Over the past two years, UTAM has worked with the University of Toronto leadership to strengthen and formalize our shared commitment to responsible investing.
As we balance prudent risk management with our efforts to generate sustainable returns, we also take a broader view of the managers we invest with - because we believe that material environmental, social and governance (ESG) considerations can have a significant impact on investment performance. We've therefore incorporated ESG considerations into our investment analysis and decision-making processes as part of our long-term strategy, as well as our day-to-day management of the university's pension, endowment and short-term working capital assets.
We define responsible investing as the incorporation of environmental, social and governance (ESG) factors into investment decision-making processes, active ownership - through proxy voting and engagement - and disclosure. UTAM pursues a responsible investing approach because we believe that material ESG factors can have a significant impact on long-term investment returns. ESG considerations are part of our investment analysis and decision-making processes, particularly in our selection of investment managers. We've developed ways to engage with companies, both directly and with other like-mind institutional investors, to help ensure ESG-related risks are effectively managed. We cast our proxy votes, where possible, applying an ESG-focused policy. Moreover, we disclose our responsible investing activities on a regular basis, via an annual responsible investing report (https://utam.utoronto.ca/utams-new-responsible-investing-report-is-now-available/) and through other updates published on our website (https://utam.utoronto.ca/news/). We believe that taking this broader perspective allows us to make better-informed decisions and ultimately results in better outcomes for our client.
The PRI framework guided us in crafting our comprehensive Responsible Investing Policy (https://issuu.com/utam/docs/utam-responsible-investing-policy?e=29566501/59442745), which was published in December 2017 and applies to all assets under our management. The six Principles also underpin the deliberations of our Responsible Investing Committee, which meets regularly to consider all matters relating to the development and implementation of our responsible investing practices. Although we have generally taken an integration approach to ESG considerations, our client has directed us to exclude certain tobacco-related securities in our investment universe within certain parameters. That is the only exception to our standard responsible investing approach.
Putting our principles into action
PRI Principle #1: We will incorporate ESG issues into investment analysis and decision-making processes.
- Evaluate ESG-related risks across all portfolios.
- Integrate consideration of ESG factors into our investment and operational due diligence policies, and into other policies where relevant and material.
- Incorporate ESG considerations into our manager selection and monitoring processes, where relevant and material.
- Support development of ESG-related tools, metrics and analyses.
- Encourage academic and other research on ESG integration.
- Provide and promote ESG training for our investment professionals.
PRI Principle #2: We will be active owners and incorporate ESG issues into our ownership policies and practices.
- Adopt a proxy voting policy that is ESG-focused and apply this, where possible, to all public equity segregated account mandates, as well as to public equity funds in which the university's Pension and Endowment portfolios are the only investors.
- Encourage managers to adopt ESG-focused voting policies, where relevant.
- Support corporate and regulatory proposals that contribute to improved governance practices and more effective boards.
- Participate in collaborative engagement initiatives.
PRI Principle #3: We will seek appropriate disclosure on ESG issues by the entities in which we invest.
- Discuss ESG risks in managers' portfolios and in relation to particular securities those managers hold.
- Ask managers to undertake and report on ESG-related engagements with companies in their portfolios.
- Ask managers to report on ESG incidents in their portfolios.
- Support collaborative initiatives promoting ESG disclosure by companies.
PRI Principle #4: We will promote acceptance and implementation of the Principles within the investment industry.
- Encourage managers to become signatories to the PRI.
- Communicate our ESG expectations to managers.
- Support the development of tools for benchmarking ESG integration.
- Support regulatory or policy developments that enable implementation of the Principles.
PRI Principle #5: We will work together to enhance our effectiveness in implementing the Principles.
- Support and participate in networks and information platforms in order to share tools and pool resources.
- Address relevant emerging issues collectively with other asset owners and managers.
- Identify and support appropriate coalitions whose beliefs are aligned with the Principles.
PRI Principle #6: We will each report on our activities and progress towards implementing the Principles.
- Disclose how ESG issues are integrated within our investment process.
- Disclose active ownership activities (e.g., voting, engagement and policy dialogue).
- Communicate with stakeholders on ESG issues and the Principles.
- Report on progress and achievements relating to the Principles.
- Make use of reporting to raise awareness among a wider group of stakeholders.