At OMERS we believe that climate change and the expected transition to a lower-carbon economy can have a significant long-term impact on the financial performance of the companies and assets in which we invest. We have endorsed the Task Force on Climate-Related Financial Disclosures (TCFD) as we believe it is the most effective standard to deliver the information investors need to assess climate risk.
It is OMERS fiduciary duty to address climate-related financial risk and opportunities through our risk management, due diligence and asset management activities. We approach climate change by applying the four overarching principles that underpin our Sustainable Investing Policy: integration, engagement, collaboration and adaptation.
While the energy transition could significantly impact investments in the extraction and production of fossil fuels, the impacts could be much broader across many economic sectors and industries. Investments could face a number of climate-related risks and opportunities: advances in low-carbon technologies, intensifying climate-related policies, shifts in consumer preferences including reputational impacts, and the physical impacts of climate change. The potential impacts will range in varying degrees, across sectors, regions, timeframes, specific companies and assets.
As fiduciaries, we will take appropriate actions to understand and, to the extent possible, mitigate and/or price climate-related financial risks, as well as capture new investment opportunities. We incorporate climate change considerations into our investment guidance and decision-making and evaluate on a case-by-case basis where financial exposure to climate-related risks could be material.
We believe that engaging with our investee companies where climate change presents material risks, and striving to improve overall reporting and transparency, will enhance our understanding of the financial risks posed by climate change on our portfolio.
OMERS commits to staying abreast of, monitoring and considering evolving public policy and disclosure developments and global initiatives and frameworks in how to best address climate-related financial risk. We will evaluate these developments and, through the governance structure adopted as part of OMERS Sustainable Investing Policy, will determine OMERS response based on what is in the best interest of our members.
Recognizing that climate change risks and responses are both asset-specific and collective in nature, OMERS will continue to collaborate with other institutional investors, governments, regulators and other parties with a view to further understand climate change implications for markets and economies in which we invest.