Investment beliefs

BC’s College Pension Plan’s investments are guided by eight core beliefs.

1. The College Pension Plan invests with a purpose: to help secure the College Pension Plan’s current and future payment obligations.
   1. Understanding the nature of the College Pension Plan’s liabilities is critical to devising an appropriate investment strategy.
   2. The College Pension Plan has a growing cash requirement and inflation-sensitive liabilities; assets that generate cash and correlate with inflation are an important part of the College Pension Plan’s investment strategy.
2. The College Pension Plan invests for the long term: a long-term investment horizon is a responsibility and an opportunity.
   Having a long-term investment horizon requires that the College Pension Plan:
   1. Support the integration of environmental, social and governance (ESG) matters into the investment agent’s decision-making processes to better understand, manage and mitigate associated risks.
   2. Favour investment strategies that deliver long-term value.
   A long-term investment horizon enables the College Pension Plan to:
   1. Invest in illiquid assets and tolerate some volatility in investment returns and fund values, provided an appropriate risk premium is earned and fund liquidity is appropriately managed.
3. Taking investment risk is essential for meeting the College Pension Plan’s goals, provided there is conviction the investment risk is appropriately rewarded in the long term and is effectively measured and managed.
   1. Investment risk that is taken intentionally, is well understood within an asset-liability framework, and is reported and monitored regularly, has a greater potential for being compensated.
   2. To ensure that active management risk is being compensated at the total fund level over the long-term, the investment agent’s performance will be measured against benchmarks determined by the College Pension Plan.
4. Strategic asset allocation is the primary determinant of portfolio risk and return.
   1. Within an asset-liability framework, the College Pension Plan’s strategic asset allocation determines the market exposures managed by the investment agent.
   2. The College Pension Plan will aim to diversify its overall portfolio within and across asset classes, both domestically and internationally, and across distinct risk factors and return drivers.
   3. The College Pension Plan will pursue investment strategies only where there is clear opportunity for improved risk-adjusted returns.
5. Strong processes, rigorous research and analysis, and deep resources are needed to achieve the College Pension Plan’s goals and objectives.
   1. Diversity of talent at all levels (board, staff, investment agent, corporate board of investment agent) leads to better decision making.
   2. Continuous improvement in both the College Pension Plan’s operations and that of its investment agent is fundamental to long-term investing success.
   3. To build knowledge, the College Pension Plan relies on credible research, scientifically based data, thought partnership with peers and commitment to its own continuing education.
6. Costs matter and need to be managed so that a greater proportion of investment return passes on to the College Pension Plan.
   1. The College Pension Plan will balance risk, return and cost when considering an investment strategy.
   2. The College Pension Plan expects the investment agent and itself to be transparent about the total cost of managing the portfolio.
7. Long-term value creation requires consideration of financial, environmental and social impacts.
   1. Interests between the College Pension Plan and its investment agent must be aligned.
   2. Companies that exercise strong governance, along with effective management of material environmental and social factors, are more likely to generate long-term financial value at lower risk.
   3. Improving the sustainability and integrity of global capital markets creates favourable economic conditions that benefit the plan over the long term.
   4. The College Pension Plan expects its investment agent to integrate environmental, social and governance (ESG) factors in its investment management process, including but not limited to:
      • Climate change, management of environment and natural resources.
      • Human and labour rights, equity, diversity and inclusion.
      • Executive compensation, board independence and diversity, shareholder rights and risk management.
      • Respect and recognition of indigenous rights.
8. The College Pension Plan recognizes that climate change presents a material systemic risk to its long-term investment objectives, as well as an opportunity.
   1. The College Pension Plan supports the global goal of achieving net-zero greenhouse gas emissions by 2050.
   2. Consistent with its fiduciary duty, the College Pension Plan seeks to evaluate and manage the investment risks and opportunities associated with climate change by:
      • ensuring that actions taken by its investment agent are aligned with the global goal to restrict global warming to 1.5 degrees Celsius above pre-industrial levels by 2100, and
      • monitoring climate-related analytics such as the carbon footprint of the College Pension Plan’s investments, climate stress tests and scenario analysis.