We review every voting item put to shareholders at public companies in which we invest. Over the past five years, we have supported several dozen human rights-related shareholder proposals, many of which request additional disclosure from companies on human rights-related risk.
CPPIB believes that engaging on environmental, social and governance practices contributes to creating long-term value for our 19 million contributors and beneficiaries. Overall this change in focus areas will allow CPPIB to broaden its scope and positively influence additional sectors and companies.
For more information, please see our Annual Report on Sustainable Investing.