2022 Annual Meeting Webcast Recording Transcript

Jackie DeSouza: Good morning, everyone and thank you for joining us today for the OMERS 2022 Annual Meeting. More than 2,500 people have registered for this meeting and we're pleased to welcome you here today. My name is Jackie DeSouza and I’m the Vice President of Employer Relations and Communications and I’m pleased to be your host for this meeting.

Before we start today's session, in the spirit of respect and reconciliation, I would like to recognize that although this is a virtual meeting and we are all located across the province of Ontario, OMERS head office is in downtown Toronto and we acknowledge that the land we are meeting on is the traditional territory of many nations, including the Mississaugas of the Credit, the Anishnabeg, the Chippewa, the Haudenosaunee and the Wendat peoples and is now the home to many diverse First Nations, Inuit and Métis peoples.”  

Let me begin by thanking all of you who have been on the front lines of the pandemic and behind the scenes, working tirelessly to support our communities across the province. On behalf of my colleagues at OMERS, thank you for your hard work, your humanity and dedication over the past two years.

This is a special year for OMERS, as we celebrate our 60th year of serving members. Thank you for giving us the opportunity to serve you.

Joining me today are a number of presenters who will walk you through the 2021 results and our view of what the future looks like. Let me briefly summarize the agenda for today. We can put up the agenda, please. First, we will hear opening remarks from our Administration Corporation Board Chair, George Cooke.

Then, we are excited to screen a new video for you. For 60 years, we have been serving our members, and from the first day, from the day our first members joined until today, we have stayed focused on how important this plan is to you and to your future. We'll hear that in the voices of some of your peer members.

Then Jonathan Simmons, OMERS Chief Financial and Strategy Officer, will provide a detailed overview of OMERS 2021 financial results. We will then hear from OMERS Administration Corporation CEO, Blake Hutcheson, with an overview of the last year and the reasons for his confidence in our future at OMERS.

Celine Chiovitti, Executive Vice President and Head of Pensions, will deliver a member update to share some of the important work we are doing to better serve you. Then we will have a presentation from Katharine Preston, Vice President, Sustainable Investing, who will provide an update on OMERS ESG and climate strategy. Michael Rolland, CEO of our Sponsors Corporation, will outline the work the SC is currently engaged in and their view of the work ahead this year. Then we will have a 40 minute Q&A session followed by another short video, and then closing remarks from the Sponsors Corporation Board Chair, Frank Ramagnano.

That should take us very close to the meeting ending time of 11:00 a.m. I'll go through a few details on how the Q&A session will unfold. As I mentioned, we've set aside at least 40 minutes for questions and answers, and we'll go longer if there's time. We also respect that many of you have other commitments, and we will aim to wrap up at around 11:00 a.m. Many of you sent in your questions when you registered for this event and we have worked to include some of the answers into the presentations themselves. Others will be answered during the Q&A session. Some were specific questions about your own personal pension that we referred to our Member Experience and Pension Education teams, and they will be in touch with you.

We will also take questions during this meeting. Given the number of participants on the call, we can only take questions via the “ask a question” feature on the bottom right of your screen. We encourage you to submit your questions throughout this webcast, and we will cue them up for our presenters to address during the Q&A session. When submitting your questions, please keep them succinct. If you're comfortable providing us with your first name and location, I will say them when asking your question. Of course, that is entirely optional. I will alternate between some of the questions we received in advance, as well as those received during the meeting. All of our speakers will be available during the Q&A to address as many of your questions as we can.

The technology we are using today for this meeting is the same one we used last year. We recognize that it has some benefits and also some drawbacks, and as we look to plan for future meetings, hopefully returning to in-person meetings next year, we ask for your input to ensure this meeting meets your expectations. We will send out a survey following the meeting and request your feedback on what you would like to see next year. Please also note that a recording of this session will be posted in the days ahead to omers.com and we will provide the link in our April member newsletter, which you will receive later this month.

It is now my pleasure to introduce George Cooke, our Administration Corporation Board Chair, to provide welcome remarks. George.

George Cooke: Thank you, Jackie, and thank you everyone for joining us today. Before we begin today's program, I would like to pause for a moment to express our continued sadness over the prolonged and distressing events taking place in Ukraine. We sincerely hope a resolution will be found soon to end this deplorable crisis. In the time since I last welcomed you to an OMERS AGM, we have all navigated one more year of the COVID pandemic. Let me express, on behalf of OMERS, warm and sincere thanks to all of our members across Ontario, who continue to serve local communities under extremely trying conditions. And we also extend our thanks to all frontline workers, regardless of OMERS membership. Ontarians recognize your diligent work during the pandemic, and we are very grateful.

We are here today to review OMERS 2021 financial performance and highlight the information provided in our Annual Report, which has been available since the end of February. Shortly, we will share our very strong results for 2021. Our long term investment strategy remains sound and appropriate. Adherence to it has produced these results for the plan.

Last week, many of you will have seen an announcement of the incoming Sponsors Corporation CEO. I would like to congratulate Laurie Hutchinson on her appointment to that role. Laurie joins the SC with a strong pensions background, including eight years on the OMERS AC board, most recently as Chair of the Audit and Actuarial Committee. She embarks on her new role with context, understanding of the plan and commitment to the interests of plan members.

And of course, we also wish Michael Rolland well in his retirement. Michael has had a long and successful career at OMERS, achieving notable outcomes while serving both the AC and the SC in senior executive roles.

Before we get into today's formal presentations, beginning with Jonathan Simmons, our Chief Financial and Strategy Officer, I'd like to share a video which marks this year as the 60th anniversary of OMERS. I hope you enjoyed getting to know these OMERS members as much as I did. Let's show the video and then Jonathan, it's over to you.

Zoe: My name is Zoe Vander Doelen. I'm a Human Resources Specialist at the Ontario Secondary School Teachers Federation. As an HR specialist, I do some recruitment, but I also primarily help the staff at the office. I get up in the morning and I look forward to being able to help everybody.

Kareem: I love working with people and I love the fact that I get to promote the Toronto region as the best place for international businesses to expand to. It's pretty easy to love what I do at Toronto Global. Self-improvement is very important. It's something that I've been really heavily into, probably over the last, I'd say 10 or so years. Got to be like water, as Bruce Lee would say, right?

Rick: When I was in physiotherapy, I worked a lot with firefighters. I started asking more questions about the shifts, the lifestyle. I realized a lot of the skill sets that are required to be a good firefighter, like teamwork, problem solving, thinking on your feet, I felt that I had the base of those skills and then I could transfer them easily over to firefighting. At the end of the day, somebody's coming to you with a problem, you change someone's life for the better. That's probably one of the most satisfying feelings, and that's enough to keep you going.

Denise: I moved to Peterborough in 2005 and I started off administration and assisting people on the waiting list to apply for housing. Part of it has to do with my passion with helping people and always trying to feel that I can make someone's life a little bit better.

Zoe: I Just recently purchased a home and moved in. It was definitely a big move and something I'd been working towards for a long time. I always try and do something today that will set myself up for the future, because I know I can today. I don't know what I can do in the future.

Kareem: A lot of people, when they get into Brazilian jujitsu, their ultimate goal is to become a black belt. But then you learn very quickly that to become a black belt, you’ll to be training consistently for years. It's easy to say you want to achieve something, but it does take a long time to hit your goals.

Rick: As a physio, I had no idea how old I would be when I would retire. Would I have enough money? Would I outlive my money? And those are probably the biggest, scariest questions when you have to plan your own retirement.

Denise: My father had always said, "Find a job that pays a pension." That was a big motivation for me as well, that I would have a pension to rely upon.

Zoe: A lot of people my age don't think about pensions. Now that I've been at this role for three years and that my employer also contributes to my pension, it's a huge factor for me.

Kareem: You have an ultimate goal, financial freedom, and living the life that you want, anytime you want. Where OMERS and jujitsu are alike is that consistency beats intensity.

Rick: OMERS is the wind at your back and it just makes everything that much easier. [ We'll be financially secure well into our old age, which in turn is financial security or independence for my children.

Kareem: Just seeing my portfolio at OMERS, not only will I achieve my goal, I may be able to even retire earlier. And that's something I've never thought about.

Denise: My OMERS pension has enabled me to do lots of things. I am able to contribute to others and to help them as well.

Zoe: When I retire, I can look back and say, "I set myself up for success as much as I could. I have no regrets." And I'm looking forward to it.

Jonathan Simmons: Hey, good morning, everybody. Great pleasure to be with you. And just a quick thank you before I start to Zoe, Kareem, Rick, and Denise for being in our video this morning. I can tell you that whenever me or one of my colleagues sees something like that, our hearts really glow with pride, the work that our members do. And we know that there are more than 500,000 other reasons to be just as proud.

So my job today is to get into the numbers. And so, if the operators can pull up my presentation, I'll start to unpack the year that was 2021. And so as George mentioned, 2021 was a very strong year for the OMERS pension plan. The net investment returns were 15.7%. That's over $16 billion of investment income which was brought into the plan this year. And that was well above the benchmark of 6.6% that we set for ourselves at the beginning of the year. So a very strong year.

So where did those numbers come from? Let's move to the next slide and I'll start to unpack that for you. The answer is they came from across the portfolio, so all parts of our portfolio and what this chart shows is this chart shows the returns from each of our major asset classes against the benchmarks that we established for them at the beginning of the year. So right at the bottom, you see that 15.7% compared to our benchmark of 6.6%. So all segments of the portfolio, if you look at this chart, generated positive returns. And not only that, all segments generated above benchmark returns. So you see our public investments were at 14.6% well above the benchmark 5.8. Private equity had a terrific result, 25.8 versus the benchmark 8.0, Infrastructure over 10% versus it’s benchmark close to 8, And real estate, almost 16% versus it’s benchmark of 6%. So very strong returns across the portfolio.

Let's keep going, please. And so where did those strong returns come from? Well, really there were mainly four factors which drove that very powerful performance that we had last year. About 45% of the above benchmark performance came from our public equity. And that's a high quality global portfolio, which just had a terrific return in 2021.

About 30% came from our private equity portfolio and you saw the return of that portfolio earlier. And there, earnings growth across the portfolio, whether organically or through acquisitions, really drove a super outcome in that portfolio. And we saw that as the global economy started to emerge from the lockdowns of the pandemic, real growth in earnings and acquisitions. About 15% of that above benchmark performance came from real estate and particularly in our industrial real estate portfolio. So, when you think about industrial real estate, think about warehousing and logistic spaces that are supporting the ongoing demand of the new way of distributing goods in the economy and the shortening of supply chain. So very strong performance in that part of our business.

And finally our infrastructure business, which has just had a terrific return year in and year out, that was the last piece and that shows continued strong, stable returns from essential services. Let's move on, please.

So, at OMERS, the youngest member of our pension plan is 16 years old and the oldest is 106, so we measure time in decades. So looking at our annual returns in isolation is not enough. I also like to look at our longer term returns. And here you see across the top row of this column, our returns on a one, three, five, and shaded in blue at the end on a 10 year basis. And so our 10 year returns are now 8%, very respectable returns. And what we do is we compare that to the absolute benchmark returns, which represent compounded value of those annual benchmarks that we set.

And here you can see, not only did OMERS beat the benchmark of 6.6% on a one year basis, but also on a three, five, and 10 year basis. Our returns are now above the benchmarks that we have established and that additional investment income adds to value of the portfolio, grows our funded status, and makes OMERS stronger as a pension plan.

Let's have a look at that, please. Let's move on to the next slide and really think about our expenses. Because it's not just returns which are important. Expenses matter, and they need to be managed too and as CFO, this is something I keep a very close look on.

And so, one view to look are at our expenses, and there are many, is our management expense ratio. And our management expense ratio takes the total dollars that we spend on both internal and external investment management costs, add those two numbers together, and divides them the value of our assets under management. And we express that in basis points, and one basis point is 100th of 1%. And here you can see that our expense ratio of 68 basis points in 2021 was very much in line with historical levels, quite a bit up from 2020 and that's because our investment performance really drives the performance rated compensation that we pay to both internal and external managers.

And when we have good returns, we have a stronger pay performance in that area. And so here you can see expenses performing exactly as intended, lower in the lower performing years, and back up to normal in a year like we just had with very strong returns. Next slide, please.

So I'm going to shift and now look at our portfolio. And so, this slide shows you the allocation of assets across our portfolio. At OMERS, we believe that diversification is very important. We have a return seeking portfolio, looking to achieve strong investment returns over time. So here you can see a couple of things, very well diversified about third of the book in public equity, significant allocations to credit, private equity, infrastructure and real estate and operating with very low leverage.

Now that's one view of diversification. Just let's look at two more. Next slide, please. And so here on the left hand side is our diversification by geography. Today, about 30% in Canada, about 44% in the United States, about 16% in Europe, roughly 50/50 between the UK and the continent and 10% in Asia Pacific, where if you've been coming to our Annual Meetings, you'll know that we are increasing our allocation into that region because we believe growth in populations and the growth of the middle class in those regions are really driving economic activity and present great opportunities for us.

On the right hand side, we see our industrial exposure. So this is to the various industry classifications of investments. And I'll just point a couple of things out here, real estate's our highest portfolio allocation, which really corresponds to our allocation in that asset class, and just a 4% allocation to the energy sector. And we know the energy sector is an area which is keen interest to our members because you ask us about climate, and we have made some significant commitments to controlling climate change. And those are set out on the next slide. So Katharine Preston, next slide, please. Thank you very much.

So Katharine Preston, my colleague, is going to present later on some of the initiatives that we have underway to make the OMERS portfolio robust and sustainable for decades to come. But one of the things that we have been publishing for two years now in our Annual Report are our commitments to reduce the carbon intensity of the portfolio. You will recall that over a year ago, we indicated we wanted to reduce the weighted average carbon intensity of the portfolio, which is a measure of the greenhouse gas emissions of the portfolio by 20% by 2025. And as you can see, we're well on our way with that production that we've achieved year over year, and we've set ourselves a long term target of net zero greenhouse gas emissions by 2050, very important.

Now these numbers, we take just as seriously as our financial numbers and we actually asked our auditors, PricewaterhouseCoopers, to review and give an opinion on these disclosures and that opinion is set out in our Annual Report. Next slide, please.

So this is probably the most complicated chart I have today, but it's one of the most important, because this is a measure of our funded ratio. So there are two lines on this chart. The first line starts at 86% on the left hand side bottom and slopes upward, left to right, ending at 97% in the top right hand corner of the slide. And that is OMERS funded ratio. That's the ratio of our assets, measured on a smooth basis, to our liabilities.

Here you can see that 10 years ago, back in 2012, OMERS was 86% funded. And over time, we've been able to build our funded ratio up to where it stands today, 97%. And the main drivers for that are mostly those investment returns, which you saw that were well above the benchmark and above our discount rate.

The second line on this chart is also really important. That's the discount rate or the interest rate that we use to calculate our liabilities. And if you've been coming to our Annual Meetings, you will know that we've been trying to reduce that over time. It was around four and a quarter for many years. You see that as the line sloping down from left to right. And today, we've reduced our real discount rate to 3.75%. And that means that our plan is less reliant on investment income into the future than it was 10 years ago, and stronger as a result.

Let's look at the next slide, please. So this unpacks in some detail how our funded ratio moved or did not move in 2021. And as you can see here, we started the year with a deficit of $3 billion, and we ended the year with a deficit of $3 billion. We started the year with the funded status of 97%, and we ended the year with the funded status of 97%. So, in a year where our investment returns were very strong, why didn't our funded ratio improve significantly on a smooth basis?

Well, the reason for that is described in the bold rows that I have there. So we had smooth investment gains. Investment gains would have generated about 2% improvement in our funded ratio, but we reduced our discount rate. We took it down on by 10 basis points, and that reduced our funded ratio by 2%. And so that reduction of our discount rate, as I say, makes our plan stronger and makes it less reliant on investment returns into the future.

Let's look at our next slide, please. Last one on funded ratio. The numbers I've given you up to now are on a smooth basis, smooth investment returns over five years for reporting in our Annual report, but we also keep an eye on our funded ratio on a smooth basis, on a fair value basis. So on a smooth basis, 97% stable to 2020, and on a fair value basis, 100% funded, that's up 7% compared with the year before. That represents a cushion of about $3 billion, which is available to us, to shelter volatility in investment markets, or to reduce our discount rate into the future, or to let our funded ratio improve. Let's keep going.

This is my last slide. So OMERS paid $5.4 billion in benefit payments in 2021, compared with collecting $4.4 billion in contributions. For about the first 58 years of OMERS history, we were taking in more in contributions than we were paying out in benefits. That paradigm shifted a couple of years ago, and today OMERS is paying out slightly more in benefits than in contributions. Those benefit payments will continue to grow into the future as more and more members retire and will over time stabilize. So we think we'll need to use about 2% of our investment income each year to bridge that gap between contributions and benefits.

So what that means is if our plan can grow at say 7% a year, 2% will go to funding the gap between contributions and benefits, 5% will compound into the value of our plan into future.

But it's not just the dollars which are important to the impact. One more click, please. As I say, OMERS contributes to the economy. We did a study in 2021 to look at the impact OMERS is having on the wider economy here in Ontario. Those benefits that we pay contributed almost $12 billion to Ontario's GDP. It supported almost 120,000 jobs in our local economy, a third of those in rural areas, 25% of those among youth. Our members report higher life satisfaction. They are 48% more likely to feel secure than a member doesn't have a defined benefit pension. They're almost 60% less likely to require guaranteed income supplement from the government. They're 40% more likely to volunteer. And 94% of them are likely to give to charity. Ladies and gentlemen, that is the impact your pension plan has, not just on you, our members, but on our economy. And I think that's something really worth celebrating.

So that's it for me in terms of the financial update. I'm now going to cut over to our CEO, Blake Hutcheson, who is speaking to you on a recorded message, the reasons that he's going to outline when we hear from Blake. Blake, over to you.

Blake Hutcheson: Hello, everybody. I've really been looking forward to this opportunity to speak with you all today, but here's the drill, I'm actually in my home recording this on Sunday afternoon, the day before our Annual Meeting because as luck would have it, I caught COVID a few days ago and our team and I thought, out of respect for all of you, it would be better that maybe I record this, in case on game day I'm not up to the task, either technologically or health-wise. But listen, you deserve the very best. I feel fine. It's just my turn, I guess. I know many of you have had the same thing and I will join you remotely for the Q&A, and I will be live for that question and answer period.

For those of you who don't know me, I'm somebody who grew up in Huntsville, Ontario. Much of my family is still in that part of the world. My uncle Jack was the Fire Chief in Huntsville, Ontario, a favourite uncle of mine. Many of our neighbours were OMERS members and pensioners. My aunt Toni, who's 95, my mom's sister is a proud OMERS member. She never lets me forget. Hi, Aunt Toni. And I still play lacrosse with many of my friends from my hometown on weekends and summer tournaments, who are OMERS members. And we kind of have an understanding that they'll protect me on the floor if I protect them in their retirement, and I will do my level best to do so. That's the deal.

It's a bit sad, really, because much of the joy we get is to come out and travel across the province and see many of you. That's been taken away from us in recent years, but we can't wait to do it because that is a big part of what motivates all of us.

Listen, my job this morning is to convey three messages. I'd like to begin by making an important acknowledgement and sharing a few thank yous. I'll then provide a little more context in relation to the good news that Jonathan has already shared. And I'll leave you with some future-focused closing thoughts.

As for the acknowledgement, it is important that I begin by taking a moment to join George, who I know has already reflected a little bit, in addressing the aggression and tragedy getting played out right now in Ukraine. Our thoughts and our prayers go out to the Ukrainian people, particularly there, but also everywhere, including so many within the broader OMERS family. We are inspired by the leadership, the fearlessness, the strength of character, Ukrainian President Zelensky has shown in standing up to Putin and defending his country, their freedom and democracy. We support them and passionately hope that all Ukrainians will somehow get the justice and the peace they deserve.

I also want to make it clear, because many of you have reached out and we've received questions on this front, that we do not have any direct investments in Russia or Ukraine and that posture will not change for the foreseeable future.

As for the two thank yous, my first goes on behalf of our entire global employee base to those we all serve, you our members. I hope you know that the sense of solidarity and purpose that you inspire within our teams forms a significant competitive advantage culturally, and for us as we build out a strong and powerful OMERS in our markets here in Ontario, across Canada and around the world. And if we ever needed a reason as to why we come to work every day, the last two plus years of your heroic and front-facing community efforts, goodness, and valor is an indelible reminder. Thank you so much.

We now have 541 reasons, one for each and every one of you, to serve you, spanning five generations. And working with the Sponsors Corporation, we are deeply committed to delivering a sustainable, affordable, and meaningful defined pension for each and every one of you.

I've often said that a pension doesn't know what's happening in global equity markets, to inflation or interest rates, or what central bankers or economists have to say, much less care. A pension just knows that it has to be paid on time and as planned. That's our job. That is how we're measured. It's never lost on us. And it comes with an enormous responsibility but a promise is a promise we're up to the task, and we will not let you down.

My second thank you is to our employee base. As of June 1st, I will have proudly, officially served as OMERS AC CEO for two full years, after 10 previous years with Oxford and OMERS, touching all aspects of our platform.

This is the greatest honor and responsibility of my career. I am fully committed by the way and I personally want to thank my board and colleagues for the faith and the support and the trust you have consistently shown and conveyed to me. However, as you all know, leadership and success in any complex organization is a true team effort. Extraordinary platforms and results require extraordinary collectives, all inspired and pulling in the same direction. And I am pleased and proud to share that this is exactly what's going on today at OMERS with amazing professionals and humanity, working hard and collaboratively for you in big teams and small, here and in the best growth markets around the world, united around well supported, well-conceived long-term strategies. From a leadership team, our most senior leadership team perspective, we've now built out a powerful and diverse team of 15 experienced executives, again, representing every division and geography around the world that I would put against the very best in the world for what we do. This team has equal and opposite strengths, shares the same values, work ethic and aspirations for OMERS, knows how to make money, importantly and service you with passion. And every single one of us is here because we want to make a difference at OMERS for generations to come. From a diversity standpoint, this senior team is 40% women and has representation from the LGBTQ community, 35 separate companies, 11 industries, 8 countries of origin, and represents over 400 years of experience.

The executive leadership team at OMERS and Oxford is ably supported by roughly 3,200 dedicated people. About 2000 of those are in Oxford, are a big operating company and the rest within OMERS itself, operating out of 10 global offices working across 14 time zones in an environment where every job and every person matters, as we continue to diversify and strengthen our portfolio and build upon and fervently defend when needed, the outstanding international reputation and it is outstanding, that homers has earned.

And today I want to thank them all officially for an extremely strong 2021, and so, so much more. With respect to our 2021 results as Jonathan has by now shared in his presentation, it was an extremely strong year for OMERS. We needed it to be strong and our teams more than delivered. Our numbers stand alone and speak for themselves. However, I will briefly restate some highlights. A 15.7% net return against a benchmark, which is a goal of 6.6%. Every asset class outperformed its benchmark by a significant margin. Our net investment income totaled $16.4 billion. And although they're very different businesses, sometimes I like to put some perspective on that. The Royal Bank, which is Canada's largest, publicly listed company, had a profit last year of $16.1 billion, it's best year ever. We were slightly ahead of that. They have 85,000 people. CIBC came at roughly seven billion with 45,000 people, very different industry, they're in the service game. It's very different than our story, but just by sharing the order of magnitude of the numbers, it just allows you to help understand and appreciate the size and complexity of OMERS.

But most importantly, our return history is back again at 8%, for three years and 10 years and we are now in a fully funded ratio of 97% on a smooth basis and 100% on a fair market value basis. A few highlights that Jonathan I don't think touched on yet include, within private equity our team completed $5 billion of transactions, generated income in excess of three billion dollars. This platform was created from scratch in 1995 with one employee. And this was its best year yet. Our ventures platform with approximately two billion dollars of capital invested in 68 growing companies in the innovation economy, also at its best year ever. Our growth equity platform doubled its size this year by completing nine new transactions and two IPOs deployed over a billion dollars and again, it had its best year today.

Our infrastructure team had a very strong year. This business now has a five year average of over 10%, once again, demonstrating its stability and global strength. OMERS was also recognized within the 2021 European infrastructure community with the deal of the year. And our real estate business Oxford completed over a hundred transactions representing approximately $20 billion of buy, sell and development activity. Oxford today is a truly global powerhouse with over 80 billion dollars when you factor in our equity, our debt and some third party capital, all under management. And last year won over 50 global recognitions and awards, including being named by Fast Company magazine as one of the world's 10 most innovative companies for its ESG practices. And of course, our capital markets team with over 50% of our portfolio and equities and credits globally posted one of its best years ever.

As I reflect on our team's results, to me, they're notable for two primary reasons. One, I hope it's heartening and pride building for all of you that every investment team across OMERS contributed in a major way to this solid 2021 performance. This speaks to the strength of the diversification strategy we have had in place for now several years. And two, these results are a good reminder that a long term investment team and as long term investors not withstanding any pressures to the contrary, because there are pressures often, it's critical for our teams to stay committed to our well-considered long-term global strategies, remain focused on high quality assets and markets and increasingly rotate capital towards our proven private market platforms, taking advantage of new trends, new opportunities as we see them in real time. Today, your portfolio consists of 30 stable infrastructure assets, 25 high prospect companies within private equity, 85 ventures and growth investments over 750 real estate assets and over 60 billion dollars in high quality credit and equity holdings within our capital markets group.

It's also important for you to know that our teams add value, not just by buying and selling assets, by actively managing them, developing them, financing them astutely, partnering with other world class investors to manage code assets because of our respected, investment expertise, management skills and integrity. Is there lots more for us to do? Yes, of course, but it feels empowering for our team to be taking OMERS to the next level of competence and competitiveness from this position of strength. Having said this like any long term investor, one year will never define us, not a difficult one and not a terrific one. So our teams are all committed to remain fiercely competitive and incredibly humble. Those words you will hear often in the halls at Oxford and OMERS, fiercely competitive because we have to be to compete against the best in the world, but always we must remain incredibly humble.

That's an integral part of the culture that we created, and I can promise you it will not change. So this is not a time for our teams to stand still or even look back. My father often used to say that the rear view mirror is a lot smaller than the windshield for a reason, but rather it's a time to build on our momentum to make OMERS as successful as possible, one quarter and one year at a time, our youngest member is 16, our oldest member is 106. So it's with this long term horizon that we often use expression that a quarter for OMERS should not be measured by three months, but rather 25 years. And our board holds us accountable. Trust me, over the long term, not the short term and measures us constantly against our own OMERS specific known liabilities, cash flow needs, risk appetite, set of benchmarks and unique, historical and current characteristics, nobody else's.

Some of our other key areas of progress in 2021 include with respect to ESG and specifically climate change. Last year, we made an announcement to advance our sustainability investing efforts by sharing our commitment to achieve net zero greenhouse gas emissions across our total portfolio by 2050. This builds upon our previously announced commitment to reduce the carbon intensity of our portfolio by 20% by 2025. In my view, climate change is one of the most pressing issues of our time and as a significant asset owner and manager, I and we believe we have a responsibility to sustainably grow our assets over the long term. And we are increasingly becoming a leader in this space within the global pension plan community. Setting these long term goals are a major step for us and we acknowledge that this is the right thing to do for our members, our employees, our partners, our customers, for all of you and for society at large.

We also believe that there will be significant money making opportunities. We're seeing them now by being best in class in this field and we now have acquired over 18 billion dollars of verified green assets for your portfolio. We're confident that we can achieve our goals by working with governments, our portfolio companies, and other conscientious business and we are exactly on track to meet our commitments for 2025. We will renew those every five years and you'll hear much more detail on our commitment and approach to sustainable investing when Katharine Preston speaks in a few minutes. With respect to inclusion and diversity, another topic that I know is important to all of you as CEO, I am highly committed to I&D and have co-chaired both our ID council and the women in leadership program for our high potential women. And as a single data point that I'm proud of over 60% of the women who were in our first 2021 cohort had a promotion either during or after our first program of that nature.

And to show my commitment externally, I also recently joined, former Canadian ambassador to the United Nations as the Co-Chair of the investor leadership network. This entity is an international private platform that brings together 13 global institutions and investors, OMERS included, that together represent over 10 trillion dollars of investment capital. We share best practices and a long term vision and commitment to contributing to the transition of a more prosperous, inclusive, sustainable and fair economy in society.

At OMERS I'll share with you a few of the advancements we made this year. In an effort to equip our people with the tools to remove bias, we concluded and conducted conscientious inclusion training sessions, enterprise wide, globally. We also established partnerships to reach a more diverse pool of talent, working with groups such as UK based 10,000 black interns. Our six employer resource groups continued to demonstrate remarkable passion and leadership, and together they published over a hundred awareness and education articles, hosted over 30 activities and events and created community circles to facilitate open connections and honest, real conversations.

We are also pleased and proud to report that our employee experience surveys showed our results on inclusion were above global best in class benchmarks. And partially because of this good work, for the first year ever OMERS was honored to be named best workplaces in Canada by a great place to work and named one of GTA's top employers. In short, in this important area, OMERS is moving the needle, but I readily admit that this is journey that we have a long way to go, we can all continue to be better and get better. We also made advances in 2021 within our pension services and support functions, despite a substantial and unprecedented and increased in activity, our pension services team remained relentlessly focused on providing strong service to our members. And we're proud that we received a member satisfaction score from our interactions with all of you of 93%.

Celine Chiovitti will go into more detail about how we're striving to enhance and improve our service offering to you in a few minutes so I'll stop there. And in support of our two main pillars of OMERS, our investment pillar and our pension services pillar, we have deep dedicated professionals in the areas of operations, finance, risk, human resources, IT, et cetera, who all materially strengthen the platforms during these difficult pandemic years to make OMERS that much stronger in the time ahead. One good example is just IT, when we went into this pandemic, who could have imagined that the creativity and the innovation behind our team would keep us productive, would keep us communicating globally, would keep everything functioning at a high level force and it did. I'm really proud of that team. Last year, we also introduced mid-year reporting. Having listened to your feedback, as a measure to help you gauge our performance at the midpoint of the year.

Your feedback has been positive, it is set at precedent and we are committed to this in the future. And as for this year, because many of you have been asking, I'll make a few comments. As we look at how 2022 may play out, there are clearly many moving parts to consider. On the economic front, the widely acknowledged and certainly around inflation, the inevitable interest rate increases that we're all seeing some pull back on global stimulus packages, they're clearly involving global tensions and geopolitical risks that deeply concern us all.

They're also multifaceted unknowns in a post COVID world and unprecedented global competition for great assets and great talent. And of course, the turbulence we've all witnessed in the global equity markets commencing last year. I could go on, but I know our SC colleagues will share some additional headwinds facing OMERS later in this meeting. However, understanding the above, I want you to know that as we weigh all these factors, we remain confident that we are well positioned to muscle through this year with strength. We fully anticipated the collapse of the technology sector.

We've remained disciplined and focused on high quality assets and markets, we've avoided getting caught in aggressive multiple expansion option and we have ample capital to deploy, it varies, but somewhere in excess of seven or eight billion dollars at any given time to unlock new growth opportunities, all in support of our long term strategies. For the first almost three and a half months of this year, we have been strategically concluding some large dispositions and selecting in many ways, what we think are great equity buying opportunities for assets that are temporarily undervalued securities or otherwise. And as this year unfolds though it will not be easy, I'm confident we will meet our objectives, including our financial ones to you and every counterpart with whom we deal. With all of these forces at play, on December 31st, make everything go exactly according to plan, one can never guarantee. But directionally, our teams are doing the right things based on solid strategies for our plan and for you.

And in service of that, our priority for 2022 will remain the same. And I've shared this with many of you before, but I've had the opportunity in my career to lead for probably over 20 years, various businesses of size and of scope. And I've learned the difference between the how and the what, and many people know how to get to the what, here's the answer go make money, but the way you do that is by really focusing on the how. So our priorities remain focused on our people, t hey are our most important asset. They always will be our brand, our culture, our leadership and we have to constantly be innovative and looking forward, approaching our collective future, if we focus on our people, our brand, our culture, our leadership, and are forward focused, I've always found that by doing that exquisitely, the results will come. And this year was a true testament to this approach and thesis.

And so to close, as it turns out in a week from now, OMERS turns 60 years old, closely sharing my birthday, which just so happens to be April 11, tomorrow, for me, today for you. And I cannot think of a better way of celebrating my time on this planet than sharing these favorable OMERS’ results stories with all of you. And as we reflect on our 60 year history, in our first full year of operation in 1962, we had approximately 160 people, 8,000 members, and 5 million, that's an M, of assets under management. Today, as I've said, we have about 3,200 people, 541,000 members and 121 billion dollars of capital.

And as we mark this milestone of a birthday, we celebrate how the years have changed and matured the OMERS story. However, our fundamental purpose has remained the exact same and the commitment to our members, to you, has never wavered. I know I speak for all of us here at OMERS, when I say that will never change on our collective watch. And in service of this commitment, we look forward to working with and for all of you in the months and years ahead, setting OMERS up for the next 60 years and beyond, to be sustainable, affordable and meaningful to all. Thank you for attending our Annual Meeting, and thank you on behalf of all of us, for the purpose and the privilege of serving you, over to you Celine.

Celine Chiovitti: Thank you so much Blake and happy birthday. I have the privilege of leading a phenomenal, passionate and highly skilled team of pension professionals in service of all of you, our OMERS members. And I'm going to do three things this morning. I'm going to provide a bit of a member update and talk about some of the trends that we're seeing, I will update you on how we calculate our annual indexation adjustment for all of the retired members that are joining us today and I'll highlight a few of the areas that we're focusing in on, amplifying our service to you. And so you've heard a few times today that OMERS is turning 60. We are obviously very proud of this. We were created back in 1962, really for one purpose, to provide uniform pension benefits that were consistent for all of our members. So regardless of age or location, gender or occupation, everybody would have access to one uniform pension plan design and formula.

At the end of the day, our members are diverse. And so this is really, really important. Our members come from employers who run municipalities, school board, and other local boards, electrical utilities, and children's aid societies. And we're very, very aware that our members live all across the province of Ontario. So from small local communities in rural areas, along with big bustling urban centers, and it's really, really important that we provide that benefit to all of you. I can tell you that my team finds more pleasure in really helping to transition active members into retirement and knowing that they'll have peace of mind and collecting that pension benefit for the rest of their lives. If you go to the next slide for me, a few fun facts about OMERS members and so you've heard a few times today, our youngest member is 16 and works for a local library board. Our oldest member is 106 years old, he retired from the city of Hamilton and has been collecting a pension for over 40 years.

We have 300,000 active members with the average age of 46, and about 40% of our members can retire over the next five years. And so they're definitely contacting us and are more and more interested in getting information to help them to retire. We serve members over five generations. So from generation Z all the way up to pre-baby boomers. And while the majority of our members are full-time employees, we have a growing number of non-full-time employees joining the plan. In effect of January 1, 2023, based on a plan design decision made by the Sponsors Corporation, we're actually removing all of the eligibility requirements for those non full-time employees, so that we are providing more access to our pension plan, to all employees who work for our OMERS employers.

We have almost 200,000 retired members who my team pays a pension to on the first business day of each of and every month. And in January of every year, we apply an indexation adjustment to those pensions. In 2022, retired members received an increase of 2.74% to their pensions. And we did receive some questions about why this was different than the posted statistics Canada rates and so I wanted to explain OMERS’ pension indexation calculation, which is set out in the OMERS plan text. Instead of just using a point in time application, we instead use the average of the consumer price index for the 12 month period ending in October, compared with the average of the consumer price index for the 12 month period of the previous year. And so, for 2022, this included the average CPI from October 2020 to October 2021, compared with the average CPI from October 2019 to October 2020 and that resulted in an increase of 2.74%.

We do it this way really to help manage volatility and so it smooths out volatility and it's consistent with how the Canada pension plan also applies indexation. And looking backwards over the last 10 years, the two rates have been fairly consistent and so the OMERS rate of indexation has been fairly consistent with that of the CPI posted rates, with two outlier years. Back in 2012, the OMERS rate was higher and in 2021, it was lower. And so that defines our formula and sets out the reasons why we do it in that way. I will tell you that there's a lot of information on our website and so I encourage all of the pensioners to go on to omers.com to get more information and of course also included in the annual statement that you get in December.

Next slide, please. I will leave you with an update on three areas that we're really focusing on improving our services this across pensions, given the fact that more and more of our members are planning for their retirement, we've really focused in, on providing the right tools to help you make educated decisions. On myOMERS we have our retirement planner tool and I strongly encourage anyone who has not already used that tool to go online to myOMERS and use it. It's a phenomenal tool that helps provide a holistic view of your financial health in retirement and so not only can you plug in projections for your income stream, so your OMERS pension along with CPP and any other savings that you might have, but you can also plug in some numbers for some of the expenses that you will have to give you a more holistic plan as you're considering your retirement.

The second area we focused on is really improving our efficiencies regarding pension estimates and so we heard that many of you want to be able to run more and more estimates and have access to that information quicker and so we've amplified that area. And then the last thing we've piloted is chat functionality and so trying to get ready for finding different ways to communicate with you. We know how much you love speaking to our pension professionals within our contact center, we also communicate with you securely through messaging, and this just adds another channel for us to do that. And so with that, I will leave you with a final, thank you. I really, really do hope to see you again, across the province as we get to more and more member facing events, and I'll pass it on to Katharine Preston to discuss OMERS sustainable investing, over to you, Katharine.

Katharine Preston: Thanks Celine. Hi, my name's Katharine Preston, and it's such a great pleasure to be with you today. As the Vice President of Sustainable Investing, I have the great privilege to work with teams across OMERS, as we thoughtfully consider issues such as climate change, labour and human rights, inclusion and diversity, all within the companies that we're investing in. So during this session, I'll provide an overview of our approach to sustainable investing and just take a deeper dive into climate change.

So this timeline you'll see in front of you helps show that although lots of activities have been exciting more recently on this front, I'd like to show you that over the last 20 years, a lot has been happening on the sustainable investing front for more than 20 years. Some of the key milestones you'll see here include investments we've made in low carbon and renewable assets, as well as the policies we've developed that help govern our approach and the networks and initiatives that we participate in both at home and globally, where we're playing a key role to advance how pensions can invest more sustainably.

When it comes to our approach on sustainable investing, it's really core to our whole investment process. It's ingrained in our investment culture and it's a priority, not just for the Admin Corporation Board, but also OMERS management. The policy we have guides our approach and is approved by the board on an annual basis. We have a sustainable investing committee with members from across the organization that's led by Michael Kelly, our Chief Legal and Corporate Affairs Officer. And the approach that we take is rooted in our belief that well-run companies with sound, environmental, social or governance practices, otherwise known as ESG practices, and you're going to hear this ESG acronym quite a bit in the coming slides. We know of the companies that manage these things better will perform better particularly over the long term.

The approaches we take encompass the four principles you see here, integration, integrating ESG factors alongside other investment criteria, provides a more holistic way of assessing value, opportunity and risk that supports our return objectives. As a large institutional investor, we engage with our investee companies to influence sustainable business practices as this dialogue is preferable to divestment. We recognize our strength and collaboration. We like to work with like-minded organizations to exchange information and amplify our voice as we advocate for or better transparency and performance on ESG factors from the companies that we're investing in.

And because we know we don't have all the answers, we must continue to learn and adapt our approach to this rapidly evolving landscape. Turning to the highlights of this past year, we're very proud of the initiatives that we're embarking on investment activities that reflect the mindset I just described. The infrastructure team made notable investments to four companies in the wind and solar area. We continue to expand our company engagement activities by becoming a founding partner of Climate Engagement Canada, which is focused on dialoguing with Canada's largest greenhouse gas emitters, on their plans for reducing their emissions to net zero in line with the Paris Climate Agreement.

We also made a significant commitment that you heard Blake touch on in his opening remarks, about setting our ambition for net zero greenhouse gas emissions across the portfolio by 2050. And on that note, my next slide, I'll go into a bit more details on the commitment. We know that climates presenting both risks and opportunities to the companies we're investing in as well as to the communities in which we live and we serve. So we did set out this ambition at the end of last year. And when I say net zero by 2050, what this means is that we anticipate the companies we invest in will be emissions neutral. And this aligns to what scientists have told us is necessary to avoid the most devastating outcomes of the changing climate.

So, we've taken several steps to understand the implications of climate to the OMERS portfolio, using the best industry standards to calculate and report our position. This includes computing our total fund carbon footprint on an annual basis, which shows us the carbon intensity of the companies we invest in and you'll see that reported each year in the Annual Report, Jonathan Simmons showed that slide in his deck and you can see progress we're making towards that commitment.

Secondly, we're exploring how climate change will impact longer term GDP growth and inflation in the markets that OMERS invests in and how this could be reflected in the portfolio. As well, we're evaluating our exposure to green assets, which includes green buildings, solar and wind renewable type assets, as well as newer companies like manufacturers of green batteries. And this is an increasing significant part of the OMERS portfolio. So we touched on the shorter term commitment we've already made, 20% reduction by 2025, we're going to continue to report those results in the Annual Report. and we're going to continue to send five-year interim targets on this pathway we've set ourselves to net zero. And how we're going to reduce those portfolio emissions is by working with our portfolio companies to reduce their emissions in line with this timeframe, as well as tilting the portfolio towards lower carbon assets over time. And that's it for me back to you, Jackie.

Jackie DeSouza: Thank you very much, Katharine. We've had some terrific presentations so far, and I know we've thrown a lot of content your way. We have one more presentation that you won't want to miss before we begin our Q&A session. It's now my pleasure to introduce Michael Rolland, CEO of the OMERS Sponsors Corporation, Michael, over to you.

Michael Rolland: Thank you, Jackie and thank you to all of you for joining us today, out of your busy schedules, I know we've got a lot to do every day as we go to work on behalf of OMERS and the members in our community. And thank you to George Cooke for his kind remarks regarding my upcoming retirement. It has been my privilege to work at OMERS for more than 20 years. It's been an honor and a privilege, as I say. And a little anecdote, going back to a comment Blake made, when I first started at OMERS, our assets were $35 billion. Quite a story has happened, and I’ve had a front row seat to watch for over this last period of time. And I'll truly miss working at OMERS and more importantly, I'll truly miss going to work every day for you, the members. And as George mentioned, and it was announced last week, Laurie Hutchinson has been appointed the new CEO for the Sponsors Corporation and she will be taking that seat a week from now on April 18th. And I'd like to add my congratulations to Laurie. I've known Laurie since she stepped on the OMERS board more than eight years ago, and I've had the pleasure of working with her and I know she'll do a great job as the CEO of the Sponsors Corporation and I know she'll serve you as the members, very, very well.

Last but not least, I have to take the opportunity to wish Blake a very happy birthday, not sure when I'll get another chance to do that. And certainly on behalf all of you as the members, and all of us as presenters, let's hope that Blake gets some time beyond OMERS today to celebrate his birthday with his family. Now, onto a little bit about to why my reason for being here today, why I'm on the agenda. It's my pleasure to talk to you a little bit about the work of the Sponsors Corporation, or SC for short. As Katharine said, we have lots of acronyms at OMERS, SC being another one of them. We do work at the SC in partnership with our colleagues at the AC, because it's OMERS, it's all of us together, recognizing more than a half million people and their families count on us for your retirement security.

And as you've heard from Blake and you've heard from others, it's an enormous responsibility, and one that we all take at OMERS very seriously. It's critical we deliver your retirement security, not only you the current members, but those future generations OMERS members as we move forward. The phrase and the tagline I like a lot, "building tomorrow together", it's a wonderful reminder about OMERS and the first 60 years. The first 60 years is obviously something that's to be celebrated, but more importantly, I think as Blake said, and others have said, it's about the next 60 years of what we do to make this plan strong and sustainable for the years going forward. And one of the primary responsibilities of the SC, before I get into a few slides, our job is to regularly review the benefits and contributions, to make sure that it's appropriate and sustainable for members today into the future.

We refer to this work, and you'll hear this term, many points, is the work that's done every year by the SC, which is called plan risk assessment. Said another way, it's the mandate of the SC to determine benefits and contributions and do that work, plan risk assessment, on a regular basis, assessing and reviewing a number of factors, including the funded status of the plan, the maturity of the plan, and the risk or headwinds facing the plan, as Blake talked about. And all with a goal of making sure we have sufficient reserves, working with our AC colleagues to make sure we meet the challenges for today and tomorrow. And with my goal today, is really to cover a few items that are on our mind to give you a flavor of some of the discussions that take place at the SC as we go about our work, looking at the benefits and contributions for today, tomorrow, and the future. With that, I'll go ahead to the first slide if we could, please.

And this slide is depicting a story that is something you've heard over and over in comments today and before, that it's about making OMERS sustainable, affordable, and meaningful as a defined benefit pension plan for the years going forward. Another acronym, SAM, just get used to it, we have lots of them. This slide is meant to highlight the achieving SAM is a balancing act. It's just like a scale or as like when I was a kid, my teeter-totter. There's a tension between meaningfulness and affordability. Members want benefits that are meaningful for all their approved retirement. At the same time, both members and employers want to have affordable costs or contribution rates. And that's where sustainability is about finding that balance. A stable balance between the two, and being able to adjust as balance conditions warrant. Said another way, sustainability is about making and delivering meaningful benefits at affordable costs, both in good times and in difficult times.

We're always reminded though, in doing and making our decisions that as a jointly sponsored plan, the risk of this plan is shared equally by our members and our employers. And we rely on that strong partnership to make sure we can make that pension promise year in and year out. If we go forward to the next slide, please. This is a simple slide and why did I put it up there? Getting the balance right, that is really the job of the SC, of trying to make sure how we get the balance right. As we said in my opening comments, it's reviewing and assessing the funded status. And how do we do that? It's really a simple formula, and I put it here in front of you to explain our job in simple terms. What is it? It's about finding how we fund the plan. How do we make sure we have enough money to fund your pension today, tomorrow, and the future?

And that funding comes through three main sources, the assets we have in the bank today, Blake and Jonathan talked about $121 billion, an enormous amount of money. The funding contributions that come each year from members and their employers, as Jonathan spoke earlier, $4.4 billion this year. And the investment returns that we make. And as Blake talked about, the 15.7%. All those things come into this balancing formula. But for many of these numbers, as Blake talked about, there are headwinds and there's others, we need to make estimates on these numbers each year, year in and year out. Plan risk assessment is about understanding and making informed assessment, working with our colleagues at the AC on the various numbers in this formula, building a long-term plan for your pension.

And when we look at this formula, I'm reminded, and I think it was mentioned earlier, not as precisely as I might suggest, but it's recognized that how important investment results are to driving these results. Anecdotally, somebody would say, somewhere around 70% of your pension benefits come from the investment results that are driven by Blake and the team at the AC. We could go back to the next slide, and I'm not going to cover as much of this because Blake spoke about many of these headwinds, but certainly headwinds are the risks facing the plan. And it's something that we, at the SC, and for all of us at OMERS, we needed to take into account. And Blake gave a good commentary on the work that's being done and his confidence, and the ability to deliver as we go forward. But it's risk we have to assess and make an assessment.

The one thing we know for certain, is the future is unpredictable. Who would've predicted COVID two years ago and you have to adapt, as people have said. We hope for a bright and solid future. We hope for stable returns. We hope for low inflation. But that may not always be the case. We also know that there could be sharp turns, and there's not always smooth sailing. So any work around plan risk assessment, you members should expect us that we are going to consider the challenges facing the plan and be prepared for them in the longer term, both building resilience and reserves to keep your pension sustainable, affordable, and meaningful in the future. I'm not going to speak in detail, as I said on these risks, there are many of them, but there are examples of things that we need to consider in doing our work as part of plan risk assessment.

If we jump forward a page, please. Beyond the economic risk, it's just the demographic challenges of the plan, in addition that we have in front of us. And they're really driven by three main factors. People are living longer, as somebody said, we have a pensioner that's well over 100 years old. I don't think when people built the plan and calculated the numbers they thought that somebody would be living that long collecting a pension. We have a lot of people retiring, Celine talked about, has the opportunity baby boomers. And with the change in nature of work, where people going to work that may not be a full-time or different jobs. All these factor into the work that we have to do as part of plan risk assessment, so we have to consider them, but they all drive to a fact that our plan is maturing.

And as you'll see on the graphic, it's a slide that you've seen many times before, they're in our Annual Report. It used to be that we had six active members contributing to every retiree, but now we're at less than two to one. And in the next 10 to 15 years, we expect that number to be down to potentially one to one. Than that's work that we need to consider. And if you consider it, if you go forward a little bit and think about a comment Jonathan made, we paid $5.4 billion in pensions this year. We collected $4.4 billion in pension contributions from members and employers. Those numbers together, there's a gap of $1 billion. And as Jonathan said, about 2% in the future of our investment income. In real dollars, we think that number will be in the range of $5 billion in very short order.

That's a gap. And that shows what of the pressure that's put on by plan maturity that has to be considered as part of any work that's done by the SC or the AC, and looking at our long-term sustainability. I think if you jump forward a slide, this is just a reinforcement of plan maturity. Why it's one of the most important issues that we have to consider as we deal with our plan for today, tomorrow, and the future. And plan maturity is something about building our resilience, given it's more challenging, and going forward. In simple language, we need to de-risk the plan in preparation for the time when we are one active member to retiree. With these large outflows, reliance on having enough assets and earning enough money on those assets to fund pensions, to build resilience and reserves, is something that becomes more and more critical every year. As our plan matures, you need to know the plan changes that might need to be made if we ever hit a real downturn, become bigger and bigger. And particularly if we don't have sufficient buffers to absorb that shock.

Just like an individual who, as they get older, wants to take on less risk. We as a plan, as we become more mature, need to take on less risk. And I'll give you an example of something that's just a scenario of what ifs, it's not real life and it's not something to cause any alarm, but it's something that the scenario work that we do in plan risk assessment. And so if we had that shock, like in 2008, what could happen? The analysis that we might do says, that we may or may not be able to use the money in the bank and our future investment returns to pay pensions without having to make adjustments to our plan. That's just a scenario, it's not reality here today, and something we can't control today.

But what it does do is remind us that we need, as part of plan risk assessment, to build over time sufficient reserves to meet future challenges, most of which we cannot control or predict. Go to the next slide, please. Jonathan talked about, we can go forward on the discount rate here. We talk about discount rate and we talk about lowering a discount rate. Jonathan did a summary of the work that's been done to date. Our funded status today is driven off a 3.75% discount rate, that discount is really the hurdle, what we need to earn every year after inflation in order to deliver and grow our assets to keep up with our liabilities. The higher the discount rate, the more pressure, as Jonathan said. As we've outlined in our Annual Report in these comments that we've got on the slide, the anticipation is that we will lower discount rate to 3%, that's something that'll be considered every year and re-evaluated based on the market circumstances.

But at 3%, that's a ways to go over the next period of time. And for purposes, as we do the planning at the SC, we like to take into account not just the current discount rate, but also the longer term discount rate for work. If we can go forward one slide, please. What does that mean? And this is not something that's anything more than our internal thinking and the dialogue we talk about. If we had a discount rate today at 3%, which we don't, what would our funded status look like? And what it does show you is that our funded status would be less than the numbers Jonathan reported. So that just shows us the challenge ahead over the next 15 years to build resilience and reserves in the plan so that we can be funded at 100% using a real discount rate of 3% versus the current discount rate of 3.75.

This is just another example of the work and the analysis that has to be done by the SC in collaboration with our AC colleagues to make sure we build a plan risk assessment plan for today, tomorrow, and the future. The next slide, please if you could. This slide is really about building resilience, and that's the whole message I think plan risk assessment should be about. We're obviously facing headwinds, Blake talked about them. We may not be funded at 100% if you use the long-term discount rate. It's critical we improve our resilience to build reserves as the plan matures. And it's keen that we focus on future and ongoing efforts to improve our long-term resilience in building reserves, that's what plan risk assessment's all about. It's what the SC is continuing to review in collaboration with our colleagues at the AC.

We recognize we cannot solve for every option ready circumstance, it will never be perfect, but we need to decide what level of risk OMERS is willing and wants to accept. And I would suggest, that over time the level of risk we want to take decreases as OMERS becomes more mature. So our focus on building protection reserves and buffers is what we need to focus on over the next 15 years. Next slide, please.

I think that one of the things that's important is we at OMERS have been working very hard in building resilience. This is not new, this is a subject we've talked about many times before. And OMERS has made lots of progress over the last 10 to 15 years, and it's something we should all be proud of. Things like pioneering our investments in the private assets, which obviously Blake with his leadership at Oxford and others in the infrastructure and private equity. Our lowering of our discount rate since 2015. The introduction of shared risk indexing. And the potential for non-full-time employees to join the plan, which didn't exist before, given the changing nature of work. Those are all examples of the work that's been underway. But our work is not complete, plan risk assessment, we have to continue to do that work every year, as we don't know with certainty what the results will be. And you can't sit on your laurels, you need to continue to look forward and think about it, and project and assess, working again in concert with our colleagues at the AC, because it's a group effort.

We work together. We're all part of OMERS. And I think that the last slide I put back up is a slide you would've seen before, if you can move forward one. It's about, if you want to think about the work of the SC, think about the simple formula. We have various variables we have to make sure that were funded in order that the benefits you expect to receive during retirement are there for you today, tomorrow, and the future. And that's going to come from the contributions that are made into the plan and the investment returns that we earn. And we recognize there's many uncertainties that are ahead, so it's not an easy discussion, so we have to assess it as informed as we can. But what I can assure you is the work that OMERS does, and the SC does regarding plan risk assessment, is an open dialogue with you the members, with sponsors and stakeholders, as we go through this review.

Every year we do this, we meet with sponsors and stakeholders, we speak to at Annual Meetings, and we give you the opportunity to hear from us. Nothing is going to come as a surprise, nothing will be short and fast. If there's any decisions that would have to be made, they'd be done in concert with all of you. And in closing, two points that I think are important to remember. We recognize that a half million people and their families count on us for your retirement security, and it's important to get it right. And our focus is long-term, Blake talked about that.

We need to make decisions to keep OMERS sustainable and affordable, not just for today, but for the next 60 years and beyond. With that, I hope that I given you a little bit of a flavor of the thinking and the discussions that take place at the SC as part of our work in the broader OMERS team. And I thank you for your time listening to me today, and I'm happy to answer any questions during the Q&A. And with that, I'll turn it back to Jackie. Thank you, Jackie.

Jackie DeSouza: Thank you very much, Michael, that was a very comprehensive presentation. At this point we will open things up for questions to our presenters, and we have a few other senior OMERS leaders on the line who can answer questions as well. We will go the full 40 minutes for the Q&A as promised, so that means the meeting will go about 20 minutes over time, until about 11:20, given the technical difficulties we had earlier. A reminder that we will post the recording of this meeting on our website later, without the gap in time when we had connectivity issues. Just a reminder of the instructions I provided at the outset, if you have a question, please put it into the Q&A feature in the bottom right of your screen, and I will ask the question on your behalf.

As mentioned earlier, we will alternate the questions coming in during the meeting with some we received from you in advance when you registered for the meeting. We do have some questions in the queue, so I'll go to the first one. And this one will be for Blake, it's an ESG climate question. And it's from a retired member from the Children's Aid Society of Toronto. This is one of our advanced questions. So, Blake, pension plans around the world are divesting from fossil fuels to stop contributing to the climate emergency. Why won't OMERS do so?

Blake: Hi, everybody. Thank you for the question, sincerely. And our sincere apology for that technical glitch. Welcome to COVID. And it'll be so nice to get people back in the same room where we don't have to depend so heavily on these things. Very fair question and I think if you listen carefully today, the amount of content we have put behind today's story explaining our ESG commitment, I hope it's not lost on anybody that it is a very, very sincere commitment from us all. Not only for the plan members who are making this something that is important to them, but for society at large. And make no mistake, we are committed. When I first came to the OMERS family, I came in as the CEO of Oxford and within months we say we will be a leader or the leader in this space. And today, Oxford's one of the global leaders as it relates to their ESG commitment. It's won literally hundreds of awards and the team have really set an example as to how we can show leadership in the industry.

And in recent years, we OMERS have done the same thing. We are totally committed. We've given five-year goals, as you know, to 2025 to decrease our greenhouse gas. We've put a stake in the ground for 2050 to do the same thing. We are actively managing our assets in a very conscientious way. We're going to continue to do it, but it's a transition. And so when you ask a narrow question, will you, as a right, dispose of everything that's fossil fuel? We think there's a balance. And I'll give you some perspective, about 4% of our portfolio is invested today in energy, about 1% of that 4%, so one of the whole entire book is actually in oil and gas. And those are with the very, very best transition entities in this country, the ones that are most thoughtful, the ones that are the leaders and we are actually working with them to help the transition.

If we were to sell our shares, we wouldn't be able to influence that and we, frankly, wouldn't be able to help the country. So we were, I think 2% a few years ago, we're at 1% of the portfolio today. We're going to be very thoughtful and let's keep in mind, we're a Canadian based pension plan, we're here in Ontario. To go out and say we will absolutely sell everything, there are schools of thought that say we should, we think, as a Canadian based pension plan, we should be very thoughtful, support only the best, make it a transition, help the country and by the way, those returns from those investments we've had have been sensational recently. And so, we'll monitor it and carefully go on a go forward basis. But no, we won't as of right sell everything we have, not at this stage. Back to you, Jackie.

Jackie DeSouza: Thank you very much, Blake. For the next question, we're going to go to one of the questions that have come in during the meeting. It's from Vicky, and it's on sustainability, so we'll be going to you Michael. With the OMERS plan continuing to face pressures with maturity, what is being done to address plan sustainability, especially now with additional challenges from the pandemic, rising inflation, and global economic uncertainty? Michael.

Michael Rolland: Thank you, Jackie. And thank you for that question. I think part of my remarks from earlier address it, but I think my comment on sustainability, it's an ongoing effort on behalf of OMERS to look at the plan to make sure we have the right balance, so that we can make those pension payments. And yes, uncertainties that were expressed by the questioner are obviously things that we take into account, that's why we wanted people to understand the work, but nothing has changed. We addressed plan sustainability a couple years ago, in 2020, we introduced a few plan changes, shared risk indexing, and also non full-time. So we continue to do this review, and it's not a one and done type of process, it's a continuous review. And the circumstances change. And the benefit of being a long-term plan and making long-term decisions, you don't have to make decisions in very short order.

So you have time. We have the ability of years to look at things as compared to moments. As Blake said earlier, we look at OMERS in quarters, and quarters are 25 years. We need to take a look at things on periods of time. And that's what we are doing in regards to sustainability. But is it black and white? Do we have enough reserves for every outcome? Probably not. That doesn't mean that we're not building them, not we're going to have an active plan. But we're doing this in an orderly fashion because, if I go back to it, it's a balancing act. What's a meaningful pension and what's affordable? That builds the sustainability of the plan and sometimes you have to take risk that you won't have it 110% buckled down. That's just the reality, so our work is ongoing, and certainly we will continue to update people on that. And that's really the primary focus of the SC on a day-to-day basis.

Jackie DeSouza: Great. Thank you. Thank you very much, Michael. Next we are going to go to George for a question on compensation. We did receive a number of pre-submitted questions asking about compensation and bonuses for OMERS, which are characterized as disproportionate to returns in the words of an active member from CUPE local 79. Can you comment on this please, George?

George Cooke: Yes. Thank you, Jackie. And thank you very much to the member for the particular observation. I'm going to try to do this with four points. First of all, our approach to compensation and in particular salaries and bonuses, is very clearly set out in our Annual report, You can go there, any member can go there and see very clearly how this is done. There's actually very good disclosure. Second point, as a starting point, our salaries and then the opportunity to earn in addition, in relation to performance, is based on job comparisons so that we're comparing like to like and structure comparisons across the Canadian pension industry, such that we are comparing like to like. And we take into consideration our competitive positioning when we do this. So, the comparisons are legitimate comparisons, we don't do this in a vacuum. We do this paying attention to the environments in which we compete for talent. And the war on talent is quite intense, as I think anybody would normally pick up a newspaper on any given day or turn on the news.

When we do this work, the board is advised separately and independently by an outside firm. The name of the firm, the credentials of the firm are set out again in the Annual Report very clearly. We do seek independent advice, because these are very complex matters. Our pay is all performance based, a substantial portion of what people take home is performance based. If you perform, you get it. If you don't perform, you don't get it. And the structures in which the performance is measured have all been reviewed over the last two years, again, with two sets of external eyes on it. One advising management as they came forward with recommendations to the HR committee of the board, and ultimately to the board. And a second set of eyes from our board, but our board being advised with an external expert who incidentally also offers similar advice and services to any number of our large plans.

So my response is, we're very comfortable that our salary and our approach to compensation is appropriate, that it is competitive, we do an annual review where we go back and look to see whether or not the outcomes that our structures produced are what we were intended relative to others, and relative to what we were hoping we might see. As a fact, very clear fact, in 2020 when our performance was not what we had hoped it would be, salary compensation went down. In 2021, when performance was what we really had hoped for, in fact exceeded what we had hoped for, our performance was up and our salary comp went up. The relationships that are there are very appropriate, they're not out of line with what goes on in our industry segment and frankly, they're critical to ensure that we have the talent that we need to continue to perform the way that we are.

Jackie DeSouza: Thank you, George. Okay so for the next question we're going to go to Celine, this is a question around pensions from an active member at Ottawa Fire. What is bridge, and how does it work?

Celine Chiovitti: Okay, thank you, Jackie. If you think about your OMERS pension, essentially we're a defined benefit pension plan, and so your pension is based on a formula that essentially has two variables, your earnings and your service. Your pension itself has two components, and so you have your lifetime pension and your bridge benefit. Your lifetime pension is paid to you, so anyone who retires would get their lifetime pension from the day that they retire, and that remains in place for the rest of their lives. And your bridge benefit is an additional amount that you would get if you retire under the age of 65, and it's only to you until age 65. And so if you retire, you're less than age 65, you get that additional bridge benefit that's in addition to your lifetime pension, paid to you until you turn age 65, and then the bridge benefit stops.

The thinking behind that, is at age 65 you would then access your Canada Pension Plan benefit, and so at 65 some people might choose to access their CPP early, but regardless we would not claw back that bridge benefit. It goes until age 65, at age 65 you, get your CPP and your bridge benefit stops.

Jackie DeSouza: That's great. Thanks very much, Celine. Okay, we're going to go to Jonathan next for a question from Fred. Given the change in interest rates and growth in returns, is there a review of the discount rate strategy to ensure its tied directly to an updated asset analysis? Jonathan.

Jonathan Simmons: The short answer to that is yes. We usually have a methodology that we have discussed with our board about determining our long-term discount rate target. The discount rate that we have today, 3.75% real, plus 2% for inflation, I think it's very clear. I think it's important to note that we've been chipping away at our discount rate now for six years. And over those six years we've been on this journey, we've taken it down by 50 basis points. We think that we still have a journey to continue on, and over time we hope to continue to reduce our discount rate. But the end goal is not static, it is something which is responsive to the economic environment we're in and the conditions that we face. It's a very, very careful thing that we at OMERS consider as we chart the long-term direction.

Jackie DeSouza: Thanks very much, Jonathan. And we hope that answers your question, Fred. For the next one, we're going back to Michael, a question from Ben. Under which circumstances will payments to retirees not be indexed to inflation? Michael.

Michael Rolland: Well, thank you, Ben, for your question and currently there is no contemplation of changes to the indexation for pensions. But we do have, as we talked about, a risk management tool we call shared risk indexing that does not come in effect till 2023. And at that point, depending on the financial health of the plan, so going back to another question about sustainability, if the SC board with a two-thirds vote decides that there needs to be some flexibility in a plan, we could reduce indexation on any pensions earned beginning in 2023 and beyond. Not before, only in the future. But if it is to be invoked, it will never reduce the pension payments that you have, and it won't reduce the indexation that's been earned on pensions up to the end of 2022.

But that decision has not been made and is not on the agenda at this point, it's a decision that can only be made by the SC beginning of 2023. As we get closer to that date, where that option does exist for the SC, I know our colleagues on the AC, Celine and team and others, are continuing to build resources and information so that people understand shared risk indexing and its implications if it was to apply. But for now, there's no change to indexation, it is status quo. As people talked about, the indexation was received on the pensions this year. And until a decision is made, people should assume that indexation is continued.

Jackie DeSouza: Thank you, Michael. I think that would be comforting for many of our members. Now we go to Celine for a question from Roxanne. What will OMERS do to encourage all employees to join OMERS from their first day of hire? And will OMERS work with both employees and union associations to promote enrollment? I mean, this could be related to non-full-time. But Celine, we'll go to you for the response.

Celine Chiovitti: Thank you, Jackie. We are working quite hard with, I would say both our employer and our union association groups, given that we will be expanding against non-full-time opportunity for enrollment effective Jan 1, 2023. And so we're definitely working with both employers and with our unions and associations. We really want to understand the employees that are out there and ensure that everybody has access to information to make an informed decision. So at the end of the day, we have a lot of information on our website. We are really looking at who those employees are out there. We were working with employers to make sure that anyone who is a non-full-time employee as of Jan 1, 2023, has the information in an expeditious way so that they can make a decision and, again, moving them towards our website and some communications that we will personally be developing. We're getting some phenomenal input from many of our unions and associations as far as what speaks to their members and again, with our employers who really know the members best. And so I would say supplementing information on the website, some written materials. We will be providing, of course our member handbook and some information that's really just encouraging people to do their homework, do their due diligence and access information about the defined benefit pension plan.

Jackie DeSouza: Great. Thank you Celine. For the next one, we're going to go first to Blake. It's an ESG question from Zach. "What role will environmental, social and governance investing play for OMERS' investments over the coming years?" Blake.

Blake Hutecheson: Thank you. Thank you, Zach. So I hope we've tried to be clear today that it's clearly a big part of our future. Our ESG strategies are very consistent with what Katharine suggested, which is we believe fundamentally that thoughtful investment entities who understand this transition to a lower fossil fuel environment are going to just do better over time. And so everyone of our businesses is focused on how we open that aperture and unlock opportunities on a go forward basis. And as I say, every decision we take at the investment table, we put it through an ESG sieve that says, is that in the best interest of OMERS long term, given the changes that are happening in the environment? So those are two quick thoughts. But maybe I can turn to my CIO, Satish Rai who runs our portfolio and Satish, maybe you can make a few comments for us.

Satish Rai: Thank you, Zach. And thank you, Blake. So I think there's a number of areas that we're focusing on. First of all is we've set five year targets for 2025 to reduce carbon emissions. We've set 2050 targets and our expectation is that we'll set a 2030 target in the near future also. And the reason we've done that is we won't have an anchor for 2050, but we also want to make sure our current management was focused on all the issues that you are talking about. You are seeing from our actions that a lot of our new investments in the last number of years have been focusing on renewables. You've seen our exposure to wind, solar and other areas continue to grow as a portion of our balance sheet. Blake mentioned that our oil and gas exploration exposure is nearly half over the last couple years. So we've actually dropped our oil and gas positioned by 50%. And it's now under one percent of our balance sheet.

But we want to be very clear, companies that have very strong ESG DNA are the ones that we expect will do well over a very long period of time. Second thing is that we want to make sure that we are doing everything, that we are a leader in the space. We're one of the leaders in the space. So I think from our point of view, we're striking, I believe, a very strong balance. Every investment professional we have on a global basis is focused on this area and we think it's also good for our investments returns over very long periods of time.

Jackie DeSouza: Thanks very much, Satish. So now we're going to Jonathan. It's a question from Doug. "Have you met your targets over a 20 year term?"

Jonathan Simmons: So Doug's question about meeting targets over a 20 year return. So what you will see when you look at our Annual Report is that I've included OMERS returns on a one, three, five and 10 year basis relative to our benchmarks. I've also included the 20 year return for OMERS, which is 7% net, but I didn't include a benchmark for that and the reason why I didn't put that benchmark in the Annual Report is that prior to about 2012, the board at the time used quite a different approach to establishing benchmarks, so I don't have the consistency there to put that in. So, but what I can say, Doug, is our discount rate today is 5.75% nominal. Our long term strategic target that we've set out in our constituting documents is 7% and our 20 year return is 7%. So overall strong versus the funding requirement plan. Hope that helps.

Jackie DeSouza: Thank you, Jonathan. Okay. Now we're back to Celine. Lots of questions about pensions. This should be an easy one. "What phone number can be called to speak to an OMERS representative to help plan and decide on an upcoming retirement date?" And that question is from Kelly.

Celine Chiovitti: Thank you, Jackie. Okay. I will give you the number. We'll make sure to post it on the video as well. So the number to contact our member services contact center, 1-800-387-0813. Or if you're local in Toronto, 416-369-2444. You can also reach our member services team by sending them a secure communication and so those of you who have access to myOMERS, which I hope is the majority of you, you could go in and send your question right through secure communications. Again, the only person that would have access to that information, it goes through a secure channel, a secure portal, and into that member services representative's hands and you can exchange information in that way as well.

Jackie DeSouza: Thank you, Celine. Okay. So next we will go to Blake. It's a question from Shiraz who's a retired member. She says, "Thanks for the great performance in 2021. Can you identify tailwinds and headwinds for 2022?"

Blake Hutechson: Sure. Thank you for the

Jackie DeSouza: Yeah, this is a sustainability question. It should go to Michael, unless you would like to say something as well.

Blake Hutcheson: Is it more of a sustainability question or an economic headwind question?

Jackie DeSouza: I mean, that's all it says. Thanks for the great performance in 2021. Can you identify tailwinds and headwinds for 2022? I believe it is an investment question.

Blake Hutcheson: Okay. Perfect. Happy to take it. Thanks for the comment. What's interesting, somebody many years ago said to me, if you want to get wealthy, put all your chips on one square and if you want to stay wealthy, diversify. And what OMERS has done incredibly well over the last decade or so is diversify into so many asset classes, so many geographies, so many different industry sectors and our shoulders just get broader and broader and broader, which makes us that much more stable. So the question, when I'm often asked that question, it really depends on the division and it really depends on the opportunity set within each of our different investment strategies. So I've shared with you earlier on in my prepared remarks the headwinds, and there are many, and it's not an easy time but within every one of our investment entities, we're actually experiencing tailwinds and opportunities, too and we just try to make sense. What's a business plan? It's what are we great at? How do we get in the wave of trend given limited resources?

So every one of our businesses says, okay, yeah, there's headwinds, but we have an open opportunity to take advantage of certain dislocations in the markets, certain stocks that we think are undervalued in the capital markets perspective, certain real estate opportunities like life sciences and industrial product and office product, certain ESG related investments with respect to our infrastructure business. So it really varies, but we are seeing them, that's what the beauty of markets presents, it presents difficulties, but also opportunities. Satish, do you want to make any other additional comments?

Satish Rai: Yeah. Thank you. So I think that we're in a very unique time, we're talking about headwinds. I think for most people know in 1981, we saw interest rates of 18%, 19% and for about 40 years now, we've seen a declining in rates and that has continued to take place and appears to us the conversation on headwind for us might really be the higher inflation, higher interest rates. People that have benefited from mortgages over the last 10 years, we may be seeing higher mortgage rates. I'd say, if you said that is one big headwind, the second is obviously the geopolitical risk that we're seeing on a global basis play out. But as Blake mentioned, for every headwind, the opportunities that we see is terrific over the next five or 10 years. We continue to improve diversification by geographies, we continue to improve diversification by asset classes and by sectors.

And let me give you a real life example. In Oxford many years ago, very high portion of our balance sheet was in offices, were about 75%. And today our exposure to real estate in office is down to 25% of that bucket business, not because we don't necessarily see an opportunity in offices, but we see other opportunities in some of the real estate spaces. And our team continues to be relentlessly focused on improving diversification and finding assets that meet the test of time. And one other comment I'd make, Blake, is that with today's amount of information that's available, there's always something bad that's going on is always a concern that we have. But we have really created a portfolio to set the test times over three, five or 10 years and we're very confident about the outlook for a long period of time for the quality assets that we have.

Jackie DeSouza: Thanks very much, Satish. Looks like there's another one here for you and Blake. So this is from a retired member from the city of Toronto. "As an organization heavily invested in commercial real estate, what new strategies are being planned to counteract the new hybrid working models to offset full use of office and retail space to ensure good financial returns? Thank you." So Blake, would you like to start this one?

Blake Hutcheson: Happy to start. I think you'd be proud of the evolution of Oxford over the last several years. Satish just touched upon it. It wasn't so long ago that our biggest allocation was to retail and office and over the last several years, we've increased our allocation for multifamily, for industrial, for life sciences and out of more of a dependency on office and retail. And I think when you look around the world, how quickly we've moved, it's really been pretty impressive, including helping deliver to our 15 plus percent returns last year. So on office specifically, it's interesting, it's getting a bit of a bad rap today and the reason is clear, people wonder what the hybrid structure means. But here's how it works, there's probably, when we poll our tenants, there's about a 20% less demand for office space, but there's probably about a 10% more demand for elbow room in the offices because people need more circulation space and more free space and you can't put people in condensed spaces like we were doing pre-pandemic.

So if there's a 10% diminution in demand and most leases roll every five years, it kind of hits your portfolio every two years. And the long and the short of it is it's not as bad as you think in terms of how it impacts office. And furthermore, better office buildings are going to do better in this market because of air quality and the like and the only assets that Oxford owns are the best of the best in the best markets in the world. So we actually think that we are well positioned to take advantage of the post-COVID environment. Our office buildings will fare much better than average. And as I say, it's a smaller percentage of our book than it used to be by a long margin. And, as Satish said, we're investing in lots of other asset classes to expand our diversification, strengthen our balance sheet. And Oxford's in great shape as a global platform today. I think you'd be proud of it. Back to you, Jackie. Unless, Satish, did you have anything to add?

Satish Rai: No, Blake. I think that was perfect. Thank you.

Jackie DeSouza: Thank you very much, Blake. So there's a nice comment here from Nancy, which I'd like to share. "Thank you for this thoughtful and thorough Annual Meeting. Despite the technical glitches, I learned a great deal and feel confident with the diligent work of OMERS." Thank you very much, Nancy, for that. So, we can take a few more questions, we'll go next to Jonathan. Here's a question from a retired member from the City of Toronto. "What is the strategy to close the gap, re the current unfunded portion of the plan?"

Jonathan Simmons: Thanks for that question. And it's a very important one because as we build for the future, as Michael Rolland was suggesting, we need to build our assets in order to close that back and actually exceed it. 100% funded won't be enough to withstand the headwinds in the future, we actually need to build up some reserves as well.

And so, as Michael mentioned, about 70% of pensions get paid from investment returns. So it's clear to me that investments have to do the work and we have to sweat the investments as we go forward. And I'm just going to pick on a couple of the comments that Satish and Blake have made already about that. It's about pursuing our asset mix and we've got a blueprint for our asset mix, we know the assets that we want to build into the portfolio going forward.

It's about rotating our capital in a smart way. Satish and Blake have given you an example of that in real estate, but there are many more. Gradually shifting more of our portfolio into Asia, where we believe that there's higher growth opportunities and therefore some higher return opportunities is one example of that. The transition to the low carbon economy is going to need to be funded and we've got capital to be able to put to work to do that in a profitable way as opportunities arise. And the final piece I think is important to go alongside all of that is team. We can't do any of this if we don't build team that are going to be able to take that $121 billion of capital that you own today and turn it into an awful lot more than that in the future. So rotating our capital, deploying our asset mix, being really thoughtful about the investments we make and making sure that we've the best team of people to do that. Those are the way we're going to close that gap.

Jackie DeSouza: Thanks, Jonathan. I believe, Frank, you'd like to add some more to that question.

Frank Ramagnano: Well, I just want to add to what Blake and Jonathan have said, they've looked at the aspect as in terms of our investment portfolio making sure that we are diversified, but I can and assure you that from our board, we're constantly looking at our plan and ensuring that we have the necessary reserve, the plan to move forward. So taking a look at what the plan design is, taking a look at our demographics and making sure we're matched up. As Michael has said earlier, we're looking 30, 40 years ahead and that's why it was so important to introduce the shared risk indexing, knowing that we needed such a tool when we were either one-to-one ratio. So investments is one aspect, but it's not the only aspect that we're relying on. We're looking at plan design and making sure that the plan design can meet the needs of our members and that it is sustainable for the future.

Jackie DeSouza: Thanks very much, Frank. So the next one is an investment question, so Satish, we'll go to you, it's from Patrick. He says, "Long bond investments have proven troublesome in the current financial environment with interest rates rising. Is OMERS finding all alternatives to bonds for the portfolio?"

Satish Rai: Thank you, Patrick, and I think your question is really spot on that this is something society's been struggling with. If you have a mortgage, you're starting to see that mortgage rates are starting to rise, long bond yields start to rise. First of all, I want to just highlight our process led by Jonathan Simmons as our CFO and Strategy Officer, we do a robust asset liability study. It's done on a regular cadence and the most recent one that we had highlighted the need to have alternatives to bonds, exactly what you've said. Our organization has thought about inflation and the low rate environment. The low rates just do not provide us the returns that we need to match our liabilities and we made decisions some time ago to have more investments in real estate, more investments in infrastructure, more investment in high quality, corporate credit. And all those are paying out.

You're absolutely right that long bonds have suffered quite a bit. Our balance sheets actually hung in very well. The average life of our bonds is only three years, so much, much lower than the five, 10, 30 year that you see some of the long term damage. So we have a lot of confidence that we have alternatives to the fixed income when it comes to government bonds. But I want to be clear. We do need government bonds as part of our balance sheet, we need them for liquidity. we need them to pay pensions, we need them to have cash set aside for future opportunities. So it feels like to us that we've got the right balance. We have fixed income exposure, but it's in the three year term. And we do have alternatives to find return asset classes such as infrastructure that will provide solid returns over time.

Jackie DeSouza: Thanks very much, Satish. Okay, next we're going to go to Michael. So it's a plan design question from Zachary, "Will OMERS change the contribution structure with the upcoming CPP enhancements?

Michael Rolland: Thank you, Zachary, for your question and certainly CPP enhancements that are coming is one of the things that the SC does consider as part of plan risk assessment and the work we undertake. I think going back to comments we made earlier, looking at both the meaningfulness and the affordability, obviously increasing the CPP contributions mean you, the members, will be making more contributions to your retirement security. We need to take a look at that.

But at the moment, there are no contemplated changes that we're looking at because obviously, CPP enhancement takes time to build into the system. But it's something we're conscious of and is part of the discussion that takes place at our board and at OMERS on a regular basis, because it affects that form that we talked about where sustainability is a balancing act between meaningfulness, what type you could expect for your retirement security, which if you get more CPP, that potentially increases it. But also the affordability, how much can you afford to pay? So it is something that's on our agenda and something that we pay attention to, but nothing on the horizon right now to contemplate changes that we'll be making.

Jackie DeSouza: Thanks very much, Michael. Okay. Next question

Frank Ramagnano: Jackie, it's Frank here. Can I just additional to Michael?

Jackie DeSouza: Sorry, yes, go ahead.

Frank Ramagnano: Thank you. And I think Michael's put it well. We also understand, as board members, that a lot of our sponsors and a lot on our board members were very instrumental in getting the changes to CPP. We understand the value of it and why it was done and we're very concerned of any changes we make to take away from that. So it's something that, as Michael said, it is there, it is not there on the agenda right now. It would probably be something that we would have to do if we were concerned with a dramatic threat to the sustainability of the plan. But we understand why the government put it in and we respect that and as a board, we're going to be very careful on how we'd look at that issue.

Jackie DeSouza: Thanks very much, Frank. And sorry for that, the interruption there. Okay, so next we will go to Katharine. It's an ESG question from Janelle. "What does OMERS plan to do to address the social in ESG?"

Katharine Preston: Thanks for that question, Janelle and I think, I know you've heard us talk a lot about climate change, so I'm really glad for this question. We can actually speak to a broader set of the ESG factors we look at, including the social ones or the S of ESG. So our investment teams are evaluating the full spectrum of whichever of those ESG factors is material to the investment they're looking at, whether it's in due diligence or whether it's during asset management processes. They look at social factors and that includes things like human rights, inclusion and diversity, employee engagement measures as well as consideration of indigenous rights. And these are all evaluated as part of the investment process. Historically, these S factors have been more difficult to quantify, there aren't the same frameworks that we have, like we do for climate change, to report on the extent of these measures. So that is something we're working on so that we can better determine that and communicate it to you on a more regular basis. So thanks for that question.

Jackie DeSouza: Thanks Katharine. Okay, we're getting close to 40 minutes here for the Q&A, so we'll ask one last question. This one will be to Celine. It's from Larissa, "At which age can OMERS members withdraw their pension? And do you have to be an active member to do so?"

Celine Chiovitti: Thanks Larissa. So I'm going to answer the question this way, so you can retire, essentially, if you are a normal retirement age 65 member, you can retire as early as age 55. And if you are a normal retirement age 60 member, you can retire as early as age 50. And so that's the earliest that you can begin withdrawing on your pension and so you can retire from your employer and begin to draw on your pension. If you leave your OMERS employer prior to those dates, you will get a number of options from OMERS. One of the options, for example, would be you could keep your money with OMERS and defer your pension and collect it at a later date. You may want to transfer your pension to another pension plan if you're going to another employer that has a DB pension plan. Or you could request to receive the commuted value of your pension.

And so those are sort of the three options available to you if you are not yet of your earliest retirement age. After you've hit those dates, then the only option is to collect a pension. And so I'm not sure if I've fully answered your question. You can also access more information on our website at omers.com.

Jackie DeSouza: Thanks very much, Celine. So we received another nice comment, which I'll share with the group from Rob, "This was my first OMERS AGM. Thank you very much to everyone involved in the AGM. Great format. Great content. Two hours is the perfect length. It was enough time to explain the 2021 performance and enough time for questions." Okay. So with that, just want to thank everybody for their participation in that Q&A, you really throw some great questions. We'll watch another brief video now and then we will hear closing remarks from our Sponsors Corporation Board Chair, Frank Ramagnano. Let's go to the video.

Speaker 1: The biggest thing I'm looking forward to in retirement is just having full control over my time and with OMERS, I think about the fun stuff about retirement.

Speaker 2: There's potentially generational wealth, I can be the first one in the family to really start that.

Speaker 3: If you have OMERS, you have more than enough to retire and enjoy what you want to do.

Speaker 4: Thank you, OMERS, for giving me the security to be able to have this wonderful life.

Speaker 5: I'd like to thank OMERS for the freedom I now have.

Speaker 6: Because of you, I am truly living my best life now.

Frank Ramagnano: In concluding this event, I would like to sincerely thank you all, the staff, who put countless hours to make this event happen. Particular thanks to Jackie who did a great job as our emcee. Baseball season just started this weekend and you know a good hitter by how they hit the curve ball, so we had one today. Thank you, Jackie for handling it so professionally.

On behalf of the AC and SC boards and senior management team, I also want to thank you, the members, who took the time of your busy day to come to our Annual Meeting. We take great pride in events like these because they provide us with a unique opportunity to showcase what we do. But more importantly, they allow us to interact directly with you and hear your questions and concerns firsthand.

As you heard today, this is an important year. OMERS is turning 60 this year. Yes, it has been 60 years of partnering with employers, sponsors and stakeholders to proudly serve members across the province of Ontario. 60 years of providing sustainable, affordable, and meaningful defined benefit plans. And we look forward to serving the members for another 60 years and beyond. We know how valuable an OMERS pension is to our members and we are proud to contribute to your retirement security.

Over 70% of pensions that OMERS pays is derived from investment earnings. Consequently, it is critical that we achieve strong, long term investment results. We are very pleased with our 2021 results. Thank you to Blake and Satish and the entire investment team for your truly great year. Our success is also driven by our ability to always keep an eye on the long term sustainability to this plan. It's not an easy task because no one has a crystal ball. As we heard from Michael, we need to look out 30, 40, 50 years in the future to ensure that the plan is set up for success for years to come.

As the plan matures and we become increasingly relying on investment results to pay pensions, we have to be mindful of the potential headwinds ahead of us and we have to think about the best way to build sufficient reserve and resiliency in the plan. And thinking about the future, in some ways it is bitter sweet moment for the OMERS SC. As many of you know, we will be losing our present CEO, who in 2021 announced his retirement. Michael Rolland has done the masterful job at leading the SC for the past three years and has done this tremendous job before are leading the OMERS infrastructure and private equity business.

As you know, he deserves a lot of credit for many accomplishments during his tenure. The introduction of SRI as a tool to address long term sustainability is one example. In addition, a new executive leadership team to help support the SC in its ongoing work is another of a long list of accomplishments. For all his contributions during the past 20 plus years of making OMERS sustainable, affordable and meaningful, we say thank you, Michael. Thank you for accepting my challenge when I asked you to step in temporary as our CEO and extending it for as long as you did. I know that all of us wish you all the best and a well-deserved retirement.

I said bittersweet because while it's certainly difficult losing Michael, we are very proud to welcome Laurie Hutchinson as our new SC CEO. SC conducted an extensive search process to find the right CO to lead us in the next phase of our evolution. Laurie is an accomplished pension expert with valuable experience managing pensions, the regulatory environment and pension governance. We are confident that she will be a great leader of the SC team and an outstanding ambassador for OMERS. She begins her duties next week on April 18th. Please join us in welcoming her to her new role.

That concludes today's OMERS Annual Meeting, and please stay safe and healthy. On behalf of the whole OMERS team, we want to wish you all the best and look forward to seeing you when we hope it will be in person next year. Have a great day.