Investment Risk - Ontario Pension Board

OPB’s investment approach emphasizes capital preservation and seeks to generate stable, long-term investment returns within an acceptable risk framework. This is achieved by minimizing unrewarded risk, reducing total risk, focusing on fundamental research and analysis to make investment decisions, and sourcing diversified investment opportunities that provide predictable cash flows.

OPB’s Chief Investment Officer and other executives have regular dialogue with Investment Management Corporation of Ontario (IMCO) about the investment risks pertaining to OPB’s investment portfolio. These include traditional portfolio risks (interest rate, liquidity, credit, etc.) as well as material ESG risks.

Since 2017, OPB’s portfolio has been managed by IMCO. Under a carefully negotiated legislative, regulatory and contractual framework, OPB sets the investment strategy and IMCO implements it.

Our agreement with IMCO states that IMCO will manage investment risk in accordance with the Pension Benefits Act’s standard of care as well as best practices for Canadian public sector managers.

Investment risk management is integrated into the investment activities and decision-making process at IMCO, and is overseen by its Chief Investment Officer and Chief Risk Officer (CRO). The CRO is expected to provide strong, independent risk management leadership within IMCO, and oversees IMCO’s investment risk and enterprise risk management functions, including all risk modelling and management systems, as well as risk-related research. Read more about IMCO’s approach to managing risk(opens in a new tab).

Climate Risk

OPB believes that climate change poses a material and increasing risk to a range of assets. As stated in our Investment Beliefs, we support the consideration of investments that would help reduce greenhouse gas emissions and slow the rise in global temperatures.

IMCO incorporates climate risk assessment in the investment due diligence process for every asset class. In 2020, IMCO also initiated climate scenario analysis and stress testing to manage climate-related risks and opportunities as well as the Task Force on Climate-Related Financial Disclosures (TCFD) recommendations.

Working together with IMCO, we expect to materially advance work on understanding, measuring and managing climate risk in our portfolio now and well into the future.