ESG integration runs up against need for returns

The head of a major institution highlights a 'slippery slope' that comes with responsible investing

ESG integration runs up against need for returns

At the recently held Milken Institute 2018 Global Conference, the head of the Ontario Teacher’s Pension Plan (OTPP) reminded investment leaders that while ESG criteria are getting more attention, there’s another critical piece that’s needed in the responsible investing puzzle.

“We have to earn a return,” said Ron Mock, Ontario Teachers’ CEO and interim chief investment officer, according to Institutional Investor.

Stressing the board’s fiduciary obligation to pay pensions, Mock discussed how the increasing popularity of ESG integration could create challenging investment decisions for the Canadian pension plan managing $190 billion for hundreds of thousands of teachers.

“[The educators we serve] want to make things better,” he said. “Think about Florida and guns in the classroom, automatic weapons in the classrooms. If you think we haven't heard from our teachers about the companies we invest in, you'd be sadly mistaken."

While the social aspect of ESG investing remains the most challenging, Mock noted that other pieces could lead to a slippery slope of decreasing investment options, particularly for large institutional investors. As an example, he noted that if the plan were to stop investing in fossil-fuel companies, other activists might call for it to take an additional step by divesting from the banks that worked with such businesses.

He clarified, however, that Ontario Teachers’ remains interested in integrating ESG into its process. “We're investing if we can get the return we need, whether in electric utilities, battery technology, [or] micro grids,” he said. “All of this is critically important, not just because it's a feel-good. But these are new opportunities going forward and we want to be there.”


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