OTPP Responsible Investing Report

The Ontario Teachers’ Federation Pension Forum and the Ontario Teachers’ Pension Plan (OTPP) annual meetings were held in Toronto on April 5, 2018, and at both meetings Plan officials drew attention to the Plan’s second “Responsible Investing Report.” (The report is available at www.otpp.com/investments/responsible-investing.)

The report highlights the OTPP’s leadership role in the area of responsible investing, and outlines the principles and the framework that guides Plan decision-making in this complicated arena. A key part of the Plan’s strategy is constructive engagement rather than blanket divestment from asset classes like fossil fuels, and the report gives interesting and specific details of the positive impact that this approach can have. The report provides five pages on the issue of climate change and the Plan’s approach to this area of risk, highlighting that its holdings in renewable energy investments increased by 28% last year to $1.6 Billion.

The OSSTF/FEESO Annual Meeting of the Provincial Assembly (AMPA) 2016 passed a policy proposed by the Environmental Advisory Work Group and the Provincial Executive that “the government of Canada should require all large companies to disclose their carbon footprint profile.” The Canadian government has not yet enacted such a law, but since 2016 the internationally based Financial Stability Board struck a Taskforce on Climate-Related Financial Disclosures (reported its recommendations in the spring of 2017) and the OTPP has committed to following the Taskforce recommendations. As part of that commitment, this year’s report provides information for the first time on the Plan’s carbon footprint and how it was calculated. The document also contains numerous other references to how the Plan is beginning to follow the Taskforce recommendations. It also notes that:

“Externally, we will promote robust management of climate change risks and adoption of the Taskforce on Climate-Related Financial Disclosures recommendations in our engagements with public companies. We plan to develop an advocacy program to foster an orderly transition to a low-carbon economy through influential industry groups and policymakers.”

It is very clear from the Pension Forum and annual meeting presentations (and a review of Plan documents on the topic) that the Plan is paying more than lip service to the issue of climate change and constructive engagement. The merits of divestment versus engagement may continue to be a significant debate in the coming years at AMPA, but it is important and useful to have accurate information about what the Plan is actually doing. There is clearly no consensus view in the labour movement or among progressive economists on the issue of divestment. Jim Stanford, former Economist for Unifor, spoke at a 2013 event entitled “Trade Union and ‘Progressive’ Strategies: The responsible investment, capital stewardship, and ‘pension fund activism’ movements.” Specifically addressing worker pension funds and the question of divestment, Stanford noted that some activists assert:

“…that you can prevent a bad company from doing bad things by starving it of capital. That has never happened in the history of capitalism. If a company is profitable it will never be starved of finance. The capitalist system is so flexible it will find ways to provide capital. In the world of workers’ pensions—why should workers accept constraints on their 10% share of capital markets, whereas the other 90% of capital markets accept no constraints.”

He also stated that the divestment approach “can distract from more important ways of regulating corporate behaviour; that is fighting for laws and regulation.”

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