ESGFebruary 14, 2024

Ontario Teachers’ Seeks Greater Accountability, Transparency in 2024 Proxy Season

The $184 billion pension giant is asking its portfolio companies to improve their climate-change risk management.

Reported by Michael Katz

The C$250 billion ($184.1 billion) Ontario Teachers’ Pension Plan is seeking greater director accountability and increased transparency in the coming 2024 proxy season, according to its recently updated annual proxy voting guidelines.

“This year we are emphasizing the role of the Audit Committee in managing climate change risks,” Anna Murray, OTPP’s global head of sustainable investing, said in a release. “We believe their oversight will play an increasingly crucial role in helping companies navigate the challenges presented by climate change.”

According to the pension fund, it is raising its expectations for its portfolio companies’ audit committees, insisting that climate-related impacts must be evaluated when reviewing budgets, performance, and mergers and acquisitions. It also expects audit committees to understand their companies’ environmental and reporting requirements.

As part of this year’s proxy guidelines update, the OTPP is looking in particular for greater accountability among company directors, as well as increased transparency on shareholder proposals.

“Ontario Teachers’ believes the entire board has ultimate accountability for climate risk oversight,” state the pension fund’s updated guidelines. “We encourage boards to establish climate change responsibility at the committee level,” adding that it expects companies to understand and disclose how climate change materially impacts their current and long-term business. “The board’s role in oversight of climate risk should be readily evident and easily understood.”

Among the changes to this year’s guidelines, the pension fund increased its preferred maximum discount rate when companies provide employees a discount on stock purchases to 20% from 15%. It also added language indicating it may vote against certain company directors if OTPP believes the rights given to the controlling shareholder class under a dual-class structure were used to weaken the rights of minority shareholders or ignore their views or concerns.

The pension fund also added clarifying language that it expects issuers of shareholder proposals to include the proponent of the shareholder proposal in their disclosure. It also updated the guidelines to include that it may consider voting against board members available for election if a company uses a staggered board structure for issues that OTPP would normally consider specific to committees.

The pension fund also expects its portfolio companies to develop an approach to diversity, equity and inclusion by developing a policy or statement of a plan with defined goals toward increasing participation of underrepresented groups on the board and within senior management.

“We support, encourage, and expect greater diversity on boards, in management, and across organizations because we believe in the benefits of more diverse, equitable and inclusive organizations,” the pension fund stated. “Companies should provide clear and timely disclosures of their DEI efforts, including the achievement against the targets they have set for themselves.”