OMERS Sustainable Investing Approach
Our goal is to be a leader in sustainable investing, to better protect and generate superior value for our members over the long term. By integrating Environmental, Social and Governance (ESG) factors into our investment decisions, we believe we can better manage risk, uncover future-focused opportunities, and improve long-term outcomes that ultimately benefit our members. Recognizing the rapid evolution of the ESG landscape, we commit to enhancing our capabilities and practices to ensure they remain transparent, relevant, and effective over time. Our process is grounded in three Sustainable Investing pillars: Integration, Collaboration, and Engagement.
We seek to integrate ESG factors into our investment analysis and decision-making processes, and our asset management practices.
OMERS integrates ESG factors into our investment analysis and decision-making processes, and our asset management practices. These factors may have a material impact on investment performance. Our investment and asset management teams assess ESG factors through processes tailored to the applicable asset class and investment strategy.
OMERS employs a direct-drive strategy* with the majority of its investment assets. For these investment strategies, we integrate relevant ESG factors into our investment due diligence and approval processes, highlighting material ESG factors to the investment approval bodies. We also integrate relevant ESG factors into our asset management approaches; our influence in this regard is commensurate with our level of ownership.
For strategies not managed directly by OMERS, we work with partners and external investment and asset managers. We have processes within each business unit (BU) to assess their alignment with the principles described in this Policy. ESG assessments are performed when engaging new external investment and asset managers with the objective of avoiding inconsistency with OMERS approach to sustainable investing. This assessment includes the review of applicable ESG policies, reports and procedures.
Any industry or sector exclusions are determined based on a set of criteria approved by our Executive Leadership Team that consider risks posed by ESG factors, as well as OMERS fiduciary duty.
We believe that investments in companies engaged in the following activities meet those criteria, and therefore do not meet our risk-return requirements:
civilian firearms manufacturers;
cluster munitions and anti-personnel landmines manufacturers; and
tobacco producers and manufacturers.
*Direct-drive strategy refers to the use of internal investment teams to source and manage investment assets, versus external managers.
We collaborate with like-minded organizations, investors, regulators and legislators with a view to improving the foundations for sustainable investment.
OMERS collaborates with diverse partners to create a more powerful voice and influence on sustainable investing practices. We recognize that the long-term health and sustainability of financial, environmental and social systems can impact the delivery of the pension promise. As such, we believe that through collaboration with like-minded institutions, advocacy, and partnership building, we amplify the impact that OMERS can have on ESG issues.
We are committed to promoting better transparency in ESG data and disclosure, aligned with relevant standards and practices, to improve the functioning of financial markets at the system level. Disclosure of financially relevant, potentially material ESG factors allows us to make better informed investment decisions, and more effectively play our role in efficient and optimal capital allocation. OMERS engages with regulators, policy makers, and standard-setting bodies such as the Task Force on Climate-related Financial Disclosures (TCFD) and the International Sustainability Standards Board (ISSB) to advocate for the harmonization of ESG reporting standards that supports long-term value creation. Our involvement with leading organizations, initiatives and networks enables us to further amplify these advocacy efforts.
Here are some of the important organizations we partner with:
We seek to actively engage with our investee companies and other stakeholders to promote sustainable business practices and long-term thinking.
Engagement with investee companies is a hallmark of our stewardship of the OMERS plan assets. Through our engagement activities, including our proxy voting program, we seek to encourage actions by company boards and management teams that will enhance long-term shareholder value.
We seek to actively engage with these companies to promote sustainable business practices and long-term thinking while addressing material ESG factors in their strategies and operational practices. For example, engagement on climate change and company net zero pathways is a priority for high impact sectors. Our engagement approach will depend upon OMERS level of control and influence over the investee company and the associated investment strategy.
While we prefer engagement to divesting, divestment may be an option when there is a material misalignment with OMERS approach to sustainability, and engagement has proven unsuccessful following an appropriate escalation process.
In our private markets investments where we hold direct ownership, OMERS engages directly with investee companies in various ways. For example, when we have a significant ownership stake we typically have governance rights, which may include active board participation of our own employees or external director nominees. We also maintain regular interactions with board members and management teams and we seek to ensure effective communication of material ESG risks and opportunities.
In our public markets portfolio, we exercise stewardship through multiple channels, including through proxy voting and direct engagement including, where appropriate, alongside our investing peers. Our process includes actively engaging with investee companies with the aim of improving outcomes and enhancing value. We believe that companies should maintain policies and procedures with respect to ESG factors that materially affect performance or mitigate risk. These policies should be an integral part of the overall management of a company. We take our responsibilities as a long-term investor very seriously and believe that, by actively engaging in a constructive way, we can influence positive change.
Consistent with our fiduciary obligations, OMERS exercises its ownership rights by voting proxies diligently and in a manner intended to optimize the long-term value of its investments. Our are available on our website alongside a subset of our proxy voting records. These are intended as a guideline for OMERS and to assist the directors and management of companies in which we invest, as well as other stakeholders, to know in advance how we are likely to vote on issues of importance.