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The University Pension Plan is integrating diversity, equity and inclusion measures into its investment strategy.

The pension plan sponsor’s responsible investing policy considers environmental, social and governance factors — including DEI — as essential to sound long-term investing, said Aaron Bennett, chief investment officer at the UPP, in an emailed statement to Benefits Canada. The approach includes supporting and participating in industry initiatives that promote diverse and inclusive representation at all levels of an organization as a means toward enhanced decision-making, innovation and long-term investment performance.

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“We convey our expectations for investee companies and managers as it relates to diversity and inclusion in their internal policies, talent strategies and training and will evolve toward formal policies and time-bound representation baselines for portfolio companies.”

The UPP has also established a proxy voting policy that identifies voting positions on the DEI policies and practices in the companies in which it invests. “For example, [the UPP] supports proposals requiring DEI policies and disclosures, including information on pay equity based on gender, race or ethnicity.”

The pension plan sponsor is also launching a dedicated member engagement program on responsible investment to further support its long-term investment strategy, said Bennett.

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Fate Saghir, senior vice-president and head of sustainability at Mackenzie Investments, says while institutional investors can easily access data on environmental and governance factors, information on social factors is comparatively sparse, largely due to a lack of mandatory reporting on ethnic and racial diversity. She says direct engagement is the best strategy to fill those information gaps.

“It’s a big challenge, especially in Canada. Gender diversity is a priority because there’s regulations that require [companies] to report on board composition from a gender lens and the most senior women in a company. There’s isn’t any mandatory reporting beyond gender right now. . . . It’s really hard to integrate [social factors] into your valuation process, so when our investment teams are running their due diligence on a company, they’ll be able to engage and ask questions about their diversity strategy.”

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While more companies are trying to collect this information, they can face challenges when asking employees to self-disclose ethnic or racial identity. Saghir says Mackenzie is asking disclosure of its own employees, in part to inspire investees to take similar measures.

“We’re conscious of that impact, but there’s some hesitancy for employees to disclose. We’ll disclose the employees that put up their hand and it’s held in confidence, but it’s a challenge.”