The interest in environmental, social and governance investing has risen exponentially over the past 20 years, but ESG investing is still in its early stages, said Peter Lindley, president and chief executive officer of the OPSEU Pension Trust, when speaking at the Canadian Investment Review’s 2020 Global Investment Conference in September.
“As a long-term investor, our role is to look far ahead at challenges and opportunities that can affect our members and their retirement security across multiple generations,” Lindley said. “And we believe that the meaning of fiduciary duty, which is central to us as a trust, has evolved and that supporting sustainability is in the direct interest of our members.”
OPTrust adopted its first proxy voting guidelines in 1997, but over the past five years, the push to ESG investing has really accelerated. The organization decided early to have the sustainable investing function sit within the investment team. “This is not the usual case. Typically, under a values-first approach, many investors view sustainable investing more as a communications or public affairs role. And if you think of it more [as] a value-first approach, it’s often viewed as a risk or sometimes a legal role. But putting the sustainable investing team in the larger investment group has helped us to foster a culture in which all sections of our investment team work together with a shared responsibility to continually improve our abilities to analyze risk and conduct our due diligence.”
The OPTrust made its first renewable energy investment in 2007 and now roughly 30 per cent of its infrastructure portfolio is invested in renewable energy. But perhaps the most unique aspect of the organization’s approach to sustainable investing is a step it took in 2019 to introduce a new sustainable investing and innovation team to the organization. “The team is building on our existing approach to responsible investing, while identifying investment opportunities at the intersection of sustainability and innovation,” Lindley said.
The organization has allocated capital to the new team and given it the mandate to look at opportunities across different asset classes. “Typically, within organizations, you have different specializations by asset class, and we feel that innovation and disruption does not always fit neatly into standard asset class divisions. So . . . where we see cross-asset class issues or opportunities, the SII team will either manage them, or invest appropriately or will help the other teams involved manage those issues or opportunities. And we feel that this, as a refreshed mandate, reflects OPTrust’s commitment to overcome the challenges that we face as long-term investors, but also gives an opportunity to think about doing things differently.”
Lindley highlighted how the OPTrust believes ESG issues are not only risks to manage, but can also be investment opportunities. “We feel the need to look at ESG from both sides of the coin, risk and opportunity. In particular at the intersection of sustainability and innovation, [is] where the opportunities lie.”
The team is starting by focusing on the theme of climate change. “While climate change is the immediate focus, additional things which will be explored in the future, as resources and time permit, will include topics such as longevity risk or the future of work and technology-driven disruption.”