Environmental, Social and Governance (“ESG”) Investing
Environmental, Social and Governance (ESG) considerations remain a key area of focus for pension plans in Canada and around the world. While approaches vary, HRM has identified a clear focus toward embedding ESG practices to support risk management.
In 2022, our Plan launched a workstream to formalize our approach to ESG issues and opportunities. With guidance from Quinn & Partners, the Committee and Pension Office staff completed ESG training and developed a two-year roadmap. This process led to the approval of our Responsible Investment Policy, which sets out how ESG is incorporated into our investment management and stewardship activities and defines clear governance and oversight responsibilities.
Our Responsible Investment Focus
Our approach is guided by four main drivers:
- Downside risk – protecting capital from ESG-related losses
- Systemic risk – managing broader challenges like climate change
- Reputational risk – upholding the trust of our Members
- Legislation – staying aligned with evolving regulations
How We Put Our Commitment into Practice
We integrate ESG through:
- Governance and clear accountability
- Strategy and policy development
- Incorporation of ESG factors into investment processes
- Active engagement with managers
- Transparent communication with Members
Progress to Date
We have advanced ESG practices across our operations:
- Integrated ESG beliefs into the Statement of Investment Policies and Procedures (SIPP)
- Updated manager selection and monitoring frameworks to include ESG metrics. We utilized an ESG Scorecard for tracking purposes and have compiled results to benchmarking across managers to identify gaps and strengths.
- Used PRI and ILPA guidance to engage managers on climate management, emissions, stewardship, and reporting
- Requested annual reporting on proxy voting and engagement from the third-party asset managers we engage with
- Joined the Responsible Investment Association effective January 1, 2023
- Managing Climate Risk in Real Assets portfolios: Extreme weather events such as hurricanes, floods, and wildfires can pose material risks to real estate investments. We recognize it is in the best interests of our Members to protect our real assets from climate-related impacts. Our ability to assess and manage these risks depends on robust information from our fund managers. We are actively working with all real asset managers to enhance data collection and improve our oversight of climate exposures across the portfolio.
