Pension plans in Canada now factor environmental, social and governance monitoring in their investment process, and in the absence of national guidance, plan managers are using various tools and methods to analyze ESG risk, noted panelists of a roundtable recently hosted by The Association of Canadian Pension Management.

“Considering ESG requires a balance of the investment opportunities with the risks, I think we’re still in an evolving situation right now where lack of data is a challenge to assessing some of the risk,” said Graeme Hay, chief investment officer for the Teachers’ Retirement Allowances Fund.

While Canada still lacks a national benchmark for ESG-risk reporting, pension plans are adopting their own internal standards. Many have turned to the United Nations’ principles for responsible investing for guidance to develop those standards, becoming signatories of the PRI’s six voluntary principles that offer a menu of possible actions investors can take to incorporate ESG issues into investment practice.

Hay noted roughly 97 per cent of his organization’s assets are managed by firms that are PRI signatories. As the fund is largely an externally managed plan, it doesn’t have the opportunity to engage directly with some of the businesses represented in its portfolio. “We recently created a responsible investing policy here [that] really revolves around a few key things, which is engaging strong managers that we think actually care about ESG risks.”

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