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OMERS 2021 Annual Meeting Webcast Transcript

Good morning and thank you for joining us for the OMERS 2021 annual meeting. My name is Shelagh Paul and I lead communications at OMERS and I am pleased to open this session. Before we start, I would like to take this opportunity to acknowledge that this broadcast initiates from the city of Toronto, which is on the traditional territory of many nations including the Mississauga’s of the Credit, The Anishinabek, The Chippewa, The Haudenosaunee and The Wendat peoples. And is now the home to many diverse First Nations, Inuit and Métis peoples.

Please let me begin by recognizing that I am certain that the pandemic we continue to experience together is impacting your lives in many ways. You're active on the front lines and behind the scenes working tirelessly to support the health and the strength of our communities across the province. On behalf of my colleagues at OMERS, we thank you for your humanity and for your dedication.

Joining me today, we have a number of presenters that will walk you through the 2020 results and our view of what the future looks like. Let's have a brief look at the agenda. First, we'll hear the opening remarks for our board chairs, George Cooke and Frank Ramagnano. Then Jonathan Simmons, OMERS CFO will discuss OMERS 2020 financial results. Michael Rolland, CEO of our Sponsors Corporation will outline the work they're currently engaged in and their view of the work ahead in 2021. Then Blake Hutcheson, President and CEO of OMERS will set the path forward.

Before we head into the Q&A, a panel of leaders across investing, HR, pensions and corporate affairs, will share some of the important work that we are engaged in, work that is aimed in driving success in service of each of you. We know you have questions, over 1300 of you have joined us this morning, and you have sent your questions in when you registered. Wherever we could, we have worked to include some of the answers in the presentations. But we encourage you to submit additional questions this morning by using the Q&A feature on your screen. Please feed us those through the webcast and we will queue them up for the group to address in the second half of our session. When submitting your questions, please keep them succinct and unless you would like to remain anonymous, please provide us your first name. All of our speakers will be available during the Q&A to hear and respond to what's on your mind. And we will address as many of your questions as we can. Pierre Côté from our sponsors corporation will be moderating the Q&A today.

We also recognize that the technology that we have selected for our session has some benefits and some drawbacks. As we look to plan for future meetings, we need your input to ensure this meeting is run to meet your expectations. We will be sending out a survey following this meeting to ask for your feedback on what you would like to see next year. One helpful tip for today, you may wish to maximize the size of our presentation slides by using the icon at the bottom right of your screen. Please also note that a recording of this session will be posted in the days ahead to

Now before I turn the mic to George, on behalf of all of us at OMERS, we'd like to share a video that shows just how proud we are to come to work for you every day. (Bright upbeat music)

Dear Members.

Dear Members.

Dear Members.

Dear Members.

It's truly been a year like no other.

And while we are finally seeing the light at the end of the tunnel, you have been there from the start.

From the front lines combating COVID, making sure life carries on. You have been there for us.

When our world seemed frightened and uncertain, you inspired us with your courage and your strength.

We knew we had to support you to do your important work.

And during this challenging time, what you do is more important than ever.

You are keeping the safe and protected.

Caring for us and keeping us healthy.

You are making sure our communities are clean and our waters stay safe.

And helping us stay happy and active when we had to change the way we lived our lives.

You are keeping us moving, clearing the path for the road ahead. You're keeping us connected, even though we're apart. And making important decisions in a difficult time.

You're keeping Ontario running so we can all be together again soon.

So, we can gather as friends and family and enjoy life to the fullest.

You are the reason that we do our jobs each day.

We appreciate what you do.

And we are proud to be working on your behalf.

Thank you.

Thank you.

Thank you.

Thank you.

Thank you.

Good morning, everyone. On behalf of the AC board, I echo the thanks to members captured in this video. Let me also extend thanks to a number of OMERS employees who have been on a different set of front lines, some work to support members and ensure pensions were paid on time. Others work to support communities through a number of our properties and consumer-facing companies. And others provided support through several community outreach initiatives. To all of them, a sincere thank you.

As many of you know, OMERS is governed by two separate boards, each with its own mandate. We work cooperatively and support each other. The administration corporation is responsible for administration of the plan and the investment of its assets. Starting in 2014, following the formal governance review undertaken by Tony Dean, we have substantially strengthened board oversight by moving to a skills-based board that has deep and appropriate skills, experience and judgement. We have confirmed the direct drive approach to investing and have guided the asset mix to approximately 50% of assets in private investments and the other 50% in public investments. During this period, the plan's funded ratio has improved from a low of 86% to 97% at the end of 2020. The plan discount rate has been decreased from 4.25 to 3.85%. It remains however, the highest of the major Canadian plans because of governance decisions taken long before our time.

Starting in 2015, the board risk oversight committee led an initiative to create what our regulator is called an industry leading risk framework, and OMERS appointed the plan's first chief risk officer. Each year has produced significant changes to position OMERS for long-term success. To be clear, we are committed to achieving a sustainable, meaningful and affordable defined benefit pension plan that serves the interests of its members.

COVID-19 has delivered and continues to deliver the most devastating blow medically, societally and economically the world has ever faced. The nature of long-term investing is such there will be good years and not so good years. As you know, 2020 was a particularly tough year for OMERS. In contrast, we believe 2021 is off to an encouraging start.

As we entered 2020, we were transitioning to our new CEO following a board led succession that had been in the works since 2018. Blake Hutcheson's mandate was supposed to begin in June 2020, but was moved up as the pandemic surged. He began his new role in its midst. In his team, many of whom are either new or in new roles, in the view of the board have performed with determination and extraordinary commitment, demonstrating strong leadership for our 3,200 employees and always putting the interests of our plan members first.

We are truly fortunate to have this extremely competent and dedicated team to lead us. As you may be aware, since OMERS announced its results on February 25th, we have been engaged in what we view as productive meetings with many of the sponsor organizations that represent you. We have discussed our results and our governance, and all participants have been straight forward and candid. With an open mind and a thoughtful look at past decisions and performance, we have thoroughly reviewed and assessed the 2020 results. We're moving forward from the 2020 setback with confidence in both the strategy and the leadership team now in place. Where appropriate, we have engaged external advisors to complement our knowledge and experience. For changes required, we have encouraged and then supported management's actions. It is our job to govern, and I speak for our entire board when I say, that is what we have done. I also believe it is important to state on behalf of the AC board and with confidence, we strongly believe that OMERS long-term strategy, which was approved by both boards in 2019 is sound and remains appropriate. With those remarks Frank, it's over to you.

Thank you, George. On behalf of the SC team and board, we also want to welcome you to the OMERS annual meeting. I also want to echo my colleague George Cooke in saying thank you to all of you joining us today and to those who could not for everything that you do and the important services you provide in our communities. Cities and municipalities, and indeed, the province could not run without your hard work. It is appreciated, especially during this past year.

I also want to echo Shelagh's comments. Some of you have told us this is not an ideal format for an annual meeting as interactions are limited. We miss the interaction that occurs at an in-person meeting. And so, we look forward to your feedback should we need to plan to do this
meeting virtually again. Please complete the survey at the end of this presentation.

As many of you are aware of the Sponsors Corporation is primary responsible for three things which we like to call the ABCs. Approving members to the AC and SC boards. Setting benefit levels and determining contribution rates. Our SC CEO, Michael Rolland will expand on some of the risks facing the plan. But as you will hear today, 2020 was a difficult year. While a year does not make or break a pension plan such as OMERS, the investment loss from last year did amplify the need to continue the focus on sustainability of the plan but more on that later.

For now, let me briefly outline some of the accomplishments of the SC in 2020. We introduced five plan changes in 2020. In particular, we extended the leave purchase deadline for those who returned from a leave of absence in 2020 or 2021. We eliminated the 36-month employment requirement for purchases of periods of reduced pay in 2020. And we allowed members to purchase credited service for periods of temporary layoff initiated in 2020 or 2021. A fourth change was introduced to improve the plan's fairness and equity. Starting the 2023 all non-full-time employees may elect to join the plan at any time. Finally, we introduced shared risk indexing or SRI for benefits occurring after 2022, a change that will improve sharing the risk of managing the plan over a larger group of members. Should the SC decide to evoke it to improve the sustainability of the plan, it must do so with a 2/3 majority vote. Before such a vote is taken, sponsors and stakeholders will be consulted on any measures that impact benefits and contributions. These are a few of the SC highlights for 2020.

We encourage you to read the annual report for more information. And Michael Rolland will expand on the SC work and some of the challenges facing OMERS. We look forward to answering your questions later this morning. Thank you and now over to you, Jonathan.

Thanks Frank and Good morning, everybody. My role today is to brief you on OMERS 2020 investment results and their impacts on plan funding. Certainly 2020 was a challenging year for OMERS. As you can see from this chart, the investment return on the primary plan net of expenses was a negative 2.7%. And we're not pleased with this result. We established a benchmark for ourselves for 2020 of 6.9%.

So, over the next 15 minutes or so, I'm going to unpack the drivers of our results. My remarks today will focus on the primary plan, which as of December 31st, 2020, had $105 billion in net assets and paid pension benefits in 2020 of $5.1 billion to more than 180,000 members and we'll continue to pay them on time and in full in 2021.

But before I move on, just a quick note about the RCA, The Retirement Compensation Arrangement, the plan assets stood at $175 million at the end of 2020, about half of the which is in a refundable tax account at the CRA and about half of which is invested in an all-equity book which returned 11.6%. So, I want to start by giving you an overview of our portfolio and so, let's have the next slide please.

So, two views of the portfolio are presented on this slide. On the left-hand side is our asset mix which we carefully construct based on periodic asset liability studies which are approved by the board. And the objective of the asset mix is to design a portfolio that will generate investment returns over the long-term to satisfy pension obligations. And as you review our asset mix, you will see the following. Firstly, at 6% we have quite a low allocation to government bonds. And this is because we believe that the very low interest rates that are available today are insufficient to provide the returns to fund pension obligations. Secondly, we've got a significant allocation to credit at about 17% of the portfolio. This represents investments in a broad range of security subject to credit risk, such as corporate bonds and loans to mid-market businesses, where we believe that for taking a small amount of credit risk, we can earn a premium over the risk-free rate. The average term of this credit portfolio is around four years.

Thirdly, about 1/3 of our investments are invested in public equities where we focus on high-quality blue-chip shares in companies that demonstrate strong profitable track records and pay high stable dividends. Fourthly, we have a large allocation to private investments and private equity, infrastructure and real estate which have generally stable valuations and which we've been able to generate 10-year average returns of 10%. And finally, we had very low leverage as at the end of 2020. In fact, we had abundant cash and other liquidity representing over 10% of our assets. I'll come back to several of these points when I talk about the drivers behind our 2020 results.

On the right-hand side of this page, you can see our exposure to industries. And there you'll note that in addition to our allocation to real estate, we've got high allocations to financial utility and industrial businesses because of our belief in the ability of these companies in this sector to generate strong returns over time. Another lens in our portfolio is the geographic view and let's move on to that.

So, although Canada is a G7 country, our economy is quite small and represents only about 3% of global GDP. A pension plan of our size needs to invest outside of Canada even though we will always have a large allocation to Canada and to Ontario. And you can see that from the left-hand side of this chart today, really like 40% of our assets in the U.S., about 30% in Canada, 16 to 17 in Europe, 10% in Asia Pacific and 3% in other countries. And you'll likely recall that our strategy is to significantly increase our exposure to Asia Pacific over time because the demographics in growth in that region are more attractive than what we foresee in developed markets. And while diversification is important to the plan, when we invest offshore, we take on currency risk. And you can see on the right-hand side that we currently have significantly less exposure to foreign currencies than you might expect from our geographic footprint. And this is because for many years, we followed the practice of hedging foreign currency exposures back to Canadian dollars.

So, you see in 2020, on the left-hand side, 30% of our plan was invested in Canada but on the right-hand side 71% of our holdings were either denominated in or hedged to Canadian dollars. And while currency has been helpful in stabilizing investment returns, it has required OMERS to set aside a large amount of collateral that could otherwise be invested in return seeking assets. And in times of great market stress, like we saw in March of 2020 in reaction to the rapid spread, devastating loss of life and economic hardship caused by COVID-19, the Canadian dollar weakened significantly requiring collateral to be transferred to our hedging counterparts.

Now we observed over time that currencies moved in cycles and given our size, global footprint and long-term investment horizon, we've decided to accept more return volatility to free up capital for profitable investing. Hence, in 2020, on the right, you can see a decrease in the portion of exposures denominated in Canadian dollars to 71% compared with 92% as of December 31st, 2020. And you can expect this percentage to decrease further over the next two years as we decrease our use of currency hedging.

Let's move on to results and analyze the components of our 2020 loss, thank you. And here you can see the asset class returns. On the positive side, infrastructure assets did very well in 2020 as they were largely unaffected by the pandemic and in some cases appreciated in value as investors seek them out as safe havens. Our regulated investments in clean power generation and utility distribution did very well in 2020, more than offsetting the negative impact of travel restrictions and stay at home orders on our London airport and our U.S. and Indian toll roads but our credit investments, public and private equities and real estate investments all suffered in 2020. And they were the drivers of the negative return of 2.7%.

Next slide, please. Three main factors explain the performance gap relative to our benchmark in 2020. More than half of the performance gap came in our real estate and private equity portfolios, which together represent almost 30% of OMERS. Empty shopping malls, closed in accordance with government orders have increased tenant bankruptcy's, bad debts, fees re-structuring and vacancies. Of its 400 large assets globally, the majority were closed by governments for the better part of the year. You saw this having impacted retailers with names like Neiman Marcus, Toys R Us reporting bankruptcy and virtually every restaurant and small retailer shattered for large parts of the year. We had to absorb over 120 million in bad debts from non-paying commercial tenants which compares to about 3 million typically.

The Oxford leasing team was asked to renegotiate 1700 leases to accommodate others incurring COVID financial difficulties. And as a result, Oxford had a negative return for the first time since 2003. And although most office tenants continue to pay rent despite many employees working from home, incendiary revenues from parking and other amenities have also been greatly reduced. And our private equity portfolio, our investment in a movie theater business with 120 screens in Europe was hit by the closure of almost all of its locations. The write down on this asset alone represents 7% the PE results. In short, many of our consumer facing businesses were negatively impacted.

The second point on this slide is that about 20% of the performance gap came from sector allocation in public equities where we have a significant allocation to blue chip dividend paying financial services companies and energy businesses. Value investments lost ground in 2020 and did not fully recover in the latter part of the year. However, much of their recovery has been taking place in the first part of this year where we've seen a real rotation into the kind of stuff that we own.

Another 20% of the performance gap came from currency. A few minutes ago, I talked about the high levels of market stress that took hold in March and April of last year as a result of the global uncertainty caused by the pandemic. In just 33 days, almost every global stock market index was off between 30 and 40%. And on March 16th, 2020, the global markets dropped between 12 and 13%. The Canadian dollar dropped by 12% in three weeks to a five-year year low with some financial authorities signaling that it could go as low as 50 cents.

We saw very high levels of stress in financial markets and we took a number of proactive actions to protect the plans from liquidity and further adverse market events, including reducing our foreign currency hedging positions to mitigate the risk against cash outflows had the Canadian dollar continued to weaken. And while these prudential actions achieved their weaknesses, they did result in currency losses as the Canadian dollar appreciated after we reduced our hedges.

It's noteworthy that hedging boosted returns by 3% in 2019. There've been years when it has worked against us and years when it has not. Ironically, all three of these areas, our large exposure to private assets, our disciplined commitment to blue-chip stocks and our long-established practice of hedging in order to reduce the impact on the Canadian dollar movement are what has served us extremely well over many years. Only this year, the combination worked against us individually and collectively.

Thankfully, there was some good news. Actions taken by the investment teams to reduce expenses and conserve cash were effective. The credit portfolio experienced new material borrower defaults, an opportune sale of the majority of our hotel portfolio prior to the pandemic insulated us from heavy losses in that sector. And our rotation of capital into industrial real estate which supports the growth of internet e-commerce has been very lucrative. Our Asian equities, as well as our ventures and growth equity portfolios have performed well. And while it did not coincide with the year end, 60% the core PE portfolio evaluations are now back to pre-pandemic levels and 30% more are recovering nicely.

Through the registration for this meeting, some of you have asked about performance relative to our peers. Some of our peers have reported their results and they've done better than OMERS in 2020. There are two main reasons for this as I see it. Firstly, long-term bonds fell sharply in March and April leading to strong returns in those assets. Accordingly, investors in those assets class have likely done extremely well. OMERS prioritizes short-term higher yielding credit investments with only a small allocation to long-term bonds whose fair values can be volatile or may even end, can be negative and not enough to meet our long-term investment horizon. And we've seen this volatility to some degree in 2020 as long-term bond yields have risen sharply in the first three months of the year generating losses for those investors. Secondly, heavy market weightings in technology enabled growth stocks did very well in 2020. OMERS is not meaningfully invested in those new economy stocks which generally do not pay stable dividends. Our returns did not materially benefit from these kinds of gains.

As I mentioned earlier, it's interesting that in 2020 we've actually seen a capital rotation into the kinds of businesses that we own resulting in appreciation. And we know that it is inevitable that members wants to compare returns either to OMERS peers or to market indices or even to your individual portfolio. It's worth noting that OMERS invests in much more than in public equities and the common reference benchmarks would be at least, are increasingly concentrated in a few names with massive weightings in the index. Moreover, for many years and for a good reason, OMERS has followed a strategy of seeking absolute returns for pension obligations rather than market-related benchmarks. And our focus is squarely on earning returns that will pay OMERS pensions.

Let's have a quick look at the impact of returns on long-term performance, thank you. So, 12 months ago, OMERS had earned an almost 12% return for the year and our three-, five-, and 10-year returns were all over 8%. Then came 2020 and you can see that they now fall short of the 7% investment return, our expectations set out in our SIPP That said, they remain well above our discount rate which is currently 5.85%. And restoring them to their previous levels is the challenge that is before us all and is the priority for us today.

Let's move on to expenses. Investment expenses were down sharply in 2020 helped by the actions that we took to reduce costs as well as lower travel and travel related costs caused by the pandemic. The biggest driver however, our lower management compensation due to the impacts of OMERS total plan and business returns being lower than their benchmark. And this is the driving factor between the decrease in the MER from 67% to 38, from 67 basis points to 38 basis points.

Let's move on to plan funding. So, two views of plan funding are presented on the donut charts on this page. On the left-hand side, we measure plan funding using the smooth value of assets and on the right-hand side using the fair value of assets. And as you can see, the funded ratio based on smooth value basis remains at 97% whereas the funded ratio measured on a fair value basis Has dipped from 101 to 93%. The latter is a drop of 8% which is approximately the amount of which the investment return fell short of the discount rate. Both the smooth and fair value funded ratios were calculated in 2020 using a real discount rate of 8.85% which is five basis points lower than the previous year. And you will recall that OMERS has reduced our discount rate by 40 basis points since 2015 in line with our strategy and we intend to keep lowering it over time to make the plan more resilient to the funding risks that we see on the horizon.

What does this mean to members? Our contribution rates and benefit accruals remain unchanged in 2021 and can be maintained until 2024 if the valuation is filed with the regulator and Michael Rolland will provide some more comments on this later.

A few final notes on how we are positioned. The credit rating is strong. We have the highest credit rating available from two rating agencies. The second highest rating from two more. And OMERS is extremely well capitalized with ample liquidity to invest in markets and take advantage of the opportunities of growth on behalf of our members that we expect will continue to emerge as vaccines are rolled out and as the pandemic abates. Michael, over to you.

Thank you, Jonathan and good morning to everyone. And thank you for joining us this morning. Let me add my voices of sincere appreciation to many thank yous you've already heard today. To you the OMERS members, for what you do every day, during these difficult and challenging times, for all of us that live in the province of Ontario, I say, thank you.

And as we move forward today, I want to talk about two areas for the Sponsors Corporation or the SC as we refer to it. And the first one will be the role of the Sponsors Corporation as you see on the slide. And the second one will be, we'll talk about our priorities as we look forward in what we've accomplished over the last year.

And starting with the roles and responsibilities of the Sponsors Corporation I want to follow up with some comments that were made by Frank earlier. And most of my comments today are expanding on the comments from our chair that were in his opening remarks. As Frank commented, we operate under the ABCs. Appointments, who gets appointed to the AC board and the SC board.

Benefits, what benefits you can anticipate receiving as a pensioner during your retirement. And contribution rates, what contributions are needed to be made by you, the members, and your employers in order to help fund the pension plan for today, tomorrow and the future.

At this point, I think I want to speak a little bit about two areas that are probably a big interest to you, the members, which are your benefits and your contributions. So, I'll focus on the Bs and the Cs as I would say. When we're making decisions at the SC regarding the benefits and contributions, our overriding objective is to ensure that OMERS remains as sustainable, affordable and meaningful pension plan for today, tomorrow and for 50 years.

So now you have two acronyms from the SC. You have our ABCs and now you have our SAM. SAM may sound simple, however, it's not. It is an enormous responsibility, one that is both complex and demanding. One that the SC team, both our board and management, takes very seriously. And one that requires assessments and reassessments on an ongoing basis. And as we go to work at the SC, we recognize that 525,000 good people who live in the province of Ontario are counting on OMERS to provide your retirement security. The decisions we make today will and may have an impact on the future in 20, 30 years from now. So, every decision we make is not just about today, it's about the long term. And with any organization, you have to have the right management team in place to do the job. And I would say that that's true for the SC, particularly with the responsibilities we have. With that in mind, I want to give you a quick update on the SC leadership team.

At the end of 2020 we welcomed a new leadership team to the SC. And this was done because we had some departures that we knew were going to be taking place in early 2021 and it was time to refresh our leadership team to have the right resources in place for today and for the future. We looked at depth and experience in the areas of governance, strategy, risk and stakeholder relations. I'm proud of the team that we have in place at the SC and they are the right team for today and the future. And as people have referred to before, the OMERS website and our annual report are great resources. And details on our team can be found in both of those locations.

By the way, just so you know, when we talk about a leadership team, if you count me, our team is only four people. So, it's not a big team, we've got a lot of responsibilities and we work very hard on your behalf every day. As he will be speaking shortly, I'm going to take this opportunity to do a quick introduction to one of our new members of our team gentlemen, a gentleman named Pierre Côté Pierre is the SC's Executive Director of Strategy, Stakeholder Relations and Communications and we're fortunate to have Pierre join us from one of our sponsors, OSSTF So stay tuned as you'll hear from Pierre later on in the agenda.

Now I’ll move forward to the second of my two slides. Kevin, thank you. And it's really the area of talking about the SC priorities. And there are five priorities on this slide that I want to speak about. Some with a few remarks and some with some more detailed remarks. Enhanced engagement with sponsors and stakeholders with the entire OMERS community. We spoke over the same subject last year and it remains 100% accurate again this year. Our goal is to enhance our engagement with all of you, whether you're a member, whether you're an employer, whether you're union or any other stakeholder and it's a work in progress. I think we've done a better job in 2020, but we're not done. We have so much more to
do to continue to improve in this area.

The second area on the slide you'll see is something called board composition review. In simple terms that's the A of the ABCs. Who serves on the boards, from our employer and employee groups? And in 2020, we did a detailed review of the board composition. And indeed, we have the right people in place. And a report has been posted on the OMERS website that gives you the details of the work that we did last year. The end result was, we made the decision not to make any changes so, the same people are in place on the board and the same sponsors and stakeholders are represented. That said, the SC board struggles with the fact that how do we engage with people that aren't represented either on the board by either their employers, their unions, or other employee groups. So, it's something that we focus on very clearly and that takes us back to our first priority, engagement. We have to do better. We have to engage with you, even if you don't have somebody sitting on one of the boards and that's our job to be transparent and stay on that focus and you should hold us accountable to that.

Board effectiveness review. That's one of the areas we've talked about, it's been in our annual report and it's on our website. It really is referring to board governance. And strong and effective governance is critical for the SC in order to fulfill our roles and responsibilities. The Sponsors Corporation undertook a governance review beginning in 2019 and we call it the board effectiveness review. Several changes were approved in 2020 and again, I'll refer you to the annual report on our website for the details.

But one area I'd like to highlight that I think is very important as the leadership changes that we made with our SC board. For the first time we moved from a co-chair model to a chair model. And as you've heard earlier today from Frank, he is our first chair of the SC board. And Frank took on that role on January 1st, 2021, and he will serve in that role for a two-year term. And at the end of that two-year term, you can expect that there'll be someone else appointed to that role.

In addition to the chair role at the SC, we have four committees of our board. And this year we made changes to the chair role in each of those committees, sourcing those new roles from the existing board members. So not anybody new, just changing the guard as the chair's role. It's important and again, all those details on the people involved are available on our website. And as I'm speaking about, speak about is plan design or plan change process. And it is a priority for us at the SC ensuring the plan stays healthy, sustainable is a key responsibility and I've said this before, but it's one that we take very seriously. Given its importance, you can expect that the SC will revisit plan design every year. It's a priority that's on our work plan every year. We actually have a board committee called Plan Design Committee. So, it is important.

And speaking about plan design, I want to expand on something Frank spoke about, is something just for further clarity. And what I mean? Speaking about is shared risk indexing or SRI, short form. As Frank talked about, SRI was approved by our board in June of 2020. First and foremost, it's a risk management tool that all pension plans should have available. In fact, many of our peer plans put SRI or its equivalent in place many years before OMERS.

Shared Risk Index provides the SC board with a tool to use when the plan's health is challenged. Let me provide a few comments that I think will answer some of the questions that were submitted in advance of this meeting regarding SRI. As a reminder, defined benefit pension plans work because the responsibility of paying pensions is shared. OMERS is a maturing plan, which in simple terms means the ratio of active contributing members to retirees is decreasing. As our active to retiree ratio decreases, the responsibly to help. fund the pension plan by way of contributions is shared by relatively fewer active members. This puts greater burden on the future generations at OMERS.

That's where SRI comes in. SRI is a risk management tool as I said, that is aimed at improving the long-term sustainability of your pension plan. I emphasize that, it is your pension plan. SRI is a risk management tool which introduces reader measures of equity between active members who pay contributions and retirees. Shared Risk Indexing is only applied to benefits earned after 2022. And for all pension benefits earned prior to 2023, SRI cannot and will not be invoked. The SC board will only consider invoking SRI if it determines the plan health and viability are at risk. That's why we referred to it as a risk management tool. SRI as Frank said, is not automatic. It requires a 2/3 board approval.

And finally, SRI does not have a discussion with the SC board until 2023 at the earliest. And while I'm on the subject of plan design I want to speak about what is taking place in 2021. As part of the annual review process, members of the OMERS community, whether you are a member, an employer, or sponsor can submit suggested plan change proposals to the SC by September 30th each year. And this past year by September 30th, we received eight plan proposals. Now I would caution you that none of these plan change proposals that were submitted were a direct result of the financial performance or the financial results of 2020. Those eight plan changes have been referred to the SC management team by our SC board for review and analysis and that analysis is underway as we speak. The plan changes the SC chooses to move forward with, will broadly communicate and discuss for consultation by May at the latest, with any decisions to be made by June unless out timelines are amended or waived by the SC board.

And the last item I want to speak about which is probably the biggest area is, plan risk assessment or in simple terms plan risk. It is a priority that is worked under by the AC and the SC together as we strive to ensure that OMERS remains a sustainable, affordable and meaningful, defined benefit pension plan for the 525,000 members that count on us. You've heard this before but I'll say it again, OMERS's long-term sustainability has been and remains one of our key areas of focus.

The investment loss Jonathan talked about earlier certainly does not help in addressing plan sustainability. As a result of the investment loss of 2020, we now have to regain some lost ground. And as a reminder, funding of your pension plan comes from two main sources, contribution from members and employers and the investment results that an investment returns that are earned. A simple formula for funding pension plans contemplates the vast majority of funding comes from investment returns but I would emphasize, not just one year returns but long-term returns, over 10 years, 20 years and 30 years. So, while the 2020 results will have an impact, something that we'll carry with us, the funding of the plan depends on the investment results over the long-term.

Now following up on the comments that Jonathan made, he gave us a good example of what can happen and what can be affected in the long-term sustainability by financial performance. As you recall, Jonathan referred to the 2020 funded status of the plan on a fair value basis has dipped from 101% to 8%. And as Jonathan said, this is roughly an 8% difference and it's made up between the discount rate of 5.25 on our investment results of minus 2.7. But separately Jonathan mentioned the funded status of the plan at 97% on a smooth basis. And this gives you a different picture of the funded status of the plan, smoothing the impact of investment results over five years.

The smooth base as a Jonathan spoke about is the one that is used for filing valuations for the OMERS plan. And as Jonathan said, the purpose of the valuation to determine the financial position of our plan and establish the minimum funding requirements on a going forward basis.

In the next week or so, you should expect that the SC will be communicating the decision to file the 2020 valuation that Jonathan referred to. Evaluation shows that the current contributions are enough to cover the minimum funding requirements for the next three years. By filing the valuations as Jonathan said, we get a three-year window before we must re-assess. This is important because the projections show as future valuations are filed, it's possible the minimum funding requirements will exceed current contribution rates. If that were to happen, plan changes will be necessitated. That's said, and repeating a comment Jonathan said, I can assure you that contribution rates and benefit levels are not changing in 2021.

A few final thoughts on plan risk. It's obviously a big area and one of the areas that speaking about mostly today because it is a main focus of our group at the SC. It's fair to say that plan risk, OMERS plan, will face more headwinds than the tailwinds that are at our back. But the headwinds that the plan faces are not new in 2020. And I would reference you to some of the things and the flavor of the factors that the SC needs to consider in making decisions with our colleagues at the AC regarding the long-term sustainability of the plan.

Some questions. How do we take into account that OMERS is a maturing plan with an increased number of retirees to active contributing members? What can we expect from employment or work in the municipal sector in OMERS universe in the years to come? Will it be a growing sector? What will the impacts of automation be? Can we expect movements away from full-time traditional employment? How do we factor in the fact that or the reality that life expectancy is increasing, which means OMERS must be able to pay pensions for longer? And what can we expect from long term future investment returns post COVID?

So, a few final comments from me, just in regard to the work of the SC and what you can expect from us as we move forward. You can expect that the SC will take the time required to carefully review, working with our colleagues at the AC, the options we have to strengthen and protect plan sustainability. The SC remains committed to taking deliberate, thoughtful and an engaging approach when considering the future of our plan. As we progress in our work, I can assure you that we'll keep you, the members informed and we will consult with sponsors and stakeholders on a regular basis.

I will end there and I look forward to answering any of your questions during the Q&A. And with that I'll turn the meeting over to my friend and partner Blake Hutcheson, the CEO of the AC. Thank you.

Thank you, Michael. Good morning, everyone. And hello to many of our colleagues around the world in different time zones. I wish we could be meeting in person more than ever this year. Unfortunately, this format remains our reality. But I wanted to start by joining the chorus of my colleagues in thanking you, our members for everything that you do each day to protect and support our communities across Ontario. This is particularly appreciated by all of us at such a turbulent, difficult and stressful time for society, our municipalities and for so many of you and your families. I also want to express my gratitude to our Administration Corporation Board and my colleagues for entrusting me with the honor and enormous responsibility of being OMERS 6th CEO, particularly during this time.

As you may know and as George just mentioned, I was asked to step into this role in early 2020 once the Pandemic broke, as opposed to officially waiting until June 1st. It has been a humbling and challenging time to say the least, since that day. However, I want to assure you that I am undaunted by these times, very realistic about what lies ahead, fully committed to serving all 525,000 of you with all of my energy and looking forward, I have great hope and optimism for OMERS.

Each of us speaking today has a different role. Our two chairs to show leadership and gratitude on behalf of each board. Jonathan Simmons, our CFO has shared and explained in detail, our 2020 results. My colleague Michael Rolland in his leadership capacity at the Sponsors Corporation has shared some of his thoughts and plans with respect to the important plan sustainability work of the SC. My remarks today reflect my role, leading the Administration Corporation and what we thought would be most useful and important to you is for me to focus my comments looking forward at our future, not back. Because I can promise you that is where my focus lies.

But before I do, I want to fully acknowledge with deep humility, on behalf of the entire AC, that the plan's loss of -2.7% in 2020 fell well short of your hopes and expectations. And as your new CEO, I can assure you I feel the same way. As a result, again looking forward, I can also assure you that we will not allow a single year to define us and our entire team is fully motivated and dedicated to regaining this lost ground and your full confidence.

In support of that outcome, I will address head on the two forward facing questions that I have been asked most often since we announced our results. The first is, do you have the appropriate global team in place to face the future with strength? And two, do you have the right investment strategy in place to set OMERS up for long term success? After I am finished my remarks, five of my colleagues will form a panel and elaborate further on some of the things I touch upon and I hope you all know we're available to ask any question you have at the end.

So, as for question one, do you have the right team in place to face the future with strength? To answer this question properly and by the way it is the right question because after all with any organization, people are the most important asset. I will address three key areas. I will provide a bit of my personal background because I think it will help explain what is important to me from a values perspective as we select or promote our senior leaders.

Two, I will then walk you through some of my leadership journey at OMERS to help explain the level of confidence that I have gained in working closely for years with many members of the senior team. And finally, I will share with you some leadership changes we have implemented recently that when combined with a great foundational team, give the board and me confidence in the success and future of OMERS.

Now first on a personal note, I was born and grew up in Huntsville, Ontario. And my grandfather used to joke that the only thing great that ever came out of Toronto is the highway to Huntsville. My Uncle Jack was the fire chief. My Aunt Joan was on the school board. My next-door neighbor was a police constable, Constable Jelly. One of my best friend's mom was the town clerk and the list goes on. I grew up playing lacrosse and I still play for my hometown with many close friends and teammates who are OMERS members. Like Bay Street and Wall Street it can be a tough and fiercely competitive sport, so it's actually served me well during my career. But most importantly, these teammates have always been in my corner and I will always be in theirs. I have a deep lifetime interest in the municipal sector and in Ontario at large. and respect for all of you. So just to be clear, as a starting point, if a prospective senior leader of OMERS does not both understand that they work for you or share your values and mine, they do not make our team.

Second, my OMERS Leadership Journey. Most of my career I have been in the real estate business and in roles that intersect with municipal governments, not just in Canada but in 5 continents. The highlight of my career came in January 2010 when I was asked to join the OMERS family as the CEO of its wholly owned Oxford Properties. I held that role for 9 years where with an amazing team, we took this platform from being a 95% Canadian based domestic business to tripling its size and becoming a $50B truly global powerhouse that competes well against the best in the world.

Over those 9 years we grew by over 20% annually and our returns averaged over 12%. And some of my proudest moments involved touring members around some of their assets, your assets such as Yorkdale, Banff Springs Hotel, Hudson Yards in New York, and many other successful structures in over 25 cities globally. I am very proud of the team and platform we built at Oxford and I know what it takes to grow and scale a truly global Canadian based success story.

In 2018, I was asked by the AC board to leave Oxford to join OMERS and assume a non-investment role which gave me the opportunity to get to know the entire OMERS enterprise. That included becoming the Chief Pension Officer, where I had the privilege of traveling around the province and listening to what truly matters to you, our members. As well as being responsible over time for all global operations, our strategy and our support functions. In that role I made it my priority to make sure we had all the right people in teams leading these areas and I can now say with 100% confidence that we do. As a result, in 2020, when I became CEO, I had full confidence in the leadership of Oxford because I knew it extremely well. The same with the Pension Services Team as well as all of our support and operational functions. However, I then had to focus on making some key leadership changes in some of our investment areas that the board and I felt were required to take OMERS to the next level and some of these became even more important given the impact of and lessons from the pandemic.

So, with no time to waste, in service of the organization, we made some changes and soon added or in some cases elevated the following investment executives to our senior leadership team. A new head of our Capital Markets Group, Ralph Berg who is a world class investor and business builder. He is well known and proven to us as he ran our highly successful Infrastructure business out of London, England for 8 years. His successor to lead the infrastructure business, Annesley Wallace, is one of Canada's Top 40 Under 40 and is equally proven to us having been at OMERS for 10 years. This business could not be, in my view, in better hands. Our new head of Private Equity, Michael Graham, is New York based and has a proven track record of being a great operator and investor. And we created a new role combining our liquidity, treasury, and currency functions that is ably led by Anca Drexler. She is future focused and has already helped us rethink our strategic approach in some of these key areas. The reason I am sharing all of this is that by making these changes and adding these leaders in with our other proven executives, we now have an outstanding refreshed global executive leadership team to face the future, who together represent virtually every aspect of the enterprise, adding more depth, diversity which is absolutely critical to me by the way, experience and global perspective than ever before.

As your CEO, again looking forward, I want you to know that I would put this team and those behind them, against any in the world in the context of what we do and how we do it. I also want you to know that they are decent, hardworking people with the right values and a relentless commitment in service of you. For those of you who know me, culture is critical. These are all real people and strong leaders who I think you would be proud to have represent you not just in small towns like Huntsville and big cities across Ontario but around the world. And most important to you and me and frankly all of us, this team is highly resulting oriented, future focused and keen to prove it.

And now to question two, do you have the right investment strategy in place to set OMERS up for success in the future? I wish I could say that from now on everything was going to be perfect. But I think it is important to be a realist and share that the global markets are still quite volatile, choppy and so much uncertainty. remains particularly in connection with the effective roll out of vaccines by city, by region, by country. Frankly, we are seeing that as we all know across Ontario this week. Further, interest rates, though up, slightly remain at historical lows. There is an unprecedented amount of capital in the world chasing transactions making it difficult to buy new assets at a reasonable price. There is no doubt in our mind that higher taxes and inflation are on the horizon. And this is not a time for us to abandon our discipline around buying high quality assets appropriate for our plan and our low liabilities and going way out the risk curve to try to recoup short term losses through short term speculation.

However, I will share with you the following, as is often the case, Sir Winston Churchill said it best, "A pessimist sees the difficulty in every opportunity "and an optimist sees the opportunity in every difficulty." With massive global stimulus still going strong particularly in the United States and the Asia Pacific region, we do expect reflation of the economy and some real growth opportunities in these parts of the world. We have already directed much more capital to the U.S. and to our Asia Pac teams in India, Singapore and Australia out, which we think will pay significant dividends in the years ahead.

Within Canada we do expect slower growth but through our relationships, particularly here in Ontario, we see significant private and capital market opportunities here. We are also quickly becoming a leader in sustainable investing, recognizing the win-win prospects of the fast-growing low carbon economy, accelerated during these COVID times. We are pleased to have announced recently OMERS commitment to lowering our carbon intensity by 20% by 2025. And I am personally very committed to seeing us move the needle on this front and have joined 14 other global CEOs to form an international network to make a difference and unlock a much bigger sustainable footprint for OMERS.

As it relates to the question, have we changed certain elements of our investment strategy as a result of the pandemic? The answer is yes. There are businesses and there will be businesses as we see it play out that will thrive and given the new normal, there will be significant opportunities that are set up for them because of the pandemic and others, that will have accelerated challenges, exacerbated by COVID that are now structural in nature. With conviction and speed, our strategy has totally focused on the former, while avoiding or down weighting with respect to the latter. I will not get into the detail of what this means for each aspect of our portfolio, cause Satish Rai, our CIO, will provide more depth in a few minutes. But for now, I can say that our portfolio has benefited from these changes every quarter since this time last year. Unfortunately, this did not show itself by our December year end.

I can also share that 2021, though still early, is much better and moving in the right direction. I also think it is helpful to remind you of some of our platforms that we are confident, are well positioned to unlock real opportunities and more directly because this is what you care about, make more money for OMERS, in the months and years ahead. OMERS Infrastructure is a highly respected global business with 30 solid assets in 5 continents. With assets such as Bruce Power, Leeward Energy, the Port of Melbourne and a healthy pipeline, we are confident in its future.

Oxford as noted earlier is also a world class business with a globally diversified portfolio. Last year, the majority of its largest 400 buildings were closed by government authorities due to COVID, resulting in its first loss in over 15 years. But looking forward, we know it remains a great business. Our Private Equity business owns 20 strong globally diversified companies. And last year, two of our consumer facing businesses got hit hard by COVID but that is now behind us and our portfolio is well-positioned for the future. And our Growth Equity and Ventures businesses are focused on innovation, technology, start-ups and the new economy. We are committed to being leaders in this space and are confident you will be pleased with what they deliver, to OMERS and frankly to Canada in the time ahead.

And within Capital Markets as I have alluded to, our new Team is very focused on setting us up for success in the years ahead. And again, we believe this team will make us all proud in the future. So, to all of you listening today, I know our platform as well or better than anyone. And OMERS is a great organization. Is it perfect? No. But are we working hard every day to improve it? Yes, it also has massive strengths, a dedicated service mindset for our members, and solid money-making potential going forward.

It is also important for you to know that OMERS has a terrific international reputation. I hear it everywhere I go. In fact, we have over 100 joint ventures globally, a deep, positive relationships with over 50 financial institutions. And just two weeks ago, when we issued a $1B AAA-rated note, we had over 80 institutions who believe in our future and lined up to invest with us. It also has a nearly 60-year history of adapting, rebounding and fighting back during times of financial economic turbulence. And further, OMERS is a long-term investor as mentioned multiple times today. Like any sizeable investor, we experience years with return highs and years with return lows.

But what I have learned over my 35-year investment and management career, is not to ever allow our team to gloat or get complacent after a great year but also not to get demoralized or lose our confidence after a bad one. What is important is that we learn and improve at each stage and I can promise you, that is what we have done with the many lessons that 2020 has taught us.

It is often said that a quarter for a Canadian pension plan should be measured by 25 years not 3 months. And from my experience and well documented by others, sticking to the discipline of a thoughtful and well formulated strategy is the only way to see through cycles and maybe not win every year but produce better and more consistent results over time. We have a strong five-year strategy, approved by both boards, that has been designed with the unique needs and characteristics of our plan in mind, that in our view, with some recent important and COVID related adjustments and improvements, is in the absolute best interest of OMERS long term.

Further as I have tried to emphasize today, we have a deep, strong and diverse global leadership team leading over 3,000 dedicated people who are united by our clear mission to deliver to you a sustainable, affordable and meaningful defined benefit pension for life. My wife of over 25 years shared a quote with me. It was about a year ago after the markets had dropped 35% in 33 days, much worse than the great depression. And it is by the first-generation American poet Clarissa Pinkola Estés. “When a great ship is in its harbor and moored, it is safe, there can be no doubt. But that is not what great ships are built for.” Nor is it what great organizations like ours, are built for.

So, to conclude, going forward, my commitment to all of you, as just one of the custodians of OMERS during its long history, is to work closely and tirelessly with our outstanding team and strategy and with our SC colleagues to do our part and level best, to not only leave this great nearly 60-year-old vessel sailing safely and confidently in the right direction but to ensure that it is set up for success for generations to come. Thank you sincerely for being here today, thank you for listening, thank you on behalf of all of us, for the purpose and the privilege of serving you. And I will now turn to Annesley Wallace and our panel for the next item on our agenda.

Thank you, Blake. For the next 15 minutes I'm delighted to lead a conversation with some of our leadership team. We will talk about the evolution of our investment program including reducing our portfolio's carbon footprint, our commitment to diversity and inclusion and how we have been continuously improving to serve the needs of our members. I will be speaking with Satish Rai, our Chief Investment Officer. Our Chief Human Resources Officer, Nancy Nazer. our Chief Legal and Corporate Affairs Officer, Michael Kelly and Celine Chiovitti, Senior Vice President Pension and Corporate Services. So, let's start with you Satish. As our Chief Investment Officer, can you talk about the progress and developments we are making on the investment front?

Thanks for the question, Annesley. I do believe we are doing a lot of great work but we also have a lot of hard work ahead of us. Our investments trends really are boiled down to two things at the core. First, having the right people in place to make us successful over the long term and ensuring the continued resilience and growth of our portfolio. Our global team is disciplined, they're experienced and they're agile. They have the skills to navigate us through very complex and fast changing times. We've also made changes in our leadership investment teams in order to achieve our ambitious global growth plans. I'm incredibly encouraged and excited by the ingenuity and the collaborative approach that they are bringing to their new roles. We are privileged to come to work every single day in your service. Our team's focus is on building a portfolio of high-quality investments. We need to be well-diversified and making sure we are resilient over the long-term.

Through the lens of the past year, you've been making shifts to strengthen the portfolio. Can you tell us a bit more about what you're doing?

Absolutely. One of the big things we've been doing is increasing our diversification. This means expanding in new places, sectors and asset classes. And let me give you a few examples. Recently, we've increased our investment in real estate logistics so we can benefit from much higher product storage needs from online shopping companies. We've also been making investments in fiber optic infrastructure as demand for a high-speed internet goes up. And we're also finding growth opportunities in key parts of our Asia Pacific region.

And maybe lastly, you could talk to us a bit about forward-looking opportunities and challenges specifically related to COVID and any other developments.

Sure, you know, many areas of the portfolio were hit by COVID-19 and we're working to show we are able to optimize opportunities that will come as the world recovers. One of the many examples is our retail shopping malls that have struggled during the pandemic. It will benefit from people returning to some path of normal activity. We know shoppers expectations have changed and we're working to boost consumer confidence and enhance the shopping experience at our malls for when they are able to fully re-open again. We're also looking at closely investing in what I call stable shifts in society by not passing trends but more fundamental changes. This includes disruptive technologies such as healthcare technology businesses that are shaping the future of patient care. In fact, healthcare is a focus across all our asset classes. Another significant focus area is clean energy and you'll hear more from about our carbon intensity reduction commitment soon from Michael Kelly.

Thanks for the updates Satish, there's certainly a lot going on for the investment teams. Turning now to you Nancy, we know that in 2020 inclusion and diversity has been a very important topic of discussion. Could you talk to us about how OMERS has prioritized this conversation?

Thanks so much, Annesley. It is certainly a part of each of us and I just want to say, hello everyone. It is wonderful to be here with you today and to be part of the OMERS family. I want to say thank you to all of our members. You give us purpose every single day. In three days, I will be celebrating my one-year anniversary and I've been humbled by how important and focused we are collectively on this mandate.

Over the last year, I've Seen Blake's personal passion for inclusion and diversity and the commitment of our people as well as our leaders. It is truly real for us. Given the injustices that continue to unfold around the world, the focus on inclusion, equity and diversity is a heightened priority. Our focus is on building and nurturing a culture that truly leads with inclusion and embraces diversity. We know diversity is fundamental but it's not enough because alone it does not equate to inclusion, equity or that sense of belonging. This past year, Blake held listening to sessions with our employees. These discussions were eye-opening and genuine as we listened to the truths of many of our colleagues who shared their experiences with us. We thank our people for their candor, their trust and willingness to share their vulnerabilities. We truly grew stronger as a result of this experience and our listening sessions helped us ask, truly listen to understand before putting action in place.

One of the key actions that we have put in place following these listening sessions has been our enterprise inclusion and diversity strategy. This will serve us in the years to come to truly differentiate us and we believe that this will be a differentiator for our employee experience in the years to come.

Thanks, you started to talk a little bit about, out of those conversations, what are the next steps? Maybe you could elaborate a bit on that and tell us what are the next steps that OMERS will take in this area.

Thanks Annesley. There are some key steps that we will be taking and some key milestones that we've achieved since we launched our strategy last year that have been important to our people. I'll highlight three of those for us today.

The first strengthening our governance through accountability. In the last year, we have enhanced our inclusion and diversity council, which now consists of business leaders representing our different businesses as well as regions. And we have representation from our employee resource groups. We've expanded the number of resource groups because they are truly the backbone and the heart of our efforts. The council is chaired by Blake who holds us accountable to change. And we have identified individual as well as collective goals and a dashboard that we aligned to our strategy and our commitments that we share regularly with all of our people.

The second area is looking at inclusion and diversity and equity in everything we do and all of our people practices that's from hire to retire. We know for us to have a culture of inclusion, equity, and diversity, it can't be treated as a program or a checklist, and it needs to reside in a culture. And one example of this is in our hiring process, we have changed the way we source and filter talent to eliminate bias. We're using innovative tools to attract diverse talent with different backgrounds. And our employee resource groups have helped us as well and they've been instrumental in broadening our reach and our networks to ensure we have again, greater diversity of talent.

Something that we are doing this year is for our divisional leaders, we're embedding that lens of inclusion. We are going to be measuring inclusion as well as diversity. We're enhancing our metrics on diversity and this will be in their scorecard. So, we are looking at not only what we do but also how and we're applying this lens in everything we do in terms of our year end process as well as our talent reviews.

The third area is about education, we want to continue to learn and grow awareness. We know that we're all on a journey. Some of us are just getting started while others are further along and we know that we all have unconscious biases and we've designed a program that we're calling Conscious Inclusion. It allows us to get greater awareness for ourselves and enable inclusivity for others. We rolled out this program in the last year for all of our people leaders because they touch 70% of our workforce. And in the last year we have 80% who've completed this program and now we're broadening the reach to all of our employees. We've also launched how to be ally workshops. And these are also instrumental ways that we are working with our people to create greater awareness and inclusivity for all of us.

We're certainly not done Annesley but we are getting started and we have made significant progresses. In the year ahead, we're placing greater importance in understanding facts by asking and listening as we did in our listening sessions and this negates any perceptions. And we're also strengthening our metrics to understand the gaps, opportunities so we can make more informed actions that are future focused. We will have better data on our demographics inclusion and people metrics. We are truly maturing in this space and we know the magic happens with our people. We look forward to continuing to share our milestones and opportunities with you in the year ahead.

As an employee, I am very proud of the progress we've made in this area. I certainly know that being able to participate in so many different discussions over the course of this past year has been incredibly meaningful for me. So, thank you very much Nancy, for your leadership.

Another important development at OMERS is the completion of our carbon footprint study and our commitment to sustainable investing. Michael, could you provide us with an update on these activities?

Sure, and thanks Annesley and good morning to everyone. You know, I think we'd all agree that climate change is one of the most pressing issues of our time. And this presents both significant risks and opportunities to the companies in which we invest as well as the communities in which we live and serve. As you may have read in last week's member newsletter, we're proud to announce that last year OMERS took significant action to identify the implications of climate change across our entire portfolio. This included our first total portfolio carbon footprint analysis which was calculated in line with the recommendations of the task force on climate-related financial disclosures, also known as TCFD, which is an initiative that we championed with our Canadian pension plan peers in the fall of last year.

Could you explain a bit more specifically about a carbon footprint and why it's important to OMERS?

Sure, this exercise helped us to understand the greenhouse gas emissions associated with our portfolio. And this allows us to better understand the risks and the opportunities that this poses to the fund over the long term. And now going forward, we will be conducting that carbon footprint analysis annually. And this will enable us to view our portfolio through a carbon lens alongside the traditional lenses like asset class and geography that Jonathan took us through earlier. It allows us to understand the carbon intensity of our investments. And it also allows us to gauge how we stack up against our peer pension plans and other institutional investors. And we're encouraged to see that right now we compare quite favorably.

And how do you see the energy transition playing out at OMERS?

Well, it's clear that the world is transitioning to a lower carbon economy. You know, at OMERS we want our portfolio to be aligned with that transition and like any good investor would like to be ahead of the curve. And based on our carbon footprint initiative, we now have a baseline and we're excited to announce our commitment to reducing that carbon intensity of our portfolio by 20% by 2025. So, this gives us a clear goal and direction. And this commitment also aligns with the most ambitious targets set by the Paris Climate Agreement and our shorter-term goal of 2025 ensures that our current leadership team is accountable now and that the right programs are put in place today to reflect this energy transition.

Thanks, Michael. And turning now to Celine, our pensions lead. Have you seen member needs change as a result of the pandemic?

Thanks Annesley. Hi everyone, I would say that members' needs have been evolving over time even prior to the pandemic. And so, keep in mind that our members are diverse and so, they range in age from 15 to 106 They've got extremely diverse backgrounds. They live all across the province. So, it really isn't a one size fits all approach. However, we've definitely seen more of a desire for online services and flexibility throughout the pandemic. So, think less paper and mail and more digital online tools. What hasn't changed throughout the pandemic and stays strong today is the need for members to connect with us throughout their journey and their life. And so, whether it's to help them plan for their retirement or to help them as they're dealing with situations within their own personal life. So, throughout 2020, we saw members go off on emergency leaves, deal with separations and divorces, deal with disability benefits and address the death of a loved one. And so, we continue to show up for them throughout all of those experiences.

And how has your team responded through the pandemic?

I think they did really, really well. And so, fortunately we were already on a path to modernize our pension services delivery model, making things simpler and faster and interactions with us smoother. And so, we were already on that journey. The team was able to pivot pretty quickly to a virtual model providing seamless service to members, employers, and stakeholders. And so, we saw on average interactions of about 700 each and every day throughout the pandemic. We continue to process all of our transactions within our service level timelines. We continue to process the pension payroll and so, every pensioner received their pay on the first business day of each month. And our road warriors, our education and training team who are used to traveling across the province supporting members, employers, and stakeholders, transitioned to a virtual model and continue to provide that support throughout 2020.

And maybe last question for you is how have we enhanced service offerings in 2020? And what are your plans for 2021?

It's a great question, Annesley. I would say again, we did a lot throughout 2020 and we've already started to improve in 2021 and we'll continue down that road. And so again, I go back to the diversity of our members and when we think of service and enhancements, we really try and keep all of our members in mind. And so, whether it's a 20-year-old living in downtown Toronto or an 80-year-old member living in the Township of Tiny, we really try and figure out what is accessibility and what does a meaningful service interaction mean for each of them?

And so, for us it really is a combination of online digital tools and real personalized professional human interactions. It's a combination of both of those things. And so, a few examples of what we've done again, we've really tried to build out our member facing portal. So, my OMERS, so I'm hopeful many, if not most of our members who are joining us today have access to their my OMERS portal. And so, some of the things that we've tried to do this year, we've included a secure a secure communication channel recognizing that many of our members are public facing and so it's not possible for them to be on the phone with us between business hours. And so, now they can communicate with us through my OMERS, have access to personalized specialized services in a secure way. from relying on mail into more online services. We have simplified the buy back process so, if anybody is looking to buy back past service, they can now request a costing online and upload information through my OMERS.

And the last thing I would point out, is we implemented the first iteration of a retirement planner. And so again, really important for people to be able to plan for their future retirement and ensure that they understand their sources of income. The retirement planner allows them to pull together many different estimates and not just their OMERS pension but things like CPP and other sources of income and really look towards planning for retirement. And we do plan on improving that even more this year so that we can also include costs in other areas for people to begin to really plan for their future retirement.

So, I would just sort of reiterate the fact that our goal really is to provide enhanced services to help members better understand their pension, ensuring that they are accessible to all of our members and understand the benefits that this pension plan provides.

Thanks so much Celine and thank you to the rest of the panelists. The conversation has really highlighted some incredibly important successes in what was quite a difficult year. I'd like to close this part of the program by thanking all of our presenters and speakers. Now it's time to start our question and answer period and I will turn things over to Pierre Côté who will host that part of our session today.

Thank you so much, Annesley. And just a couple of announcements before I provide instructions. If you're experiencing blurriness on your screens, simply refresh your screen and that hopefully will solve the problem. Next, it's 10:26, we have gone a little bit over time but we will extend the meeting to allow for a fulsome Q&A. So, we hope to go to about 11:30. So that will give us about an hour for questions and answers.

So, good morning everyone, And welcome to the question and answer portion of our annual meeting. As I mentioned, we have about an hour for this portion of the meeting and we hope to get through as many of your questions as possible. You should know that we received about 200 questions from members in advance of the meeting. And as you probably noticed, we did our best to include as many responses as possible to those questions in the presentations.

In broad terms, the main themes of the questions received in advance were the return and their implication. The sustainability of the plan. Possible changes to the plan such as contribution increases and shared risk indexing and socially responsible investing. To ask a question, please use the ask a question window on the right hand of your screen. Many of you have already done that and we're sorting through those questions as we speak. Please be as succinct or direct as possible in your question and if you can identify who your question is directed to, it would be of assistance. We will direct questions to the appropriate presenters but the information you provide will be helpful in doing so. If your question is related to your personal circumstance however, such as your own pension, it is preferable to contact OMERS directly as it would not be appropriate to answer those types of questions during this meeting. In submitting your question, you're welcome to provide your full name. In reading your question however, we will use your first name and if you haven't provided a name, we'll keep it anonymous. Please also be re-assured however, that we will maintain confidentiality and your questions will not be shared publicly.

Thank you for your cooperation and without further ado, we will now begin with a question directed at the AC CEO, Blake Hutcheson. The first question is, what concrete steps has OMERS taken to reverse the losses incurred in 2020? Blake?

So, I hope we've been collectively as clear as possible. We made some people changes that I have shared with you. Through confidentiality agreements, we don't advertise how those took place. We also don't think it's particularly helpful to celebrate those things in public but we have made some changes to certain key roles. We were also aided by some retirements because after all it all comes down to making sure you have the right people managing every aspect of the plan and every aspect of the elements of the business, every P&L. So, we have done some significant changes in that regard. And I think we, as I've said, we call it kind of a K shape recovery, when COVID hit, there are clearly economic opportunities at the top of that K that had been unlocked that you have to get in the way of a trend.

What's a business plan? It's what am I great at, how do I get in the way of a trend given limited resources? So, we have been deep students of what is going to be accelerating and doing better as a result of these times. And we've been a deep student of areas that will be structurally impaired. So as Satish suggested and Jonathan touched on it, every aspect of our game plan is to get focused on the top forward-looking growth opportunities to down wait or avoid those on the lower half of the K. And those are real-time decisions made by hundreds of people every single day.

So, the question is a totally fair one and just know from the day I've stepped in with our team, we've been 100% focused on the right people in the right places and the right strategies against every ounce of your money. And hopefully that gives you some more comfort and some more color on that question.

Thank you so much, Blake. The next question will go to our CFO, Jonathan Simmons. Question from David. Can you please explain the decision regarding currency hedging in the midst of extreme market volatility? If OMERS is committed to a long term plan designed to withstand differing market conditions, why was this necessary? Jonathan?

Thank you, Pierre, and thank you David, for your question. So, I want to go back about a year in time as to where we were about a year ago as the pandemic started to roll out. And I think as everybody knows the markets at that point became quite fragile. I talked about the drop in equity markets. I talked a little bit about the drop in the dollar. And what we were observing at that time was some other quite significant stresses that we all mind. OMERS has a commercial paper program, this is where we raise money in the short term debt markets. Typically, that rolls with no problems, we started to see some difficulties there. We had some large investment transactions that we were about to consummate. We had financing lined up with our bankers around those transactions. We started to observe that there were some issues in the banking market with bankers acceptances and other financial instruments that were not moving in the same way as we'd seen in the past. And we had just entered into a sales transaction where we were due to receive some significant proceeds. And we were frankly thinking about where we actually going to see the proceeds show up when they were due. So, all of this stress that we saw was very, very concerning to us.

We started the year with abundant liquidity, throughout the whole of the crisis, our liquidity levels never dropped below what we considered what would be a safe level. Having said that, we were looking forward and we had some conversations including those with very high levels of the Bank of Canada, thinking about what the Canadian dollar might do. And there was a real risk in our mind, That the stress that the dollar will be slow in the dollar market could continue. And so, we had a choice. Were we going to just let things ride? Or were we going to take positive action? And of course, the decision that we made was let's take positive action because we have to protect OMERS liquidity, it's so important to us.

So, we made the decision that the most effective way in order to mitigate that future extreme downside risk was to take off some of our hedges. And so, that is a decision that we made. We consulted very widely. The management team thought about it long and hard. We discussed it with the board and that was the decision that we made. Because the Canadian dollar appreciated slightly afterwards, the trade to a certain extent went against us. But hedging is a long term item, if I look back, I already said that I think this year our return had we not hedged would have been 2.7% better. Last year it would have been 3.1% worse. And over the last five years, had we not hedged our return would have been 40 basis points difference. So, things evolve over time, tends to come out in the wash and in given the circumstances that we were in at the time Pierre, that Was the decision that we made.

Thank you, Jonathan. The next question will be for Satish. Satish, what benchmark does OMERS use for its equity portfolios to measure how it has performed? How did OMERS equity portfolio do over five and 10 years against the benchmark? Satish?

Yeah, Pierre thank you. So OMERS has had a long-term philosophy of absolute return benchmarks for all our asset classes. Our liabilities had been approximately 6% and we have decided as an organization over the last 10 years to have absolute return because absolute term over five year period is what pays our pensions. So, when you think about all our asset classes, Oxford has an absolute return benchmark. Infrastructure has an absolute return benchmark. Private Equity has an absolute return benchmark. And even our capital markets business including public equities has an absolute return benchmark over five years. And so, what happens is that our focus has been entirely on investing in great businesses that are great leaders that have strong balance sheets and that have high dividends because we feel over time that those are the ones that are going to return above 6%.

Last year Pierre, the securities that returned the best were the ones that were in hyper-growth coming out with no earnings and people were transitioning from industrial long-term companies to new technology companies. So over five years, the equity portfolio has delivered the absolute return. Last year, it absolutely did not. The returns were quite a bit behind but we have a lot of confidence that investing in a great global leaders that pay dividends with solid balance sheets, that over a number of years will perform better than our liabilities which is 6%. And it actually has accomplished that over a rolling five year basis.

Thank you so much, Satish. And the next question will go to the chair of the AC board, George Cooke. George, how do you justify a raise to executives given the poor investment strategy? George?

Pierre, I am troubled by the question when someone says a raise but let me try to explain how the performance compensation system works. First of all, it is set out in great detail in the annual report. There are a number of pages that explain exactly how the performance system for the executives works. Maybe some of the confusion that the listener has relates to the fact that the amount that's paid in any year is actually a culmination of several years of awards. The amount that's awarded in a year reflects the performance in that particular year. And as noted in the annual report, there is a very hefty business results component in the pay structure for the senior executives specifically. In the annual report it notes, the named executives and in the year that just ended, 2020, 323 for those executives, the award was 0%. If one looks at the comparison of awards between this year and past years, I don't think a raise would be the right way to characterize what otherwise is a significant reduction.

Similarly, if one looks at the amount that is actually paid out because these things are averaged over three or four years, when an award is given, a portion of it is paid and a portion of it is retained and paid out over subsequent years which places that particular portion of their compensation at the risk of the plan's results which actually we think is a very fair way to ensure that everybody is focused on long term results. And so, in this particular circumstance, our senior executives did not get raises. And quite frankly, the remarks that were noted by Jonathan earlier, the actual compensation across the organization was materially lower in 2020 than it had been. And that resulted in some large percentage of the savings amounts that Jonathan identified. Hopefully, that helps Pierre.

Thank you so much, George. And just a reminder, if you are experiencing difficulties with your screen, it's a live webcast but just refresh your screen and it should solve the problem. The next question will go to the chair of the SC board, Frank Ramagnano. Frank, why in a year when OMERS investment return was -2.7, has the OMERS Administrative Corporation Board total remuneration increased by 14.7% and the OMERS Service Corporation Board total remuneration increased by 16.8%? Frank?

Thank you, Pierre. Our board compensation is done by policy. We actually review the board compensation every three years. So, the fact that you're seeing an increase in the annual report for 2020 will indicate that we actually did those compensation increases in 2019 to take effect into 2020. The way they're done is we use an external professional to help us. They make a recommendation to our HR committee and it then goes forward. The raises were closer to 9% with no retroactivity but the other decision we made is we looked at our technology where we were paying for internet, cell phone, computers and we put that right into a technology charge so that it's better for the individual board member to monitor themselves. It also makes it easier for our administration. I can report that when we do the review, our board is at the bottom or below the median. And by the time three years rolls around and we review it again, we're usually in the bottom quartile. So, I just want to make it clear that that board decision was made in 2019 and it took effect into 2020.

Thank you, Frank. The next question will go to the CEO of the SC Corporation Michael Rolland. Michael, OMERS returned -2.7 while HOOPP returned 11.4% and Teachers returned 8.6%. When will OMERS guarantee that their failures will not hurt plan members or decrease member benefits in the plan? Michael?

So, a couple of comments, I'm not going to reflect on our plan peers. Obviously, they've had a better year than OMERS this year and that's something they should be very proud of. With respect to guarantees, I think there's no guarantees as to what decisions we will have to make based on our performance. And as I said, it's a long-term performance that we need to look at. It's one of the reasons why I said sustainability is a focus and has been a primary focus for us.

So, in regard to your question, yes, we can do the comparisons. We have to look inward at ourselves and we have to determine what is the best decisions we can make. As I said in my remarks, it is a complex decision. Sustainability is important. The results of 2020 did have an impact, as I reflected in my remarks earlier. And that's why we're taking a look at it. But the time that we will take to do it is, will not be done in haste. It's a discussion that we're having with our board. And as I said to you earlier, this will be a discussion we have with you, the members, and with the sponsors and stakeholders over the next period of time. And I expect that we'll probably start these discussions later in 2021, so later this year. Hopefully, that's helpful Pierre. I know I didn't answer the exact question on our peer comparisons because it's very difficult for me to respond in my role today on how they did versus us.

Thank you so much, Michael. The next question will to Celine Chiovitti. Celine, can you explain the AVC return and how it works? I was expecting a zero return because of the pandemic but -$1000 dollars applied to my account, please explain. And this question comes from a retired member, so how do AVCs work? Celine?

Thank you, Pierre. So, the AVC plan essentially gets the same investment return apply to it as our OMERS rate of return. And so, this year it would have gotten the minus 2.7%. In addition to that, there is a fee. And so, there's a basic fee of $35 per year from an administrative perspective that gets charged to the account every year. Again, I would go back to saying when we look at the AVC plan as a whole, all of the terms and participation is available on the website. It's a great vehicle because you have access to the diversified portfolio. So not just public markets but access to our private market investments as well. Last year it earned over 11% and so again I would say, when we look at the vehicle, it's something that you should consider for a long term I would say, medium to a long term investment. If you are looking to invest for one year period of time, it probably is not the right vehicle for you. If you are looking to enhance your overall pension over the longer term, then it's definitely a great option for people to consider. But essentially, we would, if you're an active member, we would apply the same annual rate of return as we do on the primary plan to the AVC plan. And you would continue to accumulate your AVC contributions plus that investment return on an annual basis.

If a member actually leaves the plan so, upon termination of employment or if they retire, they then have the option to withdraw the full amount of their AVC plan and in that case, we will look at, if it's done prior to us actually publicizing the investment rate of return, we will look at the previous five year average. So that's how it works. I would encourage you to look on the website under the AVC section or to contact the member services area, we could provide you with a lot more information on it.

Thank you so much, Celine. The next question will go to Michael Kelly. Michael, what plans do you have to divest from fossil fuel industries?

Thanks, Pierre. That's a question that we get quite often as to our peer Canadian pension plans. You know and as we mentioned, we are really focused on our leadership in the space of energy transition. We mentioned our carbon intensity reduction goal that we have in place now. When it comes to the specific issue of divestment, we believe that the story is really one of transition. And as the world transitions to a lower carbon economy, there still remains a vital role for responsible long term investors such as OMERS and other Canadian pension plans to provide leadership on the cleaner and safer production and transportation of what we'll call traditional energy. And these assets still do form part of a balanced and diverse energy portfolio. And to divest completely would mean that we would lose our voice or influence in a significant portion of the energy market, particularly in Canada. I think the other thing that's important is many of these companies are transforming their businesses materially in anticipation of the coming transition. And there's significant for example, Canadian engineering talent residing in these companies that may be unlocked in response to a certain regulatory initiatives such as carbon pricing. But you know, having said that, because we are investing more selectively in these traditional energy assets, we're more likely to focus on those companies that have a plan for the transition and that have a strong commitment to ESG factors.

Thank you, Michael. The next question will go to Jonathan Simmons. Jonathan, will OMERS put their discount rates strategy on hold to ensure benefits for plan members are safeguarded? Jonathan?

Thanks Pierre. So just a couple of words behind this question. The discount rate is very important because as we lower our discount rate, that increases the present value of our liabilities and it does cause the minimum funding requirements of the plan to go up. So, a number of years ago while we were actually casting our 2015 strategy, we took a long hard look at our discount rate and what the conclusion that we came to be that OMERS discount rate was too high. And what that means is that places risk on future members of the plan which we did not find acceptable as a management team and the two boards agreed with us. And therefore, that was the genesis of the strategy to gradually reduce the discount rate over time. And we had a choice, we could have taken the discount rate down quickly or we could have adopted a more gradual approach. And the reason why we adopted a gradual approach was actually to balance the various generations of OMERS members because we realized if the discount rate is taken down too quickly, that does put pressure on contributions and benefits. And we didn't want that to be undue.

So, the OMERS strategy around the discount rate has not changed. It is still that we need to bring our discount rate over time. The decision around annual change in discount rate is made by the AC board on annual basis. If I look back over the last five years, there have been years when the discount rate was taken down five basis points, 10 basis points, 20 basis points, or held flat. And so, it is a decision that we will make on an annual basis but strategically over time given the fact that we are in a very low interest rate environment. OMERS discount rate does need to come down and the discount rates strategy will need to unfold, Pierre.

Thank you, Jonathan. The next question will go to Satish. Satish, what are the anticipated impacts on real estate assets such as shopping malls, et cetera given the change to online shopping?

Thank you, Pierre. So just as a bit of a backdrop, Oxford has become known as one of the leaders in real estate on a global basis. And their portfolio is comprised of a best in class office, some of the best commercial properties, some of the best malls, and also quite a bit when it comes to residential and also some of the logistics space. So that's the diversification we have. It's also diversified by global geography. We have investments in North America. We have investments in Asia. We have investments in Europe. When it comes to the retail malls, generally, you have noticed that over many years, our exposure to retail malls is generally viewed as some of the best. Examples of that would be Yorkdale Mall or some other malls that we have in the GTA. What we have always focused on is providing best in class service for our customers that come to shop. Last year as a result of government mandate shutdowns, our malls were closed for large periods of time. And even today, some of the malls are only allowed to occupy at 25% capacity. Our malls continue to focus on making sure we've got the best health protocols and we want to make sure that we have inviting experience for our customers.

So, last year our malls achieved in many cases zero revenues for certain periods of time but we are hopeful that people will come back to the best in class. But I want to be clear Pierre, we're also complementing our exposure to retail malls with best in class warehouse logistics. So, we have that exposure where people are shopping online. Oxford is also benefiting from that as we're investing in warehouses to support distribution.

Thank you, Satish. The next question will go to Blake and perhaps Michael. OMERS has more than 3000 employees. Why does the organization have an AC executive team and SC executive team with so many C level positions? Shouldn't the organization flatten its structure to be more agile and efficient? Blake, we'll start with you.

I'm happy to take the question. Thank you, Pierre. So first of all, of the 3,200 people that we have under the OMERS umbrella, about 2000 of those are with Oxford and the remaining are tied back to the various OMERS businesses because Oxford is a big global operating company and in order to do the services they need to do; we've got people in multiple cities around the world. So that's the starting point. And it's interesting, we have a fairly sizable executive team today for OMERS to run an operation that works in close to 50 cities with seven or eight times zones with 450 real estate assets, 30 infrastructure businesses, 20 private equity businesses, global offices in Singapore, London, New York, and the list goes on. And so, it's far-flung and increasingly global. So, what we did this year is we did expand our executive team. And interestingly enough, I shrunk my direct reports. So, the direct reports I have are six but we included some of our global executives underneath Satish in some of our other areas so that we actually could govern the business in a global context with inputs from around the world. So, the money hasn't changed in terms of what we pay people but the structure changed so that we can run a truly global business with the proper representation. And by the way, this also played really well to our diversity because it's essential as we all know to have multiple thought leaders around the table, we make better decisions as a result of it. So, by expanding the tent of the senior team, it has helped us on that front. But I think the math hasn't changed, it's not more expensive to run it that way but it's certainly more global, more diverse and it helps us truly run now a global organization.

Thank you, Blake. The next question is for Michael Rolland. Michael, is indexing of our pension going to stay? Michael?

As I spoke about earlier and thank you for the question, is shared risk indexing which is the decision as to what amount of inflation increases would be applied to pension benefits is remaining through the end of 2022. Any decisions to adjust the amount of inflation increases can only be made starting in 2023 for those pension benefits earned in future years. So, at the current time, there is no changes to indexation. It remains. So, in 2021 and 2022, the pensions that are received by members or are earned by members will receive full indexation. In 2023, the SC board will have a decision to make or may as the option to make a decision under the, we talked about earlier called shared risk indexing. And that will be made at the time based on the best information and the current status of the plan.

Thank you, Michael. Next question is for Jonathan. Why are you not providing us with monthly investment reports? Jonathan?

Thank you, Pierre. So OMERS is a long-term investor, I always like it when Celine quotes that the age range of our members. The youngest is 15, the oldest is 106. And as Blake said, we invest over decades. So as a long-term investor, we believe that the relevant time period to be reporting historically has been a year. And reporting more frequently than that really has very limited benefits. In fact, in some respects, it can work against us. One of the things that that we want to encourage is our investment teams to be focused on the long term and that is why we believe that the frequency of reporting that we have is right. The other aspect to it is that half of our portfolio is invested in private market assets. And unlike public market assets where you can look on a screen every day and see a value. You have to value private assets; they tend to move slowly over time and a huge amount of judgment is involved. So, Pierre, we think we've got the balance right between who we are and the frequency in which we report for behavioral reasons, for utility, for cost, and for many more.

Thank you, Jonathan. This next question is for George. George, when will OMERS acknowledge the mistakes, it has made not only in the last year, but over the past decade and commit to a comprehensive review of risk investment in AC board strategies to protect sponsors and plan members. George?

Yeah, thank you for that question. As I indicated in my opening remarks, the AC board which is the board that is in charge of governance actually has done a comprehensive review of all aspects of our operation, decisions that were made in the past and that are being made today. And has been engaged with a new management team in terms of the decisions that they're taking. We're very comfortable that we have actually turned over every rock that needed to be turned over and that the appropriate review consideration and subsequent decisions have been taken and will continue to be taken. I think it's worth noting that the board is a skills-based board. It is populated with people that are qualified with substantial experience as I indicated in my opening remarks and we have utilized the resources of external parties where appropriate and where necessary to supplement the abilities and skills that we have. So, there's no mystery to us in terms of what our performance has been and why. There's no mystery to us as to what 2020 was all about and all appropriate actions have been taken.

Thank you, George. The next question will be for Satish. What best practices can you glean from other pension plans but in particular, how can you improve the investment results from last year? Satish?

Pierre, thank you. Well, first of all, we are fortunate at OMERS that we actually attract some of the great talent from the other pension plans and when we do, we do listen to what their experiences were in the other pension plans. Even just last week, we hired another senior person from another Ontario based big pension plan has come to us and we listened to what they're doing as we're always looking to improve. But I give you two areas of change. One is that we have created a team called Total Portfolio Management which is relentlessly focused on liquidity, currency and total portfolio management. And we brought in experts from external to validate our processes and how we move forward. I think that's one area you will continue to see us make progress on. And the second area is that we have had a very high focus on blue chip value names on a global basis. You will see us continue to explore and invest in and grow our ventures, growth platforms and our other technology areas as the world continues to shift more digitally. I think that's an area of focus for us.

Another area of focus for us is that we have a high exposure to North America, Canada, the U.S. with 70% of our balance sheet versus other pension plans, we would have a lower exposure to some of the faster growing regions in Asia. And we have worked very hard over the last 2.5 years to build up a robust team based in Singapore that is looking for some of the higher growth businesses that I think will produce very strong results for us over time. So, I think the areas that we continue to focus on is total portfolio management, our focus on technology and innovation and our growth initiatives with respect to the Asia Pacific region.

Thank you, Satish. The next question will be for Nancy and it's in relation to our innovation strategy but, your senior management will see in this modeling struggles being culturally gender or race diversified. How will you adjust your personnel strategy to address greater diversification? Go ahead, please.

Thank you so much care Pierre, for the question. Again, in terms of our focus on diversity as well as inclusion and equity, it is important for us to ensure that we drive accountability as well as understanding. So, this year we have efforts to better understand the demographics of our workforce. As well, we're introducing an inclusion index. We have an annual engagement survey. We're rolling it out later this month. This will give us insights in terms of not only our demographics, as well as our inclusion and better understand applying that in everything we do as I mentioned in the end to end process in our people practices. To make us better in terms of creating greater diversity, inclusion and equity, we're embedding it in everything we do and we're driving accountability to our people leaders. We really need to ensure that they're helping us again, they touch 70% of our workforce and we started first with the education series in terms of conscious inclusion to create greater inclusion and understanding in terms of self-awareness but also inclusivity of our teams. And then the second area of focus for us has been in driving accountability in our performance management program. So, this year we're rolling out a new program that measures not only what we do but how we do it. And in terms of that how, we're adding in a better metrics, people metrics which we have launched a Workday technology that will support us to understand our people demographics beyond gender. And we have a campaign going on right now for self-identification. So, this will give us insights in terms of our broad diversity and also tie into that in terms of the people metrics that we have for our divisional leaders, for themselves and their teams to have this in their scorecard. So, these are just some of the ways that we are again, focusing on better understanding and understanding the diversity of our enterprise as well as inclusion so that we can put the right actions in place that have the impact for our people.

Thank you, Nancy. The next question, we will go back to Satish. At which time or how long do you see OMERS investing in the Asia Pacific market? And what investment types are you looking to invest in, for example, real estate, bonds, financial institutions, et cetera, Satish?

Thank you, Pierre. Just as a reminder, this was mentioned earlier on but approximately 50% of our assets are in privates and 50% of our assets are managed to the capital markets public exposure, so just making sure people mind that. But when it comes to the Asian investments, we've made some very strong progress in a couple of areas. So, I'll give you the kind of investments we've been focusing on. The first area is on the real estate side, we have invested a good amount of money with some of the leading logistics players. So, these are building, state of the art warehouses to support the internet delivery mechanisms. We are seeing that the whole Asian region has a higher portion of ordering online. And so, our focus on Asia particularly is through the logistics space when it comes to real estate. Real estate again, we have a focus in Australia which has done absolutely terrific where we have focus on office and that's a market that's very much similar to the Canadian market. In the infrastructure space, our focus has been on roads and toll roads. Some of the nation’s there are progressing much quicker when it comes to toll roads than we have in the Western worlds. And we have partnered with other like-minded institutions in that area to invest in toll roads. We also have investments in Australia, we're in the infrastructure space when it comes to ports. So, this is really benefiting from the increased global trade where ships come in and dock and we get a fee for that. With respect to the capital market space, our focus has been a combination of high quality leaders with respect to the whole Asian economy and we continue to see progress. So, our office is based in Singapore and that's where our hub is. And so, I would say that in the broad philosophy, what is consistent is the best asset with the best partner, the best geography, whether it's a real estate, infrastructure or capital markets, that is our focus.

Thank you so much, Satish. The two next questions actually are for Celine. So, I'll start with the first one. How over budget is the OMERS transfer to a new membership database system? How overdue is that system? Celine, and then I'll have a follow-up question. Celine?

Thanks, Pierre. So, I would say we are in the process of iteratively improving our pension administration system. We are within budget in doing that. So, if you look at our shift this year and last year really was looking at our backend system, our pension administration system as well as our front end portals. And what you would have seen in 2020 was a lot of iterative improvements to our member facing portal and our employer facing portal. Again, going back to focusing more on modernizing and providing more self-serve functionality. We're doing that literally for the most part in-house, utilizing our fantastic products and technology team. And we're now also looking at our backend system. And so, we made a decision to take that in-house. We have a system right now that is pretty much self-run. It's our old MSS system, we are looking at modernizing that system over time and we have started that process. And so, I would say that the system works well for us today. It's also well positioned to help us make changes into the future. And so, Michael Rolland talked about SRI. We are now in the process of implementing changes to the system to be able to implement those changes. The other thing that we look at all the time is just our ability to have effective throughput rate and so, automation versus manual processes. And so, we are doing that iteratively over time. We have the right people to conduct that work. We have the right governance and oversight set up and it will be an iterative process. So, unlike the past decisions of sort of trying to implement something in sort of a one big bang approach, we are taking our time and doing it iteratively over the next few years.

Thank you so much, Celine. And just a second question, more practical. Will you send out a recording of the AGM so we can catch the parts that we missed because of frozen screens or technical difficulties?

Yes, thank you Pierre. By tomorrow, everyone who has participated in the session will get an email that will also include a link to the recording of this session as well as a survey to complete. And I said that recording will also be available on, on our website for anyone who's missed any of it.

Thank you so much, Celine. The next question will go to Blake. What is OMERS doing to reduce its physical footprint? Given that employees work from home appears to be here to stay. Blake?

Yeah, well, it's an early call for how this all transpires, right? Globally for people occupying offices. Most of the studies today tell you that organizations can probably reduce their footprint, occupied space by 20% by allowing people to continue to function from home. They'll also tell you that most organizations will require 10% more elbow room because there was a real movement to putting too many people in too small of a space per square foot. So, the net diminution in demand will probably resemble more like 10% for office product as opposed to a greater number than that. And so, from an Oxford perspective, when most leases are five years rolling, there's a maybe it's a 2% hit to the annual revenue of Oxford and we actually have the best of class assets and air quality will matter so, we think our office product will be fortified during this time. As it relates to our organization, it probably is, there will be opportunities for more flexibility and choice on a go-forward basis that we have our chief operating officer and our HR team focused on because I think that's here to stay. I don't know that there will be a big push to absolutely exiting people and say, you can work here or there because we're an office based culture and bringing people together matters and we do better work when we are working together. So, the long and the short of is, by this fall we're doing a study, we will have, I think some opportunities to diminish our space. It's probably in the order of magnitude of the general numbers that I'm sharing. It might be a 10% diminution. And we're going to put the priority of our people first, their wellbeing and the organization alongside it to make sure that we don't lose any service to you by adopting some of those policies. It's complicated and we're comparing notes with every other major institution in this country as to how to get that right.

Thank you so much, Blake. This next question could go to Jonathan and/or Satish. Is there a danger of overreaching, making too many changes? and doing long term damage, presumably in terms of the investment strategy? Jonathan, do you want to start? And then maybe we go to Satish.

Thank you. So, you know, strategies are there for the long term and one of the things that we've been doing, we've been looking at our overall strategies. We think our overall strategy is solid but we're not so blind us to realize that there aren't places where we need to correct
and course correct along the way. So, Pierre, I think it's about balance. Certainly, throwing the baby out with the bath water is not something that we intend to do. But I'm going to ask Satish to make some comments because I know he's got some very clear views on the strategies that we have in place and particularly around the quality, equities that we have that grow their intrinsic value and dividends over time which we think are a very strong match for the pension obligations that we have. Satish.

Thank you, Jonathan. Thank you, Pierre. First of all, I just want to remind everybody that we conduct on every three year basis a very robust asset liability study which both boards are aware of, management is aware of, and that provides from our point of view a very good framework for how to think about asset allocation on a long term basis. And I would say the first thing is that you'll find that we will make small change on every three year basis for what our optimum asset mix should be. And the input for that Are assets and liabilities not just on the asset side. The second comment is that there are some core philosophies that I think that are really important for pension plans and we've talked about this, this is buying great businesses with great partners in great geographies. And I think that DNA for us as an organization has not changed. We do get from time to time; I've been in this business for about 35 years. And unfortunately, it happens about once every seven or eight years where a type of investment that's not geared towards best in class global leaders does very well. I can think through in 2009 when resource stocks went up a lot. I can think through in 1999 when technology stocks went up quite a bit. I can think through 1990 when real estate stocks went up quite a bit. But what the main thing that really focuses I believe, that creates value over a long period of time is great investments in great businesses with great leaders, with great partners on a global basis. And our vision has not changed. And Blake alluded to this and Jonathan alluded to this is that we start to see the recovery in our high quality names in the fall of last year. And we're continuing to see that recovery taking place this year.

And we've also seen recovery in our real estate, in our private equity companies which all have that same philosophy. not to chase what happened last year but have a clear vision of over a cycle and how we think about that. And I believe we've got a very strong vision for the next number of years.

Thank you so much, Satish. This next question is for Michael Kelly and it's a follow-up to a previous question. Can OMERS provide examples of an oil and gas company that has a plan to align its business model with need to decarbonize the global economy by mid-century? Which traditional energy companies that OMERS invest in have a Paris aligned emissions plan? Michael?

Yeah, I think, I mean, it's a good question. I think, if you thought about Canadian companies there are some that probably have an articulated plan. Suncor is one that comes to mind internationally. You would have heard about BP re-characterizing itself as an energy company versus an oil and gas company. So, you know, there are examples out there of these companies that are realizing where the future is going. And so, that's where we would look to rather than simply selling every fossil fuel related asset that we have in the portfolio which I don't think that would be a great strategy currently right now, given that, it's still a significant part of an energy portfolio. So, there are examples and as I mentioned before, there is a lot of ingenuity in these organizations and when you mix things like you know the Canadian government has come out with its carbon pricing and a relatively aggressive carbon pricing program which will then I think unlock some ingenuity in these sectors. Having said that we see huge opportunities in renewables, our infrastructure team is certainly focused in that area. And so, that's where we see a lot of opportunity. We just don't think it's the right thing to completely divest of that sector at this point in time.

Thank you, Michael. This next question is for Blake. The information I am hearing is very concerning. Can you please explain what? Some of the specific strategies you will be using and explain it in simple language so I can inform my members. And can you please explain some of the specific strategies you are using to correct a situation and please do so in simple language so I can inform my members. Blake?

Okay and I hope we've answered that in multiple different ways with multiple different angles today but I can go over some thoughts that may be helpful. And so, the first thing is, as I said earlier, people are our most important asset. It is essential that you get the right people in the right roles that are properly and judiciously investing on your behalf. And so, it all starts with there. So, it is a clear strategy across our organization, working with Nancy, working with every single business leader, Satish in the investment side to make sure we're getting the people right. And I've been here for a year. I have been relentlessly focused on this role for a year. I've been relentlessly focused on that. We've made some tough calls all in service of the organization. And so, strategy number one is getting the right people in place.

We then sit down with every business that we have and every operating P&L that we have. And we sit with Satish and we sit with those who lead those businesses and we overlay what's happening in the world today and we see where we should stay the course consistently whereas Satish said earlier, we will see through cycles by being committed to great assets, great partners, great geographies and areas where we should pivot a little or learn from what's going on? And so, let's go back to real estate as a specific strategy. Probably 10 years ago, 40% of our portfolio was malls. We've actually downgraded over years to the point where it's about 16%. And as Satish said earlier, they're the best in class assets, Yorkdale, Square One, Scarborough Town Centre, Upper Canada Mall. And those assets will do very well over time. They have not done well this year and until we get legislators to allow us to open the buildings they can't improve. And places like Square One, it's just a massive development site. You know, we can probably build 25 buildings in and around that in the future so, we like its prospects. So, you know, taking real estate, focus on our assets, really do the best we can with those assets. And then the flip side of that is we've put an awful lot of money into the logistics space, into industrial buildings to make it clear.

So, when retail shrinks, the net beneficiary is the industrial markets because of online shopping. So, we've gone from 5% of our portfolio to closer to 30% of our portfolio in industrial in the last few years to take advantage of those trends. So, there's a specific example. I think within private equity, we've been really focused on some of our consumer facing businesses as we shared with you got hit hard. So, we have a cinema company, 120 assets, almost zero revenue over the course year, really hard hit. So that team have sat down and said, okay, consumer facing businesses, here are five areas in the new economy that we can focus our resources away from that sort of investment product. For example, we bought a mechanical and electrical company in the United States that services mechanical, electrical buildings for at-home, for office buildings, for industrial buildings, et cetera that we think can insulate itself against the market trends. So, we could go through each business but A, start with the people, then do a deep dive on each business, then study where we are today. In some cases, stay the course, in some cases make sure we get in the way of a trend to improve our prospects. And I hope that's helpful.

Thank you so much, Blake. And that concludes our question and answer session. We have time for some concluding remarks by the chairs of the AC and the SC board, George and Frank. So, without further ado, I will turn the microphone over to, I believe, Frank. Thank you so much and thank you for all of the questions that you've submitted.

Thank you, Pierre. We have now reached the end of our formal program for today and will therefore be adjourning shortly. On behalf of both our OMERS boards and OMERS leadership, we sincerely thank you for joining us for this 2021 Annual General Meeting. Engagement with our more than 525,000 OMERS members, whether in good times or more difficult ones is important to us. I also want to express our shared appreciation to all members, employers, sponsors and stakeholders who made the time to tune in today. George, do you have any final thoughts that you wanted to share before we close our meeting?

I do actually, Frank, thank you very much. First of all, I want to share with you in thanking our members. We've gone longer than what was intended today by about half an hour and we did so because our presentations took longer than was intended. We extended so that we have the longer Q&A period so we would be able to hear directly from and respond directly to our members. So, thank you for your patience as we otherwise extended by about half an hour. I also want to acknowledge this is the second time that we've done one of these sessions virtually and there's a whole lot of invisible people or people that are invisible to us that actually make these events happen and they go off as well as they do. So, I'd like to acknowledge the work they've done and to actually thank them for the contribution they've made in today in terms of making this virtual message possible. To all of us here, I say, please stay safe and healthy. Thank you for all you do to our communities. All of us that have been here today are proud to work for you. We'll say that one more time. And with that remark, this particular session is concluded and adjourned. Thanks very much.