As the asset manager for the University of Toronto’s Pension, Endowment, and short-term working capital fund (EFIP), we are committed to being a responsible investor on behalf of the University while fulfilling our investment mandate and fiduciary duty.
Consistent with the United Nations supported Principles for Responsible Investment (PRI), UTAM defines Responsible Investing as an approach to investing that aims to incorporate environmental, social, and governance (ESG) factors into investment decisions to better manage risk and generate sustainable, long-term returns.
We are pleased to report that we made significant progress during 2016 in enhancing our investment approach so that it now more fully incorporates ESG factors into our decision making process. Although incorporating ESG analysis into our investment approach is not new, we are now much more rigorous and systematic in our approach. We believe that this is not only consistent with our fiduciary duty but that it also allows us to make better-informed decisions and ultimately makes us better investors.
In December 2016, UTAM became a signatory in support of the PRI, which are a set of six aspirational principles designed to encourage and to assist investors in integrating ESG into their investment processes. In becoming a signatory, we have committed to the following statement from the PRI and their six Principles for Responsible Investment, which we have adopted as our own.
"As institutional investors, we have a duty to act in the best long-term interests of our beneficiaries. In this fiduciary role, we believe that environmental, social, and corporate governance (ESG) issues can affect the performance of investment portfolios (to varying degrees across companies, sectors, regions, asset classes and through time).
We also recognize that applying these Principles may better align investors with broader objectives of society. Therefore, where consistent with our fiduciary responsibilities, we commit to the following:
There are many ways in which UTAM, on behalf of the University as an asset owner, can engage with companies and like-minded investors and we thoughtfully consider the ways in which we can do so effectively. The following sections describe where we have already made commitments to engagements that represent alignment with our Responsible Investing Principles and we continue to identify and evaluate initiatives that promote the interests of the University as an asset owner and the University community of beneficiaries of its endowment funds and pension plan.
In the past, for all public equity securities held directly by the Pension Fund and the Endowment, UTAM delegated proxy voting to its external managers according to each manager’s own proxy voting policy. Although we reviewed these policies and each manager’s voting record annually, this was a more passive approach.
We have determined that the best way we can vote proactively and deliberately is by taking back voting responsibility from our managers and by engaging a third-party proxy voting service provider to vote according to our beliefs. This allows us to better respond to shareholder proposals related to ESG, including those aimed at reducing climate-related risks. Accordingly, in September 2016 we engaged Institutional Shareholder Services (ISS) for proxy voting services and adopted their Sustainability policy and guidelines, where possible, to all direct public equity investment mandates (i.e. where public equity securities are held in the name of Pension or Endowment), and to public equity pooled funds in which Pension and Endowment are the only investors (i.e. where pooled funds are held in the name of Pension or Endowment and these pooled funds, in turn, hold public equity securities).