Workers Capital and Responsible investment. SFL Pension Conference May 4, 2016

Transcription

1 Workers Capital and Responsible investment SFL Pension Conference May 4, 2016

2 Agenda About SHARE Responsible investment Capital stewardship What to do?

3 About SHARE

4 About SHARE Responsible Investment Services

5 National non-profit created in 2000 Offices in Toronto and Vancouver Secretariat for Global Union s Committee on Workers Capital On behalf of funds with $14 billion AUM Union funds, pension funds, endowments, foundations, mutual funds

6 Secretariat for the Global Unions Committee on Workers Capital

7 Small investors working together Mutual Fund Pension Fund Religious Institution Religious Institution Foundation Foundation Pooled Engagement Capacity (SHARE) Pension Fund

8 Workers Capital $38T $1.4T

9 Health and safety and the BP Gulf oil disaster 11 employees killed; 17 injured 4.9 million barrels crude oil spilled Largest marine oil spill in the history of the petroleum industry Chronic weak safety & risk culture Significant externalized costs born by shareholders, society and future generations

10 Labour standards in Qatar Kafala system has elements of Forced Labour Big infrastructure projects in energy, 2022 World Cup 4000 worker deaths expected as part of World Cup construction Pension funds engaging construction companies on their contracting practices

11 Where are you? Beneficiaries Trustees Service Providers Investments Appointing body (e.g. union) Investment managers, Investment consultants, actuaries, lawyers Public and private companies, governments, hedge funds, real estate, infrastructure

12 Definition RESPONSIBLE INVESTMENT is an investment approach that incorporates environmental, social and corporate governance criteria when making investment decisions.

13 Challenges Will we breach our fiduciary duty? How will our rate of return be affected? How much extra work for board and staff?

14 Pension fund responsible investment is growing Materiality of ESG issues Systemic risks and capital market behaviour impact pension fund outcomes Members interests Increasing expectation to be accountable corporate citizens

15 3rd anniversary of Rana Plaza factory collapse Consumers measure brands response Need for greater transparency across sector Plan members do no harm With great power comes great responsibility (Voltaire)

16 Principles for Responsible Investment Commit to integrate ESG into asset management and stewardship, promote broadly $50 trillion AUM 1400 institutional investors and asset managers

17 Canadian signatories 27 asset owners 42 investment managers 10 service providers bcimc AIMCo BC Municipal Pension Plan Healthcare of Ontario Pension Plan Caisse de depot et placement Canada Pension Plan Investment Board OPSEU Pension Trust Colleges of Applied Arts and Technology Public Sector Pension Board Ontario Pension Board Ontario Teachers Pension Board Fonds de solidarite FTQ CUPE Employees Pension Plan United Church of Canada Pension Plan

18 What are your responsible investment beliefs? Underlying ideas about investment and financial markets on which policies are built

19 Responsible Investment Beliefs - Exercise Over the long-term, pension fund investment returns depend on a healthy economy, and a healthy economy depends on a fair and just society and a sustainable environment. Discussion question: Do you agree with this statement? Why or why not?

20 Responsible investment strategies Asset Selection Active Ownership Public Policy Screening Proxy Voting Legal and regulatory reform Integration Engagement Voluntary initiatives Targeted/impact investment Securities Class Action

21 Responsible investment strategies Asset Selection Screening Integration Targeted/impact investment

22 Responsible investment strategies Asset Selection Screening Integration Targeted/Impact Investment

23 Responsible investment strategies Asset Selection Screening Integration Targeted/Impact Investment

24 Responsible investment strategies Active Ownership Proxy voting Engagement Securities Class Action

25 Responsible investment strategies Active Ownership Proxy voting Engagement Securities Class Action

26 Responsible investment strategies Active Ownership Proxy voting Engagement Securities Class Action

27 Responsible investment strategies Public Policy Legal and regulatory reform Voluntary initiatives

28 Responsible investment strategies Public Policy Legal and regulatory reform Voluntary initiatives

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30 Fiduciary duty Integrating Environmental, Social and Governance (ESG) factors in asset selection and ownership can improve risk adjusted returns. Trustees should consider where financially relevant. ESG factors can tip the scales for otherwise equal investments. Plan members and beneficiaries interests can be considered.

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32 Responsible Investment Strategies Exercise Be it resolved that our pension plan should remove from its portfolio all apparel companies sourcing in Bangladesh Discussion question: Do you agree with this statement? Why or why not? If you disagree but think the issue should be addressed, what are other approaches?

33 Educate yourselves, discuss at trustee board Consult and inform plan members Seek help from advisors and service providers Monitor and review investment manager and other service providers Implementing Responsible Investment Getting Started

34 Implementing Responsible Investment Next steps: Establish and disclose policy, incorporate into SIPP Include ESG in all service provider RFPs Audit portfolio to identify ESG risks and opportunities Assess asset managers stewardship capacity

35 Implementing Responsible Investment Going further: Join collaborate initiatives Review equity managers proxy voting reports Review managers ESG activities annually

36 What can the plan members do? Ask your union to support its members pension plans in establishing a responsible investment mandate Put trade union-controlled funds to work as responsible investors Include Worker Capital Stewardship in training for trustees and pension activists Other ideas? Implementing Responsible Investment

37 What is Decent Work? Employment that is accompanied by rights, representation, and protection Access to Productive Employment Promoting Social dialogue Decent Work Rights at Work, particularly with respect to the core labour standards Systems of Social Protection

38 Investing in Decent Work Investment strategies that promote and protect human rights in a complex, globalized environment Challenges to integrating labour rights in investor decision-making: Materiality of social issues in responsible investment practices Complex production chains and labour recruitment practices Lack of corporate accountability and transparency Limited resources and information; poorly organized

39 Issue 1: Forced Labour Relevance to Canadian Investors: Political, Legal and Regulatory Risks Reputation and Profitability

40 Issue 2: Precarious employment Relevance to Canadian Investors: Reputation and Profitability Social Costs

41 Issue 3: Occupational Health & Safety Relevance to Canadian Investors: Reputation and Profitability Legal and Regulatory Risks

42 Project Description Assist investors in ensuring their pension investments uphold the highest standards of labour and human rights Project objectives: To establish a credible and evidence-based framework linking investment risk and poor labour standards; To support the capacity-building of Canadian trade union pension trustees; To raise the awareness of trustees about investment risks associated with poor labour standards.

43 Climate Change risk to pension funds Warming trend is primarily human caused; Status quo on track to C global average temperatures; International consensus: should be held below 2C; Failure carries severe threats to human societies (heat waves, flooding, drought, fire, climate induced refuges).

44 Climate Change risks for pension funds Environmental, economic and social costs Company- and portfolio-level risks Risks relevant across asset classes and sectors Earlier action will make for an easier transition

45 How real is the risk of stranded assets? Mark Carney Governor of the Bank of England September 2015 If the IPCC carbon budget estimate is even approximately correct it would render the vast majority of reserves stranded oil, gas and coal that will be literally unburnable

46 A significant portion of the world s fossil fuel reserves will need to remain in the ground in 2050 if we are to avoid catastrophic levels of climate change

47 Recognizing Opportunities Energy Efficiency Renewable Energy Innovation Green Bonds

48 Investor Tools to Address Climate Change Divestment Reinvestment Engagement Proxy Voting Public Policy

49 Climate change: Investor responses Reduce Remedy Regulate Reallocate

50 1 2 The Environment Agency Pension Fund has set an objective to ensure that its investment portfolio and processes are compatible with keeping the global average temperature increase to below 2 C relative to pre-industrial levels. 120 institutional investors signed the Montreal Carbon Pledge committing to measure and disclose their investment portfolios carbon footprint. 3 Global investors with more than $4.6 trillion in assets wrote to the Alberta government supporting its commitment to update and strengthen its climate policy.

51 Get started!

52 For more information contact: Peter Chapman, Executive Director Telephone: