We believe that, by fully considering ESG risks and opportunities, we become better investors, able to both enhance returns and reduce risk for our 21 million contributors and beneficiaries.
The legislation that created CPP Investments gives us clear investment objectives: to maximize returns without undue risk of loss, considering factors that may affect the funding of the CPP. While our investment horizon permits patience and allows us to work with businesses to better understand their approach to integrating material ESG factors into their strategy, inaction with respect to these factors is not a viable long-term strategy.
We believe that, by fully considering ESG risks and opportunities, we become better investors, able to both enhance returns and reduce risk for our 21 million contributors and beneficiaries.
We reflect this belief through our sustainable investing strategy, which is supported by a formal governance structure and a dedicated Sustainable Investing team. This strategy includes the integration of ESG considerations through the life cycle of an investment (from due diligence through the ownership phase and when our portfolio companies prepare for listing). Learn more about how we are informing investment outcomes.
CPP Investments is an active and engaged owner, and is constructive in our partnership with companies on their ESG related journeys. We recognize and respect the different roles that owners, boards and executives each play in ensuring long-term value creation.
To build trust with portfolio companies, we find it helpful to share our expectations of them with respect to considering ESG factors as they exercise their fiduciary responsibilities to both preserve and grow shareholder value. Learn more about our approach to sustainable investing and what we expect of our portfolio companies.
Investing in the path to net zero
CPP Investments has established governing policies, approved by our Board of Directors, to guide our ESG activities.
Our Policy on Sustainable Investing establishes how CPP Investments approaches ESG factors which aligns with our legislative objective to maximize long-term investment returns without undue risk of loss.
Our Proxy Voting Principles and Guidelines provide guidance on how CPP Investments is likely to vote on matters put to shareholders and communicate CPP Investments’ views on important matters that boards will deal with in the normal course of business.
CSO’s Message
“We believe the performance of our portfolio and the generation of long-term investment returns relies upon our ability to adapt to a global economy that is moving toward net zero.”
– Deborah Orida, Global Head of Real Assets & Chief Sustainability Officer.
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Listen to our Head of Sustainable Investing discuss the impact of COVID-19 on the consideration of ESG factors.
Our Climate Change Principles
In November 2021, our inaugural Chief Sustainability Officer led the development of our Climate Change Principles. Click here for a message from our Inaugural Chief Sustainability Officer.
These Climate Change Principles help guide and inform our decision-making so we can deliver our mandate against the backdrop of escalating climate risk and opportunities created by supporting the transition of the whole economy towards sustainability. These five Principles are:
Principle 1: Invest for a whole economy transition required by climate change.
Principle 2: Evolve our strategy as transition pathways emerge and global standards for decarbonization materialize.
Principle 3: Exert influence to create value and mitigate risk.
Principle 4: Support a responsible transition based on our investment beliefs and expertise.
Principle 5: Report on our actions, their impacts and our portfolio emissions.
Learn about our commitment to net zero.
Learn more about how our Fund-wide approach integrates climate change considerations into all relevant investment activities and into our risk framework.
CPP Investments is one of only two global pension fund managers represented on the Task Force on Climate-related Financial Disclosures (TCFD). We are a strong supporter of the TCFD and fully adopted these recommendations by the end of fiscal 2021. Click here to view our reporting in accordance with the TCFD recommendations.
In 2018, CPP Investments became the first pension fund manager to issue a green bond. Green bonds provide CPP Investments with additional funding as we pursue acquisitions of attractive long-term investments that will accelerate the energy transition to a lower-carbon economy.
Listen to members of our Sustainable Energies Group discuss how they are working together to enhance the Fund’s performance.
2021 Proxy Voting Overview
As at June 30, 2021
Key 2021 updates to our Proxy Voting Principles and Guidelines:
- adopted a new climate change voting policy
- Increased our gender threshold to 30%. Learn more about the evolution of our gender diversity voting practices.
- broadened the scope of explicit diversity-related expectations
- added guidance on our governance expectations for newly public companies
We believe that good corporate governance enhances long-term shareholder value. One of the most effective ways we can convey our views to boards of directors and management and fulfil our stewardship responsibilities as an active owner is to vote our proxies at annual and special meetings of shareholders. We oppose resolutions that are likely to diminish long-term shareholder value, even though they may produce short-term gains.
CPP Investments conducts an annual review of our Proxy Voting Principles and Guidelines to ensure they reflect evolving global governance best practices. The updated Proxy Voting Principles and Guidelines are reviewed and approved annually by CPP Investments’ Board of Directors.
As the world moves toward net zero, we aim to manage the investment risks and invest to capture and support value-creating opportunities that will arise as society works to remove greenhouse gas (GHG) emissions from the whole economy.
We believe that the performance of our portfolio will be influenced by how well it adapts alongside the global economy on the path to net zero. As such, we believe stewarding the portfolio to net zero is in the best interests of the contributors and beneficiaries of the Canada Pension Plan and meeting our mandate.
Investing in the path to net zero
We are holding ourselves accountable to our net-zero commitment by taking the following actions. We will evolve and expand our plans over time.
- We will continue to invest and exert our influence in the whole economy transition as active investors, rather than through blanket divestment.
- We will achieve carbon neutrality for our internal operations by the end of FY23.1
- We expect our $67 billion investment in green and transition assets will increase to at least $130 billion by 2030.2
- We will build on our new decarbonization investment approach that seeks attractive returns from enabling emissions reduction and business transformation in high-emitting sectors.
Our commitment is made on the basis and with the expectation that the global community will continue to advance towards the goal of achieving net-zero GHG emissions by 2050. These advancements include the acceleration and fulfilment of commitments made by governments, technological progress, fulfilment of corporate targets, changes in consumer and corporate behaviours, and development of global reporting standards and carbon markets, all of which will be necessary to help enable us to meet our commitment. We are committed to staying ahead of developments that will impact our portfolio’s path to net zero.
Our Climate Change Principles help guide our decision-making so we can deliver our mandate against the backdrop of escalating climate risk and opportunities created by supporting the transition of the whole economy towards sustainability.
Navigating the risks and opportunities presented by the whole economy transition required by climate change will be a defining challenge of the 21st century. It will require courage and extraordinary skill on the part of policy makers, regulators, executives, boards, investors and individual citizens. As an investor, we join this effort not just as a capital provider but as a capital partner, one that brings experience and expertise as well as financial resources to the table.
We are committed to doing our part in the best interests of helping to keep the Canada Pension Plan secure and solvent for generations to come, and are delivering our statutory mandate.
1. Across Scope 1 and 2 GHG emissions and business travel emissions, which are Scope 3.
2. Figures as at December 31, 2021. We arrived at our definition of green and transition assets by considering different frameworks and taxonomies, including the E.U. Taxonomy. We consider an asset to be green when at least 95% of its revenue can be classified as being derived from green activities, as classified by the International Capital Markets Association. We consider an asset to be transition if it has announced its commitment to net zero with a credible target and plan and is making meaningful contributions to global emissions reduction.