OMERS: Integrating ESG in investments isn’t a trade-off, it drives value

In November, OMERS was among eight Canadian pension plan investment managers that called for improved ESG data reporting by companies and investors. What progress is required in this area?

We believe integrating ESG factors into our investment approach is not a trade-off for strong returns. Instead, it is a key element of our fiduciary duty that will safeguard our portfolio and drive value for our members over the long term. We know that while companies face a myriad of disclosure frameworks and requests, it is vital they report relevant ESG data in a standardised way to provide clarity and improve data flow. Markets around the world are beginning to mandate and regulate disclosure requirements, so having a standardised approach is necessary.

How do OMERS Private Equity and other OMERS business units integrate sustainability considerations into investment decisions?

OMERS believes that well-run organisations with sound ESG practices will perform better, particularly over the long term. When looking at what ESG means for OMERS, we start with broad principles, and then we integrate specific factors into investment decision-making, across all investment teams and asset classes. We integrate these in a number of ways, including through ESG assessments of potential new investments and ongoing oversight and influence of ESG issues in our investee companies. For each ESG assessment, we seek to evaluate a range of material ESG factors, including climate change, inclusion and diversity and board structure.

The events of 2020 brought ESG risks to the fore. Has this impacted your approach?

Investing responsibly to deliver sustainable returns to our members over the long term has always been in our DNA as an organisation. The events of 2020 have highlighted urgent challenges facing our global community, and the need for more inclusive economic growth.

Our approach continues to evolve as more data becomes available, as tools develop to better measure these factors and as our portfolio companies respond to, manage and anticipate material ESG factors. Our internal Sustainable Investing Committee reviews our approach to ESG integration across the portfolio on an annual basis to ensure we employ best practices.

How do you engage with OMERS portfolio companies in private equity and other spaces on ESG?

We engage directly with portfolio companies in various ways. When investing in private assets, we typically acquire governance rights, including board seats. We exert our board-level influence to encourage the investee company to maintain and build on sustainable business practices and long-term thinking. Through this active governance, OMERS can influence material ESG-related practices in our investees’ strategies and operations.

Having close partnerships with the management teams of our portfolio companies is central to our investment philosophy. We partner with our portfolio companies to find opportunities to evolve sustainable business practices and grow sustainably.