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Sustainable Investing

Sustainable Investing

Driven to create long-term value

Detailed reports of our achievements & performance

2023 Annual Report
Date: March 31, 2023
Size: 5.8 MB
2023 Sustainable Investment Report
Date: Sept. 14, 2023
Size: 3.2 MB
2023 Climate-related financial disclosures
Date: Sept. 14, 2023
Size: 448.9 KB

Looking beyond the numbers

Environment

Assessing risks and opportunities such as climate change, water usage and waste

Social

Prioritizing worker, community and societal health and well-being

Governance

Encouraging high performing boards of directors and good governance practices

Contributing to the transition to global net-zero emissions by 2050

A roadmap to guide our climate action

PSP Investments believes that climate change is one of the most critical social, economic and environmental challenges of our time.

 

We acknowledge that climate change will have significant physical and economic impacts on the economy, communities and the environment. We are committed to using our capital and influence to drive Paris-aligned decarbonization outcomes across our investment portfolio.

 

We are also committed to supporting the transition to global net-zero greenhouse gas (GHG) emissions by 2050. By executing on our climate strategy, we anticipate reducing our portfolio GHG emissions intensity by 20-25% by 2026*, relative to our September 2021 baseline.  

 

*Emissions trajectory is calculated on a weighted average carbon intensity basis, tonnes of CO2e per $M revenue.

Taking action on climate change

Using our capital and influence to accelerate the transition to global net-zero emissions.

 

As an institutional investor, we adopt a long-term world view and are seized with the potential for the financial sector to support the transition to global net-zero emissions. PSP Investments' actions are guided by our innovative bespoke Green Asset Taxonomy and our Climate Strategy Roadmap that outlines five focus areas:

Climate Integration

  • Integrate climate risks and opportunities in investment decision-making & asset management practices
  • Conduct climate scenario analysis and stress-testing

Climate Investing & Sustainable Finance

  • Increase investments in green and transition assets

  • Reduce proportion of carbon-intensive investments without transition plans

  • Expand sustainability-linked financing

Engagement & Proxy Voting

  • Further develop and continue to implement proxy voting principles and guidelines
  • Engage with portfolio companies to develop mature transition plans

Reporting & Disclosure

  • Advocate for TCFD-aligned disclosures
  • Further develop & continue to operationalize our Green Asset Taxonomy
  • Increase portfolio-wide GHG data coverage

Leadership & Collaboration

  • Participate in investor-led initiatives on climate change-related matters

Our Green Asset Taxonomy

We recently developed and operationalized an innovative bespoke Green Asset Taxonomy which we used to quantify our GHG emissions exposure across our portfolio.* The Taxonomy allows us to track GHG changes at the asset level over time, monitor progress against our targets and inform our investment decision-making and approach to engagement.

 

A bespoke classification system that considers GHG performance to assess PSP Investments' baseline exposure across three types of climate-relevant investments:

Green Assets

Investments in low-carbon activities that are contributing to climate mitigation and adaptation

Transition Assets

Investments that are committed to contributing to the low-carbon transition through targets and plans

Carbon Intensive

Investments in high-carbon sectors that lack transition plans or fail to show low-emission performance

*In scope: Long-Only Public Equities (Active and Passive); Real Assets (Direct and Indirect); Private Equity (Direct and Indirect). Out of scope: ETFs, Complementary Portfolio, Credit Investment, Fixed Income, Funds of Funds.

Short-term targets to guide progress

Climate Investing and Sustainable Financing

 

 

We pride ourselves on our long history of integrating ESG into investment decision-making. We are working with portfolio companies to support initiatives that aim to enhance the quality of our investment and engagement practices.  

*Applied to in-scope AUM

Investing for a better tomorrow

Our Climate Strategy Roadmap is a call to action to our investment teams and business groups, portfolio companies, partners and stakeholders to work together in achieving our commitments and target.

Download our Climate Strategy Roadmap
Corporate View on Climate Change
Date: April 21, 2022
Size: 380.0 KB
Green Asset Taxonomy (white paper)
Date: Nov. 10, 2022
Size: 6.4 MB
Investment Beliefs
Date: April 21, 2022
Size: 32.4 KB

Translating our beliefs into action

We believe that well-run companies that effectively manage social and environmental issues are more likely to prosper over time. That is why, as a long-term investor, we integrate environmental, social and governance (ESG) considerations into our investment analysis and decision-making, and support sustainable business practices among the companies we invest in.

 

One of our roles as an investor is being an active steward of the assets we own, recognizing that stewardship is a shared responsibility. For PSP, sustainable investing means being committed to principles and collaborating with others to support robust and vibrant financial markets.

Sustainable Investment Policy

PSP is a member of the Canadian Coalition for Good Governance (CCGG) and supports the CCGG Stewardship Principles.  The Principles offer a framework of key stewardship responsibilities and were designed to help articulate investors’ fiduciary role. Although the Principles were designed with a view towards application in Canada, they are consistent with international developments in stewardship guidance to complement, rather than supersede or conflict with, the stewardship principles or codes of other countries and organizations.

External research reports

How public pension and sovereign wealth funds mainstream sustainability

 

United Nations Conference on Trade and Development

 

Date: September 18, 2020

VIEW REPORT

Climate Change Mitigation and Your Portfolio: Practical tools for investors

 

Investor Leadership Network


Date: September 15, 2020

VIEW REPORT

Integrating ESG in private investments

We conduct an in-depth ESG risk and opportunity analysis during the due diligence process for our private investments in Real Estate, Infrastructure, Natural Resources, Private Equity and Credit Investments. As owners, we closely monitor assets and engage directly with boards and management of our investee companies on material ESG risks and opportunities, with a view to protecting and enhancing long-term financial value.

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Photo of a harbor at dusk

Integrating ESG in public investments

As part of our investment analysis and decision-making processes, we identify material ESG factors that may impact the long-term financial performance of our public market investments. We leverage our ownership positions to promote good governance practices, exercising our proxy voting rights and actively engaging with companies. We take a stand on issues that matter to capital markets more broadly by supporting best practices. A report of each year’s engagement activities is provided in our annual Responsible Investment Report.

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Integrating ESG in our Green Bond Framework

Through the issuance of Green Bonds, PSP Investments aims to fund projects that demonstrate positive environmental and climate outcomes for the benefit of society. Net proceeds from this issuance will be allocated to assets that demonstrate strong ESG performance and support the transition to a more environmentally sustainable economy. We established five high-level pillars to guide the development of our Green Bond approach. They describe the real-world outcomes we seek to achieve through our Green Bond program.

Our Debt Programs

Standing by our beliefs

Proxy voting

We strive to vote at all shareholder meetings organized by companies in which we invest. Our Corporate Governance and Proxy Voting Principles serve as our guide and focus on nine themes.

 

Our proxy voting record

PSP publishes its voting records for shareholders' meetings on a website hosted by Institutional Shareholders Services (ISS).


Voting records can be searched by issuer name or by date starting from November 1, 2017.

Search voting records
Téléchargement Document Corporate Governance and Proxy Voting Principles
Date: Feb. 10, 2023
Size: 268.2 KB

Setting a high bar for external managers

We assess the ESG practices of fund managers to ensure that their approach is aligned with our Sustainable Investment Policy and expectations. Before allocating capital to any external managers for public market investments or committing to private investment funds, we use an in-house framework to objectively evaluate their ESG practices. By reporting back to them on our findings, we share our ESG vision and open the door to discussions about ESG best practices and how to adopt them.

Collaborating on issues that matter to capital markets

We work with a number of organizations to support initiatives that enhance the quality of ESG practices and disclosure.

Principles for Responsible Investment (PRI)

We are a signatory of the PRI, the world’s leading proponent of responsible investment, and a member of the PRI Québec Network. The PRI works to understand the investment implications of ESG factors and supports its international network of investors in incorporating these factors into their investment and ownership decisions.

30% Club

The 30% Club believes that gender balance on boards encourages better leadership and governance, and ultimately contributes to better board and corporate performance. We have joined with others to support the objective of 30% of board seats and senior management positions to be held by women.

Canadian Coalition for Good Governance (CCGG)

CCGG allows us to unite our voice with those of other institutional investors to promote good governance practices in Canadian companies, as well as the efficiency and effectiveness of Canadian capital markets.

CDP

We are a signatory to the CDP and the CDP Water Program. The CDP runs the global disclosure system that enables public companies to measure and manage their environmental impacts. We support their campaigns encouraging companies to disclose their climate-change and water-related risks and opportunities.

International Corporate Governance Network (ICGN)

ICGN is an investor-led organisation whose mission is to promote effective standards of corporate governance and investor stewardship to advance efficient markets and sustainable economies worldwide. As an ICGN member, we support its Global Governance Principles and Global Stewardship Principles.

Pension Investment Association of Canada (PIAC)

We are a member of PIAC, the national voice for Canadian private and public pension funds and a forum for sharing knowledge and best practices. As an active participant in PIAC’s Investor Stewardship Committee, we aim to develop, monitor and promote robust standards and best practices for pension investment stewardship in Canada.

Sustainable Stock Exchange (SSE) Initiative

We have joined the SSE Initiative, a peer-to-peer learning platform for exploring how exchanges, in collaboration with investors, regulators and companies, can enhance corporate transparency and ultimately performance on ESG issues.

Finance Montréal

We have joined Finance Montréal’s Responsible Investment Work Group to identify strategic projects for the development of responsible investment practices in the financial community.

Council of Institutional Investors (CII)

CII is a leading voice for effective corporate governance, strong shareowner rights and vibrant, transparent and fair capital markets. CII promotes policies that enhance long-term value for US institutional asset owners and their beneficiaries. We are an active member of CII’s Corporate Governance Advisory Council.

Contact the team
Historical Reports

Learn more about our processes

This diagram illustrates some of the risks we look into when evaluating investments across asset classes. Some cut across several categories; for example, climate change can have far-reaching social impacts in addition to its environmental ramifications. While cybersecurity risks need to be properly overseen by boards as part of their risk management responsibilities, security breaches often have significant social impacts. As a long-term investor, we proactively address the following factors as part of our investment strategy:

Our ESG lens

This infographic details how we integrate ESG at each step of the investment cycle. The ESG integration process varies according to asset class and type of investment.

How we integrate ESG with private investments

With the assistance of a service provider, we dialogue directly with companies in our public equity and bonds portfolio, and participate in collaborative engagements with peers. Companies are selected for engagement based on the ability to create shareholder value, the prospects for successful engagement and the relevance of ESG issues. Engagements have clear objectives aimed at driving behavioral change and can involve multiple meetings and last several months or years.

 

This infographic breaks down our four-step engagement process.

Our engagement process with public companies
  1. Fostering effective boards of directors
    We believe that well-sized and diverse boards with the proper balance of skills, expertise and independence are critical to a company’s long-term success. As a result, we place considerable emphasis on the quality of directors and the overall composition of boards. We expect robust nominating processes that attract qualified and independent candidates from diverse backgrounds, and sound director performance evaluations and renewal practices. Directors should have sufficient time to devote to their board duties.
     
  2. Voting standards in support of shareholder democracy
    We support initiatives and mechanisms that provide shareholders with meaningful and effective elections. We generally support actions that enhance shareholder democracy such as individual and annual director elections, majority voting, and the use of universal proxies for contested meetings and proxy access.
     
  3. Providing shareholders with a meaningful voice
    We believe that voting rights should be proportional to shareholders’ economic interest. Companies should allow shareholders to participate in decisions concerning fundamental corporate changes and adopt governance structures and procedures that give shareholders the ability to hold the board of directors and, indirectly, management to account.
     
  4. Seeking alignment between compensation and performance
    Compensation and incentives to management and directors should be structured to enhance shareholder value while rewarding performance that meets or exceeds objectives. The compensation policies and amounts payable to senior executives and directors should be disclosed in the proxy circular so that shareholders can assess whether the interests of senior executives and directors are aligned with their own.
     
  5. Fostering an efficient capital structure
    Companies should have an efficient capital structure that minimizes the long-term cost of capital. All changes to the capital structure of a company should be fair and completed with a view to supporting growth, increasing shareholder value or for other sound business reasons.
     
  6. Merger, acquisitions and takeover protection: opportunity to maximize shareholder value
    Proposed mergers, acquisitions and corporate restructurings have important impacts on shareholder value. These transactions as well as any takeover protection measures should be structured to maximize shareholder value without compromising shareholder rights.
     
  7. Protecting the independence and integrity of auditors
    External auditors play an important role in verifying the integrity of a company’s financial reporting to ensure that information provided to shareholders is free from material misstatements and presented fairly in all material respects. As such, we place great importance on the quality and independence of the external auditors.
     
  8. Sustainable investment: promoting long-term performance through shareholder proposals
    Our approach to proxy voting seeks to be consistent with our Sustainable Investment Policy. We will always take into consideration the principles set forth in our Sustainable Investment Policy when addressing environmental, social and governance (“ESG”) issues that we may be requested to vote on from time to time.

  9. Taking action on climate change
    We believe that climate change is one of the most critical social, environmental and economic challenges of our time. Climate change will have significant physical and socio-economic impacts on industries, biodiversity, communities and human activity, hence impacting investment returns. The broad society-led focus on decarbonization is likely here to stay and will become amplified in the coming years, in part due to the Paris Agreement. As an institutional investor, we adopt a long-term science-based world view and are seized with the potential to use our capital and influence to support the transition to global net-zero emissions by 2050. For more information, please refer to our Climate Strategy Roadmap and our Corporate View on Climate Change. 

PRI principles

Table which explains PSP Investments’ actions in support of PRI principles