Item - 2025.IB10.5

The Toronto Investment Board:

1. Directed that the confidential information contained in Confidential Attachment 1, Confidential Attachment 2, Confidential Attachment 3, and Confidential Attachment 4 remain confidential in its entirety, as it contains information that involves the security of property belonging to the City or one of its agencies or corporations.

2.  Directed that the Director, Capital Markets investigate and review further Environmental, Social, and Governance ratings solutions and enhancements under the terms of the current contract with Aon Solutions Canada and report back to the Toronto Investment Board at the next meeting with an outline of the additional information to be provided, terms of service, additional costs, and any other relevant details.

Randy LeClair, Director, Capital Markets gave a verbal update on Environmental, Social, and Governance  Reporting Update.

The Toronto Investment Board (Board) engaged MSCI Inc. (MSCI) and its subsidiary MSCI ESG Research LLC as its ESG Ratings Service provider. The agreement was in response to City Council's request to the Toronto Investment Board and the Chief Financial Officer and Treasurer to monitor and report on the performance of the external investment firms hired by the Board with respect to ESG factors according to the Investment Policy.

In addition, the agreement includes the MSCI Carbon Portfolio Analytics reporting package that is part of MSCI's Climate Lab Enterprise, a comprehensive set of climate data and analytics. Carbon Portfolio Analytics reporting from MSCI ESG Research helps investors understand, measure and manage carbon risk at the portfolio, sector and company level.

Both MSCI products are being provided on a managed service basis whereby City staff provide portfolio information to MSCI via secured channels and MSCI generate reports on a portfolio and consolidated basis for the Long-Term Fund (LTF) and Sinking Fund (SF). Benchmark index information is also provided for comparison.

The information from MSCI is proprietary and confidential. There are a number of identifiable individual companies and governments in their detailed reports. The agreement with MSCI allows for the viewing and use of the information on a confidential basis by a limited number of City staff, the Board and City Council. The contract does allow for the public use of general consolidated information on a limited basis.

Portfolio holdings as at December 31, 2024 were submitted to MSCI in February 2025. Results were received as at the date of this report. Summary data is provided in this report as well as in Confidential Attachments 1, 2, 3 and 4.

Further investigation into the MSCI ESG ratings fluctuations is recommended.  The Board's investment consultant Aon Solutions Canada Inc. (“Aon”) provides a service which may enhance the information currently provided.  City staff will review the proposed service with Aon to understand the usefulness and additional costs of the ESG information.  A report back to the Board will be presented at the next meeting.