As a long-term investor, PSP Investments believes in the importance of establishing strong governance oversight of its investments. PSP Investments actively uses its ownership positions to promote good corporate governance practices by actively engaging with companies and exercising its proxy voting rights.
PSP Investments recognizes that a broad range of financial and non-financial considerations can be relevant in terms of making investment decisions. PSP Investments has adopted a Responsible Investment Policy which embodies its belief that responsible corporate behaviour with respect to environmental, social and governance (“ESG”) factors can generally have a positive influence on long-term financial performance. In analyzing the risks inherent in any investment, PSP Investments looks to identify, monitor and mitigate ESG issues that are, or could become, material to long-term financial performance. Consideration of ESG risks is part of the due diligence process with respect to potential investments and the assessment of the practices of external managers. The monitoring of these risks is part of an ongoing dialogue with external managers, boards of directors and senior management of the private and public companies in which PSP Investments invests.
With the assistance of a service provider, PSP Investments actively engages in dialogue with public companies with a view to improving their ESG practices. Public companies are selected for engagement based on a process that takes into account elements such as a company’s ability to create shareholder value, the prospects for successful engagement and the ESG issues at hand. The intensity of PSP Investments’ involvement with public companies evolves over time: some engagements entail one or two meetings over a period of months, while others are more complex and entail multiple meetings with board members and senior management over several years. PSP Investments tracks its engagement objectives primarily in the context of issues where it feels changes in behavior are warranted. Often there are multiple ESG issues to be addressed within the same company, each of which may require different levels of effort and engagement approaches as well as different contact points.
In addition to its direct engagement activities, PSP Investments also undertakes collaborative engagement initiatives with other like-minded institutional investors from time to time.
PSP Investments has adopted Proxy Voting Guidelines addressing the areas of corporate governance with respect to which it may be requested to vote on from time to time, as well as the principles on which PSP Investments will rely in determining a response to such requests. PSP Investments will give due consideration to corporate governance principles when assessing the merits of an issue and will exercise its voting rights with a view to maximizing the value of its shareholdings.
As part of the active management of its proxy voting, PSP Investments reviews proxy circulars and research from service providers when voting the equities held in accounts managed internally as well as those in segregated accounts managed by external managers.