51±¾É«

The Investment Oversight Sub-Committee (IOC) reviewed the issues pertaining to responsible investing and developed a statement regarding socially responsible investing. The Statement on Socially Responsible Investing is the actual statement that was developed in October 2014. This statement emphasized the IOC’s fiduciary responsibility to the Pension Plan and Endowment Funds. The IOC also recognised that the application of environmental, social and governance (ESG) principles can contribute to the long-term financial returns of the funds. As a result, the IOC committed to understanding the university’s investment managers’ ESG practises and keeping up to date on the trends in the industry.

In November 2015, as per changes to the Federal and Provincial Pensions Acts/Regulations, 51±¾É« included its position on ESG within the Pension Statement of Investment Policies and Procedures as follows:

“The Plan’s active investment managers may consider all qualitative and quantitative factors affecting financial performance of existing and potential investments, including environmental, social and governance (ESG) factors. An investment manager’s ability and desire to incorporate ESG factors into their investment selection process may be used as part of the decision criteria when evaluating investment opportunities.”

This policy statement was also included in the university’s endowment statements of investment policies and procedures.

Statement on Socially Responsible Investing

The IOC’s mandate is to assist the Pension and Finance/Investment Committee in meeting its investment fiduciary obligations for the pension plan and other university investments including the Endowment Fund, Sinking Fund and the Balsillie Fund.

This fiduciary responsibility requires the committee to be prudent and use good judgment when making investment decisions. The most common test for this responsibility is taken from Section 27 of the Trustee Act (Ontario), commonly known as the “Prudent Investor Rule.” The Prudent Investor Rule suggests that overall portfolio performance should be accepted as one of the core measurements as to whether or not the trustees have acted in accordance with the required standard of care and prudence. Thus, any position that is adopted with respect to socially responsible investing must not conflict with this primary responsibility.

Arguments have been put forward that the application of environmental, social and corporate governance (ESG) principles to investment selection can contribute to long-term financial returns.

Recognizing the primary responsibility of overall portfolio performance, the IOC has developed the following list of practices relating to the university’s investment portfolios. The IOC will:

1. Develop an understanding of how/if the current portfolio managers incorporate ESG principles into their investment process.
2. Have prospective managers articulate how they integrate ESG relevant criteria into their investment process are part of the RFP process.
3. Not mandate the exclusion of companies or other investments that operate in certain industries or geographical areas.
4. Continue to review, on a periodic basis, changes in the practices of other Canadian pension funds and university endowed investments with respect to responsible investing to identify changes in trends and best practices.