ANNUAL REPORT 2021 - CPP Investments

1 ANNUAL REPORT 20213 CPP Investments 2021 ANNUAL ReportOverview Who We Are 1 Chairperson s REPORT 2 President s Message 4 Resilience Through COVID-19 7 Our Mission 8 Sustainability 9 Global Investments 10 Our People 12 Investment Departments 14 Operational Highlights 15 Global Leadership 16 Strategy Our Purpose 17 Investment Strategy 22 Investment Approach 23 Decision-Making Process 32 Sustainable Investing 38 Investment Departments Overview 43 Purpose and People Drive performance 48 Furthering Operational Capabilities 51 Accountability 52 Strategic Direction 53 Fiscal 2022 Objectives 53 Management s Discussion and Analysis Management s Discussion and Analysis 54 Fiscal 2021 Total Fund performance 55 Managing Costs 61 performance of the Investment Departments 66 Risk Management 97 Financial Policies and Controls 106 Key performance and Non-IFRS Measures 108 Compensation Discussion and Analysis REPORT of the Human Resources and Compensation Committee 109 Compensation Discussion and Analysis 112 Our Compensation Framework 113 Compensation Disclosure 118 Governance Letter from the Chair of the Governance Committee 125 Governance Practices of the Board of Directors 126 Board of Directors Biographies 135 Consolidated Financial Statements and Notes Management s Responsibility for Financial Reporting 139 Investment Certificate 140 Independent Auditor s REPORT 141 Consolidated Financial Statements 143 Notes to the Consolidated Financial Statements 148 Forward-looking statementsThis ANNUAL REPORT contains forward-looking information and statements.

2 Forward-looking information and statements include all information and statements regarding CPP Investments intentions, plans, expectations, beliefs, objectives, future performance , and strategy, as well as any other information or statements that relate to future events or circumstances and which do not directly and exclusively relate to historical facts. Forward-looking information and statements often but not always use words such as trend, potential, opportunity, believe, expect, anticipate, current, intention, estimate, position, assume, outlook, continue, remain, maintain, sustain, seek, achieve, and similar expressions, or future or conditional verbs such as will, would, should, could, may and similar expressions. The forward-looking information and statements are not historical facts but reflect CPP Investments current expectations regarding future results or events.

3 The forward-looking information and statements are subject to a number of risks and uncertainties that could cause actual results or events to differ materially from current expectations, including available investment income, intended acquisitions, regulatory and other approvals and general investment conditions. Although CPP Investments believes that the assumptions inherent in the forward-looking information and statements are reasonable, such statements are not guarantees of future performance and, accordingly, readers are cautioned not to place undue reliance on such statements due to the inherent uncertainty therein. CPP Investments does not undertake to publicly update such statements to reflect new information, future events, and changes in circumstances or for any other to read this reportThis ANNUAL REPORT describes the strategy, performance and governance of Canada Pension plan Investment Board (CPP Investments ) over the fiscal 2021 year ended March 31, 2021.

4 The Strategy section includes a description of our purpose, investment approach and who we are. The REPORT then describes our investment performance in the Management s Discussion and Analysis section, attributing our results to various activities and operations during the fiscal year. This is followed by additional information on the way we pay employees and executives, our governance and detailed Consolidated Financial Statements. An overview of this REPORT and supplementary information including previous ANNUAL reports is available at Sustainable Investing REPORT can be found at The next REPORT will be released in November of ContentsCPP Investments 2021 ANNUAL Investments is a global investment management were established to help ensure the Canada Pension plan (CPP) is strong and sustainable for the long term , safeguarding the best interests of CPP benefi ciaries for generations.

5 Our experienced and knowledgeable teams invest around the world in public and private assets. Investments are diversifi ed by asset class and geography so that the Fund remains resilient as it achieves growth in global markets over time. For fi scal year ended March 31, 2021 Net assets $ 4 9 7. 2 BNet Net income$ BOur PerformanceCPP Investments 2021 ANNUAL Report2A year on, the impact is clear: people everywhere have experienced hardship, economies were disrupted and businesses were forced to adapt swiftly to unprecedented challenges. Today, we are certain of two things: fi rst, we owe a great deal to those who have risked their own safety to help us manage through this crisis; and second, the pandemic will continue to shape our lives far into the future. I commend our employees for their extraordinary eff orts during this diffi cult year. We went from having nine offi ces to more than 1,900 offi ces virtually overnight.

6 Our colleagues have had to balance family responsibilities and safety concerns with their work to manage the Fund. This has required agility , resilience and adaptation to radically diff erent work and personal environments. Our people have risen to the of the organization s operations and risk management became ever more important this past year. Throughout the crisis, our Board of Directors engaged regularly with Management, meeting more often, and receiving enhanced briefi ngs and reports on the health of our people and our investment portfolio. Two factors are critical to our performance as a global investment manager and consistent with our mission: a world-class governance model and public accountability. The organization s independence from political interference since its inception has been key in safeguarding the Fund and instilling public trust. In that context, I am pleased to REPORT that the organization s strategy remains on track with a 10-year net return of of the long-term investment strategySuccession planningSuccession planning is an ongoing activity, not an event.

7 Key members of the Senior Management Team (SMT) are identifi ed and prepared for potential appointment as chief executive. This ongoing process enabled the Board of Directors clarity and conviction in appointing a new President & CEO, John Graham, when Mark Machin stepped down at the end of February. Our fi scal 2020 ANNUAL REPORT was published soon after the onset of the COVID-19 pandemic. At that time, I wrote that its full eff ects were yet to be Heather Munroe-Blum, Chairperson Dear fellow Canada Pension plan contributors and benefi ciaries Chairperson s ReportCPP Investments 2021 ANNUAL Report3 Since joining CPP Investments in 2008, John has established a successful track record as an innovator and builder of leading global investment businesses. A highly regarded member of the SMT, John has been instrumental in helping shape and execute our organization s strategy. John s commitment to the organization, to his colleagues and to CPP Investments unique mandate is unequalled.

8 The Board of Directors unanimously agreed that he is ideally suited to lead the organization forward. I thank Mark Machin for his leadership and very signifi cant contributions to the growth and success of CPP Investments during his tenure as CEO. My fellow Directors and I wish Mark the best in his future managementThe Board of Directors has remained focused on risk management and approved a new Integrated Risk Policy eff ective for fi scal 2022. It is a timely, world-class standard in risk systems and governance. Undoubtedly one of the greatest challenges to business is climate change. This past fi scal year, the Board of Directors approved an addition to our Proxy Voting Principles and Guidelines to address the impacts of climate change. For those companies that have palpably failed to address climate risks and have thereby impaired the value of the company, we will vote against the reappointment of their directors involved in risk with business activities In fi scal 2021, an ad hoc Board committee was established to review the mandate and function of the Investment Committee of the Board to further its focus on investment strategy and performance .

9 Updated Terms of Reference were approved for the renamed Investment Strategy Committee eff ective for fi scal oversight activities also include the ANNUAL review of the operating budget. In fi scal 2021, the operating expense ratio of basis points was fl at compared to the fi ve-year average of CPP Investments held public meetings across Canada in 2020, allowing CPP contributors and benefi ciaries to hear directly from, and ask questions of, the organization this time, virtually. I provided an introductory message at each meeting and was very pleased to see the level of engagement by Board of Directors holds a meeting in one of the organization s key markets around the globe on a regular basis. For fi scal 2021, the focus was on Asia Pacifi c and due to safety considerations and travel restrictions, the meeting was conducted virtually, during which the Board met with peers, partners and employees in the of Directors renewalOver the years, the Board of Directors has recruited new directors in a process consistent with our commitment to achieving global best-in-class standards of corporate governance, independence and diversity, commensurate with our public purpose.

10 Consequently, our Board of Directors today is even more diverse vis- -vis age, gender, leadership and global business experience. The distinguished National Association of Corporate Directors awarded our eff orts by choosing CPP Investments , the fi rst Canadian company to be so recognized, as one of three recipients of its 2020 NACD NXT Award, which applauds boards for their excellence in utilizing board diversity and innovation as a strategy for building long-term value. This past July, we welcomed Boon Sim to the Board of Directors, replacing retired Director Jackson Tai. Mr. Sim brings with him an impressive array of global experience in fi nance, technology and health care. Ashleigh Everett, John Montalbano,Mary Phibbs and I have all been reappointed to the Board of closingIt is diffi cult to fi nd words that fully express my thanks and pride in the work done by our employees, Senior Management and my fellow Directors this past year.