Canada Pension Plan Investment Board's response to John Bennett
Recently, Sierra Club Canada learned that the Canada Pension Plan Investment Board (CPPIB) is investing $250 million of Canadians' money into the tar sands. Our Executive Director wrote the CPPIB a letter, asking them to account for fueling catastrophic climate change. Here is their response.
Dear Mr. Bennett,
Re: CPP Investment Board's Consideration of Environmental Risks
Thank you for your letter dated July 7, 2010 regarding the CPP Investment Board's (CPPIB) approach to environmental risks.
By way of brief background, the CPPIB's mandate, as set out in our legislation, is to maximize the investment rate of return for the CPP Fund without undue risk of loss. Our long-term goal is to contribute to the financial strength of the CPP to help sustain the future pensions of 17 million Canadian contributors and beneficiaries.
As part of that mandate, CPPIB encourages responsible corporate behavior on environmental, social and governance (ESG) factors as an important means for enhancing the long-term financial performance of the companies in which we invest. CPPIB's Policy on Responsible Investing articulates our approach and describes the main activities and processes we use to pursue our goals and objectives. CPPIB's approach to responsible investing is consistent with the United Nations' Principles for Responsible Investing (UN PRI), which provides best practice guidelines for investors to integrate consideration of ESG factors into the investment decision-making process.
CPPIB recognizes that emerging risks related to climate change could have significant consequences for long-term shareholder value. We have a record of actively engaging with companies we invest in, to encourage improvement in ESG factors. Our engagement activities related to climate change are centred in the energy and utilities sectors, which face high potential costs from tightening regulation of greenhouse gas (GHG) emissions. We seek improved disclosure from companies on GHG emissions and reporting on strategies to manage climate change related risks. We also communicate our views to regulators and industry associations regarding gaps in disclosure on climate change related risks. For instance we provided our views regarding environmental disclosure requirements to the Ontario Securities Commission (OSC).
ESG factors, such as GHG emissions, are integrated into investment decisions, where relevant, across all asset classes in our portfolio. For public equities, the CPPIB's Responsible Investing team works with internal portfolio managers to assess ESG risks and opportunities as they relate to overall corporate performance. In our private market and real estate investments, ESG factors are evaluated, where applicable, in the due diligence process and monitored over the life of the investments.
I hope our response has given you more insight into how CPPIB reviews transaction opportunities and incorporates ESG factors into our investing activities. For more information on our responsible investing activities, please visit the "Responsible Investing" section of our website at www.cppib.ca
Vice President, Stakeholder & Government Relations
CPP Investment Board