||Volume 18, Number 5, March 2006 |
Teachers’ pension plan:
Environmental, social and governance: Factors for investing
Most Canadian pension-plan sponsors still think of socially responsible investing (SRI) as a "screening framework" to eliminate investments in certain equities. Speaking at the University of Toronto’s Environmental Finance Workshop Series session entitled "Responsible Investing—will we reach a tipping point?" Susan McGeachie, of Innovest Strategic Value Advisors said that one of the reasons SRI is taking longer to be accepted in this country is confusion over the terminology. The confusion lies in the common perception that SRI is only achieved with negative screening. To better describe ethical investing, Jaqui Parchment, of Mercer Investment Consulting, said that the focus of SRI has shifted in recent years from ethical investing to something broader, which incorporates environmental, social, and governance (ESG) factors into mainstream investments.
The Teachers’ Pension Plan is active in ESG activities. One such activity involved supporting a recent symposium. BC Investment Management Corporation (bcIMC), on behalf of the Teachers’ Pension Plan and the other public-sector pension plans, and in conjunction with the Ministry of Environment and the University of Victoria, hosted the "Climate Change and Responsible Investing Symposium" in September 2005. The focus of the symposium was to present the scientific aspect of climate change and the implications on institutional investing. Guest speakers included Dr. Greg Flato from Environment Canada, David Russell from the Institutional Investors Group on Climate Change, United Kingdom, and Truman Semans from the Pew Center on Global Climate Change, United States. The symposium, chaired by Dr. Tom Pederson from the University of Victoria, generated constructive discussion and was well received. On behalf of the trustees of the Teachers’ Pension Plan, bcIMC recognizes that climate change will present both opportunities and risks to investment activity, and therefore seeks to remain informed of the relevant trends and issues in this area.
Through bcIMC, the Teachers’ Pension Plan participates in a real estate pool called Realpool. Recently Realpool received recognition for the excellence of its environmentally friendly buildings. When the Building Owners’ and Managers’ Association (BOMA) announced the winners of the 2005 national awards in recognition of excellence in commercial real estate, Realpool took home awards for three of its office properties: Western Canadian Place in Calgary, Allstate Corporate Centre in Markham, and the Hatch building in Mississauga. The awards recognized excellence in property management, operations, resource conservation, environmental awareness, leasing, building design, customer service, and innovation.
Corporate engagement is another mechanism for applying ESG factors to investing. The Teachers’ Pension Plan, through bcIMC, encourages good corporate governance and corporate responsibility by voting at company AGMs. bcIMC generally votes against issues such as excessive executive pay and slate voting for directors, votes in support of separate CEO and board chair positions, and thorough disclosure of social and environmental policies. As well, bcIMC meets privately with CEOs and management to promote positive change in corporate governance structures, labour relations, and environmental impact of company activities. As in teaching, the objective is to change behaviour rather than simply expelling the misbehaving student.
Doug Pearce, bcIMC’s CEO, has recently been appointed along with David Denison, the CEO of the Canada Pension Plan Investment Board, to the board of the Canadian Coalition for Good Governance (CCGG). The mission of this coalition is to represent Canadian institutional shareholders in the promotion of best corporate governance practices and to align the interests of boards and management with those of the shareholder. The appointment of Doug Pearce gives bcIMC, and therefore the Teachers’ Pension Plan, a stronger voice in helping to shape the corporate governance agenda in Canada. bcIMC is also a member of the Asian Corporate Governance Association and the International Corporate Governance Network.
These are examples of how the Teachers’ Pension Plan is applying environmental, social, and governance factors to investing the pension fund.
Teachers’ Pension Board of Trustees.