The Canada Pension Plan Investment Board (CPP Investments) has published an updated policy on sustainable investments, reflecting its increased conviction in the importance of considering environmental, social and governance (ESG) risks and opportunities amid an increasingly competitive corporate operating environment.

According a statement by CPP, the integration of ESG factors, including climate change, into investment analysis and asset management activities supports the organization’s clear legislative objective: to maximize long-term investment returns without undue risk of loss.

“ESG considerations are inextricably linked to our ability to successfully achieve our investment objectives,” said Richard Manley, managing director and head of sustainable investing for CPP Investments. “Our Policy reflects the growing body of evidence showing that companies that integrate consideration of ESG-related business risks and opportunities are more likely to preserve and create long-term value.”

The new “Policy on Sustainable Investing” specifically outlines CPP Investments’ support for companies aligning their reporting with the Sustainability Accounting Standards Board (SASB) and the Task Force on Climate-related Financial Disclosures (TCFD).

As an investor to whom boards are accountable, CPP Investments asks that companies report material ESG risks and opportunities relevant to their industries and business models, with a clear preference for this disclosure to focus on performance and targets. When issuers seek input, the organization now indicates its preference for companies to align their reporting with the SASB and TCFD standards.

The policy also reiterates the importance of asset owners like CPP Investments engaging with the companies in their portfolios, noting employees, customers, suppliers, governments and the community at large have a vested interest in forward-thinking corporate conduct and long-term business performance.

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“We believe active ownership through constructive engagement can enhance and sustain returns over time and significantly reduce investment risks,” adds Manley. “As a supplier of patient, engaged and productive capital, we are able to work with companies to bring about change, helping them deliver enduring value-building growth.”

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