Context for Change

• In October 2005, the CPP Investment Board's Policy on Responsible Investing replaced the Social Investment Policy and builds on the CPP Investment Board's Proxy Voting Principles and Guidelines.
• The policy is the result of an extensive review of emerging trends, standards and initiatives regarding responsible investing among institutional investors in Canada and internationally.
• We understand that the issues associated with responsible investing are complex and dynamic.
• Our response is a new policy and approach that is consistent with our mandate, fiduciary duty and investment objectives.

Key Principles

• The overriding duty of the CPP Investment Board is to maximize investment returns without undue risk.
• Long-term responsible corporate behaviour with respect to environmental, social and governance (ESG) factors can generally have a positive influence on long-term corporate financial performance.
• Portfolio constraints, such as positive or negative screens, increase risk or reduce returns over time.
• Disclosure is a key factor that allows investors to better understand, evaluate and assess potential risk and return, including the potential impact of ESG factors on a company’s long-term corporate performance.

Commitment

• CPP Investment Board has committed to build an engagement capability and will use its ownership positions in over 2,600 companies to encourage improved performance on and disclosure of ESG factors.
• Shareholder engagement is widely recognized as an effective tool to bring about positive change, especially for investors with passive portfolios.
• Going forward we will vote our proxies and support resolutions in line with our Policy on Responsible Investing.
• We are also planning to work with other parties to develop solutions that support ESG factors.
• We are currently investigating international accords around ESG factors that will act as platforms for engagement with the management and boards of companies and influence our proxy voting.
• We will build further engagement capabilities over time.

Our Outlook

• We will consider joining with like-minded investors who are commissioning research on the long-term materiality of ESG factors.
• In March 2006, we joined the Enhanced Analytics Initiative (EAI) – an international collaboration of asset managers that collectively manage more than $1 trillion. The Initiative aims at encouraging investment research that considers the impact of extra-financial issues on long-term company performance.
• In April 2006, the CPP Investment Board was one of two Canadian institutional investors to sign the Principles for Responsible Investing published by the UN Environmental Programme Finance Initiative.  The Principles provide a best practice framework to help integrate consideration of environmental, social and governance (ESG) factors into investor decision-making and ownership practices, thereby improving long-term returns to beneficiaries. The CPP Investment Board was one of 20 leading institutional investors with combined assets under management of $2 trillion invited by the UN Secretary General to address the issue of responsible investing from an investment fiduciary perspective.
• We will continue to participate in the global dialogue around responsible investing such as the UN Working Group on principles of responsible investing. These principles were developed by a task force of 20 large institutional investors from around the world, including the CPP Investment Board.

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