Can you talk us through your Climate Action Plan? Karen Lockridge: It’s a work in progress, at an early stage of development. That said, it is underpinned by a philosophy, shared by the investment team and the corporate Board, that favors engagement and stewardship over divestment and exclusion. We believe that recognizes what the real objective is. When you consider the commitment statements of the Net Zero Asset Owners’ Alliance or the Paris Aligned Investment Initiative, for example, there’s a clear emphasis on emissions reduction in the real economy; this is about reducing climate-related risk in our portfolio at the company level, but it’s mostly about reducing systemic risks that threaten the entire portfolio, and indeed the ability of our members to live in a comfortable retirement. At the same time, we can only affect real-world change through the companies in our portfolio. Therefore, while we and our asset managers may use exclusions to reduce portfolio risks, or to recognize that a company isn’t responding to engagement, we regard stewardship as the only truly impactful way to pursue the change we need. In my view, that is why good stewardship became so prominent after the Great Financial Crisis: systemic risks, whether financial, societal or environmental, demand proper oversight from asset owners and not just selective divestment. This is another area where we would like to build on our asset manager relationships. We have engaged directly with some of the key North American companies through our two internally managed investment sleeves, tracking the Toronto Stock Exchange Composite and the S&P 500 Index, but we recognize the limitations of that approach and want to enhance our leverage in partnership with our external managers. Is advocacy with government and regulators an important part of your strategy, as well as engagement with companies? Karen Lockridge: It is—in fact, I would underline it. Different sectors and companies have differing incentives on sustainability questions. As an independent advocate, we can help to cut through that to help regulators create a truly level playing field for competition. I’d highlight our response to the Canadian Securities Commission’s recent consultation on Disclosure of Climate Related Matters. It was strongly worded, asking for more stringent disclosure requirements than proposed, and warning that if Canada falls behind international standards, companies may find it more difficult to raise capital. Where will you focus after the climate and DE&I strategic priorities? Karen Lockridge: We focused on climate risk because it is so prominent and urgent, and on DE&I because the COVID-19 pandemic and the George Floyd
incident raised a lot of awareness, and because it is such a priority for Canada Post itself, as a large Canadian employer. You’ll have noticed that Indigenous Rights have a special place in our IMA with Neuberger Berman. It’s an area of focus for us. We recently rolled out a five-hour online training course on indigenous culture awareness which we expect all of our pension investment staff to take. The course was developed by the indigenous consulting group NVision Insight. The training raised awareness of historical and ongoing injustices and it coincided with discoveries of unmarked graves of indigenous children at former residential schools. Our staff were really appreciative that Canada Post was making this training available, as these are things that were not covered when we went to school. There are other issues that are strategic to Canada Post that may inform where we focus next. Accessibility and waste management are two good examples. Our business depends upon thousands of postboxes and post offices all over Canada being accessible to the elderly and the disabled, and our operations involve a lot of packaging, which we are working hard to make more sustainable. High standards on issues like these that are material to Canada Post are important to the investment team because they show us “walking the talk.” It would be difficult for us to demand certain standards from external asset managers and portfolio companies if Canada Post didn’t take its own sustainability and ESG risks seriously. For now, our focus is still on climate and DE&I, but because these sustainability issues are often interrelated, we find that we are already making inroads on additional goals, such as the Sustainable Development Goals. Would the Canada Post Pension Plan ever consider impact investing? Karen Lockridge: Our number one purpose is to pay pensions. To do that, we need financial returns. Our most recent asset-liability study led to discussions of having a public equity climate-transition allocation, or strategy with a similar sustainability objective, in order to gain more formal exposure to sustainability opportunities. But it would need a performance benchmark comparable with standard financial benchmarks, so the bar is set very high. We are looking for those types of opportunities. For example, in real estate, affordable housing investments can provide an opportunity to earn returns by addressing a market failure that has damaging social consequences. But whatever we opt to do, there can never be a trade-off against potential return.
The Canada Post Corporate Pension Plan spoke with Neuberger Berman in London on March 22, 2022.
2021 ESG ANNUAL REPORT
Made with FlippingBook flipbook maker