May 2022 - Responsible Investment Association

ESG in Executive Pay: A Look at the Big Canadian Banks

Posted on May 26, 2022August 19, 2022 by Editor

Currently around 60% of Canadian companies listed on the S&P/TSX Composite link ESG performance to executive pay in some way^[1], mainly in their short-term annual bonus plans. This is consistent with the US, where also approximately 60% of companies include ESG measures in incentive plans. Because ESG risks and opportunities vary by sector and company, the type of ESG metrics used in compensation also vary widely. However, two main ESG themes have emerged in compensation plans across sectors in the past two years:

Climate change
Diversity, equity and inclusion

This also holds true for the financial services industry. As the big six Canadian banks^[2] (“the banks”) have historically led the market on good governance practices, a look at how they are progressing on integrating ESG metrics into compensation, and comparing this to global peers, can indicate where best practice is heading and highlight opportunities for further development in the next few years. In the financial sector in general, ESG linked pay has evolved over time from focusing solely on customer experience to a broader range of environmental and social factors. However, information on how such factors are measured to determine compensation outcomes is generally provided at a high level rather than in detail (which is not exclusive to the banks) and what methods are used to integrate ESG in the bonus plan varies per bank.

A 2021 Sustainalytics report noted that the Canadian banks were among the 9% of companies in the FTSE All World Index to tie executive incentives to ESG. In 2022 almost all the banks introduced further updates to their approaches or disclosures.

In the table below we provide an overview of how the Canadian banks integrate ESG into short-term executive compensation plans.

While it can be expected that the banks will continue to refine their ESG pay links over the coming years, innovation on this front continues to be led by European banks. A November 2021 report by Capital Monitor comparing ESG pay links at the world’s 100 largest banks notes that 25 of these explicitly link environmental goals to pay, with 21 of those based in Europe. The report also highlights European banks NatWest, ING, HSBC, Barclays Societe Generale and Westpac as scoring top marks in transparency. More developments are expected after the European Banking Authority published guidance in June 2021 on ESG risk integration.

We also expect more developments on ESG linked pay at the Canadian banks in coming years based on emerging local regulation and trends, specifically in the areas of climate and diversity and inclusion.

Climate and Financed Emissions

The Canadian Government released its 2022 Federal Budget in April 2022 which will require the banks to assess climate risks and emissions of their clients. Financed emissions has been a contentious issue with certain shareholders having expressed concerns on how some of the banks’ lending portfolios impact their net zero commitments. Collectively, there were five shareholder proposals filed this year at the banks related to concerns over funding fossil fuels – an increase from two in 2021^[9]. These shareholder concerns, coupled with evolving regulations, emphasize the importance of greater transparency by the banks on their progress on climate ambitions. Now that the banks have made net zero commitments, we expect continued developments in how progress against 2050 and mid-term goals are measured, reported and integrated into executive compensation.

Diversity, Equity, and Inclusion (DEI)

DEI integration into executive compensation has seen wider adoption in recent years across sectors, especially sparked by racial justice protests in 2020 and beyond. Such issues prompted conversations on racism in the workforce while shifting DEI leadership from human resources to senior management. There are even certain companies (such as Starbucks) which have integrated DEI goals into long-term incentive plans.

As companies across all sectors increasingly adopt DEI strategies, some shareholders (particularly in the US) are calling for external racial equity audits to be conducted in the workforce. The purpose of these external audits is to uncover any explicit or unintentional biases in the workforce related to employment, compensation and business practices including products and services. While there were no proposals filed at the Canadian banks this year related to these external audits, TD reported in its proxy circular that it would work with a third-party law firm to conduct a racial equity assessment of its Canadian and US employment policies following conversations with the B.C. General Employees’ Union.

Whether this sets the precedent for the other banks is unclear – but suggests a growing expectation from shareholders for more disclosure on how companies are assessing and improving their DEI efforts. Such disclosures can help shareholders gain more insight into the efficacy of the DEI initiatives and diversity targets embedded into ESG compensation metrics at the banks.

Assessing ESG Metrics in Executive Compensation Plans

While BMO GAM does not have a specific voting policy penalizing companies for lacking ESG metrics in their executive compensation plans, we do have expectations of best practices and as set out in our Corporate Governance Guidelines will generally support thoughtful shareholder proposals calling for ESG integration in compensation plans.

Through engagement we ask for:

Alignment: ensuring that the ESG metrics in pay plans align with broad business goals and commitments related to material ESG risks and opportunities.
Rigour: ensuring ESG metrics have rigour and are not a “tick-the-box” exercise that allows for easy payouts each year.
Performance-based: ensuring ESG metrics are based on ESG performance and disclose performance outcomes as well as related pay outcomes.
Measurable: ensuring progress, outcomes and performance is measurable. If ESG metrics are qualitative rather than quantitative, provide transparency around pre-determined goals and whether and to what extent they were met.
Transparency: provide clear disclosure on goals, targets and performance against those, and how each metric rolls up into overarching metrics.

Overall, ESG pay links can be a valuable tool used to gauge companies’ commitments and actions on addressing material environmental and social issues. In addition to how ESG factors are measured, we expect that future areas of shareholder engagement could focus on weighting schemes and whether ESG objectives should remain in short-term incentive plans or instead become part of long-term plans.

Sources:
[1] Based on author’s calculation of data collected from MSCI

[2] Consists of Bank of Montreal (BMO), Canadian Imperial Bank of Commerce (CIBC), Royal Bank of Canada (RBC), The Bank of Nova Scotia (Scotiabank), The Toronto-Dominion Bank (TD), and National Bank of Canada (NBC)

[3] https://www.bmo.com/ir/files/F22%20Files/BMOProxy_March2022.pdf

[4] https://www.cibc.com/content/dam/cibc-public-assets/about-cibc/investor-relations/pdfs/annual_meetings/2022/management-proxy-circular-2022-en.pdf

[5] https://www.rbc.com/investor-relations/_assets-custom/pdf/2022englishproxy.pdf

[6] https://www.scotiabank.com/content/dam/scotiabank/corporate/Documents/MPC-2022.pdf

[7] https://www.td.com/document/PDF/investor/2022/E-2022-Proxy-Circular.pdf

[8] https://www.nbc.ca/content/dam/bnc/a-propos-de-nous/relations-investisseurs/assemblee-annuelle/2022/nbc-circular-2022.pdf

[9] As calculated by the author

Contributor Disclaimer
BMO Global Asset Management is a brand name that comprises BMO Asset Management Inc. and BMO Investments Inc.

®/™ Registered trademarks/trademark of Bank of Montreal, used under licence.

RIA Disclaimer
The views and opinions expressed in this article are solely those of the authors and do not necessarily reflect the view or position of the Responsible Investment Association (RIA). The RIA does not endorse, recommend, or guarantee any of the claims made by the authors. This article is intended as general information and not investment advice. We recommend consulting with a qualified advisor or investment professional prior to making any investment or investment-related decision.

Stewardship & Inclusively Addressing the Labour Crunch

Posted on May 26, 2022August 19, 2022 by Editor

The material importance of human capital on company performance has taken on a renewed focus two years into the COVID-19 pandemic and following a wave of employee resignations. While a labour shortage existed leading up to the pandemic, the disruption to normalcy served to intensify this as employees took the opportunity to rethink their approach to work. Now companies are not only looking to attract new talent, but also trying to retain the talent they have come to depend on. This is a formidable objective as companies look to meet their strategic ambitions in a context of challenging economic conditions and a low-carbon future. Investors are increasingly paying more attention to human capital practices as a competitive advantage in their investment analyses and engagement with companies. Measuring performance on this front and identifying and remedying gaps are key given the current realities of this ever-present talent crunch, and we provide examples of how investors can play a stewardship role in achieving these goals.

Structural Labour Shortage Intensified

The significant mismatch of labour supply and demand that currently exists in North America results from a mix of factors, including baby boomer retirements, birth rate decline, slowed immigration, declining labour force participation, and pandemic uncertainty. While this is a global issue, North America’s labour shortage is particularly acute. In Canada, we have seen the unemployment rate drop to 5.3% in March, the lowest rate on record according to Statistics Canada. In the U.S., we have seen a stark and historically high gap between job openings (11.3 million as of February 2022) and the number of unemployed individuals (6.3 million)^[1].

On top of this is a skills gap, where available workers lack the technical training to meet the economy’s current and future needs. Employees are increasingly cognizant of this, recognizing their value and opting for jobs that better suit their preferences – whether that includes higher salaries, remote work, expanded benefits, aligned values, etc. In fact, the U.S. quit rate in February was 2.9%, almost double the rate seen 10 years earlier, with voluntary separations now representing 71% of all employee job departures^[2].

Canada Unemployment Rate

Source: Bloomberg, Statistics Canada. As of March 31, 2022.

U.S. Job Openings vs. Unemployed (‘000s)

Source: Bloomberg, U.S. Bureau of Labor Statistics. As of February 28, 2022.

U.S. Quit Rate

Source: Bloomberg, U.S. Bureau of Labor Statistics. As of February 28, 2022.

Inclusivity as a Solution

While fixing the systemic issues creating this growing labour shortage requires public policy changes that encourage a greater skilled labour supply, companies do have tools to compete for existing talent. To do so, employers need to update antiquated approaches to the worker experience to better cater to employee preferences as well as to cast a wider net when considering what talent looks like. Diversity and inclusion can be used to create a corporate culture that attracts a larger swath of qualified (yet previously overlooked) candidates. This is particularly true of professional occupations, where there is substantial room to grow when it comes to expanding gender, racial and ethnic diversity. Given that employees have more options due to the labour shortages, companies need to put their best foot forward so these diverse candidates know they will be valued and supported. This in turn can provide a compelling corporate culture, contributing to recruitment and retention in a time of an overheated labour market.

Tech Growth and Corporate Culture

The technology sector plays an important part in fueling the global economy, a reality that became intensely clear as the world virtually manoeuvred the pandemic with an eye to maintaining data security. This is a knowledge-intensive sector that has and continues to face challenges in acquiring the talent needed to meet growing business demands. In fact, the U.S. Bureau of Labor Statistics projects software developers and software quality assurance analysts, for example, to be one of the highest areas of new job growth through 2030.

Despite this, the tech sector has struggled to advance diversity, equity and inclusion efforts. According to a Pew Research Center study released in 2021, women amounted to 25% of computer occupations, a proportion that declined from 2000 to 2016 and stayed at that level through 2019. This study mentions a persistent pay gap in Science, Technology, Engineering and Math professions, with Black and Hispanic women typically at the bottom when compared to their colleagues. Working conditions for women and visible minorities in tech have also come under criticism, with concerns around workplace discrimination, harassment and bias. Building transparency around corporate progress on improving on any of these fronts is critical to retain and attract talent in today’s heated job market – transparency that would help encourage all employees to further contribute to the company’s strategic goals, innovation and growth.

Investors as Stewards of Value

As global investors, we continue to use stewardship to engage companies on their human capital management strategies. We remained steadfast for the 2022 proxy season in our support of proposals that lend well to healthy corporate culture, particularly in light of the need to combat talent shortages. This includes supporting proposals that aim to build transparency around diversity across corporate ranks, proposals that advance disclosure of gender and racial pay gaps, proposals that look for assessments of company diversity and inclusion practices and policies, and proposals that recommend adoption of policies which ensure employees have avenues to voice concerns. These employees have more power than ever. There is value in listening to them.

Sources

[1] Bloomberg, as of March 31 2022

[2] Bloomberg, U.S. Bureau of Labor Statistics. As of February 28, 2022

Contributor Disclaimer
Certain statements in this document may contain forward-looking statements (“FLS”) that are predictive in nature and may include words such as “expects”, “anticipates”, “intends”, “believes”, “estimates” and similar forward-looking expressions or negative versions thereof. FLS are based on current expectations and projections about future general economic, political and relevant market factors, such as interest and foreign exchange rates, equity and capital markets, the general business environment, assuming no changes to tax or other laws or government regulation or catastrophic events. Expectations and projections about future events are inherently subject to risks and uncertainties, which may be unforeseeable. Such expectations and projections may be incorrect in the future. FLS are not guarantees of future performance. Actual events could differ materially from those expressed or implied in any FLS. A number of important factors including those factors set out above can contribute to these digressions. You should avoid placing any reliance on FLS.

TD Asset Management Inc. is a wholly-owned subsidiary of The Toronto-Dominion Bank.

®The TD logo and other TD trademarks are the property of The Toronto-Dominion Bank or its subsidiaries.

RIA Disclaimer
The views and opinions expressed in this article are solely those of the authors and do not necessarily reflect the view or position of the Responsible Investment Association (RIA). The RIA does not endorse, recommend, or guarantee any of the claims made by the authors. This article is intended as general information and not investment advice. We recommend consulting with a qualified advisor or investment professional prior to making any investment or investment-related decision.

Quick Wins, Goldmines, and Moonshots: Reinventing Alberta’s Energy Sector

Posted on May 26, 2022August 19, 2022 by Editor

Business-as-usual has plenty of inertia in Alberta. That shouldn’t be surprising, given that historical growth, jobs, and rates of return have long been tied to the province’s natural resources sector. And it’s tempting to depend on that model of prosperity. After some lean years, the price of oil is high, oil and gas firms are profitable, and economic recovery is far surpassing expectations. The war in Ukraine has brought the issues of energy security and affordability into sharp focus and highlighted the geopolitical implications of where our energy comes from. But that doesn’t change the longer-term realities.

Because here’s the thing: investors know that past performance doesn’t necessarily predict future returns. A savvy investor reads other cues, from increasingly mainstream net-zero government policies to increasingly cheap net-zero technologies. There’s a reason investment capital isn’t flooding into new oil and gas projects, despite the high price of energy. In the medium- to long-term, Alberta’s future prosperity will look different than its past.

For Alberta to thrive, policymakers, investors, and businesses in the province need to work together to create the conditions to attract the attention of those forward-looking investors. That means creating an economy built for a net-zero future, not a carbon-intensive past. Fortunately, the expertise, capital, and infrastructure already in the province can build this foundation.

Ambitious Change Requires Ambitious Policy

If we want the Alberta energy sector to reinvent itself, we will need to be intentional about it. Governments will need to get the conditions right, not in the form of small one-off successes, but at scale. The building blocks of this new future include carbon removal and management, the hydrogen economy, lithium extraction, geothermal power, and non-combustion uses for bitumen.

In a nutshell, Alberta needs a policy direction that creates a bridge to a lower-carbon economy and builds on the immense human capital and assets of the sector today.

But first are two hard truths to swallow: not everything will fit, and not everything will work. Complicating matters, what “fits” can and will be a moving target over time as prices, consumer needs, and investor expectations change. As an example, removing carbon from traditional sources of energy is essential to bend the emissions curve now, even though opportunities for different forms of energy like clean hydrogen or geothermal will likely overtake this down the road.

One way to think about fit and risk together is by characterizing different opportunities – and the respective policy action needed – from lowest to highest risk and from immediate opportunity to longer-term possibility.

We can call these policy options “quick wins,” “goldmines,” and “moonshots,” and Alberta can capitalize on all of them.

Quick wins can be implemented, well, quickly. They build momentum and lead to immediate progress but, on their own, do not create larger transformation. Embracing corporate reporting standards that align to the Task Force on Climate-related Financial Disclosures and Sustainability Accounting Standards Board frameworks would be an example of a quick win that anticipates the eventual world of mandatory reporting, while streamlining regulations to incent the repurposing of aging oil and gas assets could open the doors to brownfield development of solar farms and lithium extraction.

In contrast, goldmines can drive significant change for the sector and address larger barriers to attracting investment. But, as a result, they take more time and effort to put in place, are situated higher on the risk curve, and might be politically challenging. A core foundational goldmine policy that is currently lacking is a provincial net-zero commitment that aligns with our national targets, backed up by robust plans and interim targets. Alberta could also feed the growing investor desire for transition finance opportunities by securitizing transition-aligned loans into bond instruments, bringing much needed capital to critical transition projects. Piloting an Indigenous equity ownership or participation requirement for new energy infrastructure in Alberta could herald a new dawn for economic reconciliation.

Finally, moonshots are where things get interesting, where the challenge and reward are greatest. Success depends on getting a number of factors right. They are not only difficult to advance but they also vary widely in terms of how long it takes to become reality—it could be years or even decades, if at all. But getting them right yields huge returns for the industry, investors, and Albertans. This is where Alberta can look to accelerate net negative emissions technologies, blending the province’s expertise in carbon capture and underground storage with the agricultural sector’s growing interest in carbon sequestration, plus the province’s natural infrastructure to develop nature-based capture solutions founded in traditional ecological knowledge.

We sit at an inflection point. It’s time for forward-looking investors to participate in these emerging net-zero policy conversations actively, even loudly. Investors need to encourage all levels of government to embrace the policy shifts required to make ongoing investment in Alberta attractive and aligned with net-zero objectives. That doesn’t mean going all-in on windmills and solar panels. It means building a diverse portfolio of new emerging opportunities and leveraging existing assets and expertise in transformative ways.

Because with each step forward, expectations shift a little bit more. The more carbon risks and climate opportunities become mainstream in boardrooms, the more capital flows into exciting new transition-consistent projects. The more that climate policies become normal operating conditions, the more valuable emissions-reducing projects become. And the more investments in net zero pay good returns, the more other sources of capital join in.

Before long, business-as-usual will look dramatically different. And that’s precisely the point.

Alicia Planincic, Dale Beugin and Jamie Bonham are all members of the Energy Futures Policy Collaborative, a multi-partner collaborative focused on helping policy leaders create the policy signals that can help scale new low-emissions pathways, bridge our polarized divides, reignite investor confidence, and ultimately transform Alberta’s hydrocarbon sectors. A detailed discussion of the ideas above, and more, can be found in the EFPC’s recent report Same Game, New Rules.

Ukraine and the Geopolitical Considerations for ESG

Posted on May 26, 2022August 19, 2022 by Editor

Despite the growing importance of considering ESG factors as part of an investment process, many investors remain unclear about how to incorporate such an approach in their decision making, particularly in the context of emerging global events such as the crisis in Ukraine.

As corporate credit investors, our team’s investment process revolves around quantifiable observations of relative value and valuations that are supported by an in depth analysis of corporate credit and industry fundamentals. Our efforts to emphasize ESG within our traditional investment process has encouraged us to consider factors that are challenging to quantify and measure. The difficulty in measuring the impact of ESG initiatives and evaluating their materiality has resulted in serious debates within our team and the broader investment community. Everyone claims to be an ESG leader, but very few can back it up. Navigating this environment requires an active approach supported by a rigorous research process to maximize performance while adhering to ESG objectives.

Within a sea of ambiguity, one thing has been clear – the fossil fuel sector has generally been viewed as challenging within ESG investing frameworks. It is no secret that the extraction, refining and consumption of fossil fuels results in significant greenhouse gas emissions. Under pressure to act on climate change, many large investors, including pension plans and sovereign wealth funds, have made plans to exit investments in the oil and gas industry altogether. While these moves will certainly help to advance environmental objectives, it is worth debating if an abrupt exit is the right approach, especially considering that we continue to rely on oil and gas in practically every aspect of the global economy. We are beginning to see the impacts of a lack of investment in the energy sector as a constrained supply environment could contribute to growing inflation and negatively impact consumers, particularly those in lower-income brackets.

The recent shocking events in Europe have important implications for the cross-border flows of fossil fuels and will result in increased debate about how Western economies consume energy products. Russia is a major producer of oil and gas and a significant amount of Russia’s energy production flows into Europe and beyond. The simple reality is that the world (and Europe in particular) remains very dependent on Russian energy exports which makes it challenging for Western governments to effectively sanction Russia’s energy production. Sanctions can create hardships for all involved, and could potentially leave millions of people in the dark, without power or heat.

The terrible crisis in Ukraine and its spillover effects throughout Europe could spark a call for increased investments in renewables. As uncertainty surrounding energy supply causes spikes in price volatility, reliance on unfriendly foreign jurisdictions for energy products should accelerate a collective call to action. We could see European nations make increased investments in domestic sustainable energy production initiatives to wean their economies off Russian energy imports. Unfortunately, the impact from such investments won’t be felt in the short-term and could also come at a high cost to consumers. The transition to a more sustainable future will take time and could involve near-term environmental trade offs to balance social and economic considerations. We are already hearing calls to restart domestic fossil fuel driven generation in Europe to plug the gap from reliance on Russian energy products.

An argument can be made that energy sourced from jurisdictions where there are strong governance frameworks and commitments to future net-zero carbon emission goals can play an important role filling the gap as economies transition to greater reliance on renewables in the future. Ignoring the role that energy currently plays in our economy seems like a risk, especially considering the harmful impacts of surging inflation that pressured energy supply is contributing to.

Canada can play an important role in the transition to renewables as a safe and stable supply of oil and gas products presently. Environmentalists may argue that Canada’s oil sands have significant greenhouse gas emissions; however, if the alternative is to continue to source energy from countries with increasingly significant social and governance concerns, perhaps one shouldn’t be so quick to dismiss Canadian energy production. As we transition to a greener future, perhaps greater emphasis should be placed on investing in the energy sector of stable, friendly jurisdictions to reduce reliance on foreign oil from bad geopolitical actors. Transitioning to a sustainable future in the long-term remains one of the best ways to reduce our reliance on unfriendly regimes for oil and gas. The key question is how we get there.

It’s worth debating how the energy sectors of stable jurisdictions, with strong corporate governance and strong environmental oversight, fit into an ESG investing framework. This is where an active investment approach can add value and will require a comprehensive research process that revolves around detailed discussions with management and industry players, rather than simply relying on an issuer’s slide deck or third party ESG scores. The importance of transitioning to renewables remains more important than ever, however, to maintain economic stability and avoid chaos from an abrupt exit of fossil fuels, the path to a greener future requires careful consideration and planning.

How ESG Ratings Work and Why They Differ

Posted on May 26, 2022May 26, 2022 by Editor

Environmental, Social and Governance (ESG) ratings are fast becoming essential to investors globally. Their key advantage is aggregating ESG metrics into one simple and relatively intuitive rating that helps investors take sustainability into consideration while investing. They are also becoming more widely available, at little to no cost. ESG data will continue to increase in relevance over the coming years as investors look for insights beyond the traditional financial lens.

In some areas, ESG ratings vary widely, which can cause investor confusion. If ESG ratings are different between providers, then how do investors make informed decisions based on these ratings?

Additional Challenges with ESG Ratings

Other aspects of ESG ratings that need to be addressed are that they are usually backward looking, tend to ignore engagement and proxy voting efforts, and often do not consider the “output” of companies that are creating products for a more sustainable future. A classic example here is a solar panel manufacturer – while everyone would agree that panels would benefit our collective future, they are quite carbon intensive to produce. This sometimes results in a lower “environmental” score for such companies, due to their higher carbon operational footprint, even though the products they are producing are better for the environment in the long-term.

Another example highlights the complexity around reporting greenhouse gas emissions of a company. Does the rating consider the direct emissions from owned or controlled sources (scope 1) only, or also indirect emissions from the generation of purchased energy (scope 2)? Furthermore, are scope 3 emissions included (upstream = supplier emissions and downstream = customer emissions), and if so, do they account for both upstream and downstream activities? If scope 3 emissions are included, an additional challenge is that many companies currently do not self-report, putting the burden on ESG data providers to model or estimate these emissions. The lack of transparency, complexity of methodologies, and multitude of approaches to information sourcing on “E”, “S” and “G” metrics are just a few reasons why investors have difficulty wrapping their heads around how to make use of ESG ratings.

So, What Do Investors Look to Measure?

In 2015, the CFA Institute released a guide for possible approaches to responsible investment (RI). These have since been revised and additional guidance has recently been given by the Canadian Securities Administrators (CSA), to make the various methods to ESG investing more relatable to a wider audience. For the purposes of this paper, we bucket these into six main responsible investing methods that investors should be aware of:

Exclusionary screening: avoiding investments based on moral values and norms
ESG integration: inclusion of ESG risks and opportunities in investment analysis and decision making, generally focusing on financially material issues
Best-in-class selection: investing in ESG leaders relative to peers
Active ownership: engaging with companies to effect positive change, including exercising voting rights
Thematic investing: investing based on long term sustainability trends
Impact investing: investing to generate measurable social and environmental benefits that may extend beyond what is financially material

Investors may apply a combination of the above methods to reach their goals. But is it possible to select one ESG rating to support an investor’s goals? The table below suggests that investors may want to consider different characteristics depending on what their end goals are.

How an Investor Might Consider Different Rating Systems

Let’s walk through how the Sustainability team at Mackenzie Investments assesses ESG ratings from two popular providers and how they compare:

Why the Differences?

ESG reporting is still in some ways in its infancy. Many companies self report to a limited extent and in an inconsistent manner. Given these challenges in reporting, ESG rating providers source information based on analyst opinions, modelled data and/or artificial intelligence. This leaves room for mixed results depending on sourcing methodology and adds to the observation that ESG ratings from different providers can be very different, even when they would aim to measure the same characteristics in companies.

Will ESG Ratings Converge Over Time?

As companies ramp up their ESG reporting in line with emerging standards (such as from the International Sustainability Standards Board), we would argue that this should lead to more consistency in ratings. However, there are arguments that ESG ratings will continue to be different from one provider to another as investors apply different values and perspectives to their responsible investment approaches. In addition, there is a level of dynamic materiality as it relates to sustainability. Carbon emissions are deemed much more material to today’s investment world than 10 years ago; more recently, COVID-19 has uncovered many social factors that firms need to consider. For example, safety and good supply chain management are now considered more material than before the pandemic. This is partially due to reputational risk but also operational risk. A dynamic materiality view would require a real-time re-evaluation of material ESG risks and opportunities which may be challenging for ratings providers to offer. As a result, the discussion on what is sustainable and what is not, will likely continue to be a hot topic.

While ESG ratings can be very helpful, investors should be aware of what their “ESG rating of choice” measures and validate if this corresponds with their own responsible investment philosophy. A specific ESG rating might work very well for one investor but perhaps not so well for another. There are many roads that lead to Rome, the same can be said when looking to invest sustainably.

Sources

[1] MSCI ESG Ratings Methodology

[2] Sustainalytics ESG Ratings Methodology Abstract.pdf

As Green Bonds Grow, What Should Investors Know?

Posted on May 26, 2022May 26, 2022 by Editor

The $5 billion inaugural green bond sale held by the government of Canada in March represented a tiny slice of its overall bond issuance for 2021-2022. Yet the move marked a significant step, as public and corporate issuers around the world are increasingly leaning on green bonds to meet carbon emissions goals. Given the rapidly shifting landscape in this new asset class, what should investors know?

The global market is already expanding at a rapid pace. According to recent figures compiled by the Climate Bonds Initiative, green bond issuances represented roughly half of the overall sustainable debt market in 2021, reaching US$522.7 billion, a 75% jump from 2020. Based on this growth rate, investor expectations surveyed by the Climate Bonds Initiative in October 2021 could very well become reality and lead to issuances of US$1 trillion in 2022 alone.

Green Bond Guidelines

Of course, growth in green bonds might not have been the same had it not been for certification guidelines developed with the help of technical experts, such as the Climate Bonds Standard, which are meant to be consistent with the Paris Agreement’s target of limiting global warming to 1.5 degree C. These guidelines have served to provide a solid foundation for market credibility, ensuring funds go to credible climate projects and promoting third-party verification thereby generating investor interest. As is the case with any security, however, investors should still perform due diligence before acquiring green bonds since continued credibility and ultimate growth of this critical market is in investors’ hands.

The Green Bond Framework designed by the Canadian government is aligned with the International Capital Markets Association’s (ICMA) Green Bond Principles (GBP). These define the security as “any type of bond instrument where the proceeds or an equivalent amount will be exclusively applied to finance or re-finance, in part or in full, new and/or existing eligible Green Projects and which are aligned with the four core components of the GBP”. These four components of the ICMA GBP are:

Use of Proceeds
Process for Project Evaluation and Selection
Management of Proceeds
Reporting

Eligible Green expenditures include projects such as clean transportation, energy efficiency, protection and restoration of biodiversity, terrestrial and marine ecosystems, sustainable water and wastewater management, climate change adaptation and pollution prevention.

Growing Pains in the Green Bond Market

Faced with the same need to address climate change, emerging markets have also been busy in this space. As green bonds continue to expand, China, which hopes to see its carbon emissions peak before 2030, is likely shaping up to be one of the big global issuers with some estimates already forecasting issuances totaling more than US$100 billion in 2022. The Chinese market is still evolving, however, and investors should know that not all green bonds are yet aligned with international standards. For the full year 2020, for instance, only roughly half of Chinese green bonds issued were aligned with the Climate Bonds green definitions. “While a green bond is indeed a commonly recognized sustainable finance instrument in China, the country lacked consistent and unified definitions and classifications of green industries for a long time”, Sustainalytics pointed out in February 2022.

One of the recent changes in the Chinese market has been the 2021 edition of a “Green Bond Endorsed Project Catalogue” by the People’s Bank of China (PBOC), the China Securities & Regulatory Commission and the National Development & Reform Commission. When the Catalogue was made public, the PBOC issued a release outlining its main benefits and mentioning the adoption of “more scientific and precise definitions on green projects”. Thankfully, the PBOC is working on strengthening practices and restricting use of proceeds to go to fossil fuel and coal development. It also referred to a “stable framework” for domestic green bond development.

Green Bond Future Growth

It is against a global backdrop of strengthening practices that the government of Canada issued its inaugural green bond, which was followed by the publication of its 2030 Emissions Reduction Plan underlining the importance of private sector capital to achieve the transition to net zero emissions. “Sustainable finance initiatives can help crowd-in needed private investment and amplify existing climate policy signals in a business-friendly manner,” the government wrote.

With countries pledging to achieve net zero emissions by 2050, which requires capital and robust practices, investors in Canada and elsewhere are likely to pay increasing attention to make sure that labelling, use of proceeds and reporting all align. Many are already showing a healthy appetite.

Demand for the 7.5-year bond (with a 2.25% coupon) issued by the government of Canada was so strong that the final order book exceeded $11 billion, the department of Finance announced in a press release on March 3. Most of the buyers (72 percent) were “environmentally and socially responsible investors” whereas in geographic terms, international investors represented 45 percent of the investor base, it added.

Other participants are already busy in the Canadian green bond sector. One is the government of Ontario, also a member of the GBP, which has been active in the green bond space since 2014-15, issuing $10.75 billion over time. The City of Toronto, for its part, issued four green bonds from 2018 to late 2021, the latest being a 10-year debenture with a 2.2% coupon. The City of Vancouver and the government of Québec have also issued green bonds. For its part, the corporate sector has been active issuing green bonds as well, helping total Canadian issuance reach $39 billion to date.

In its Emissions Reduction Plan, the federal government indicated that it aims to issue $5 billion in green bonds annually. The bond program “will add liquidity and AAA-rated ESG assets to create a more mature, liquid, and diverse market for investors, and support the growth of Canada’s sustainable finance market,” it wrote. If the line-up in March was any indication, future offerings could draw strong demand as well.

Exploring ESG Integration Challenges: Governments, Standards & Technological Solutions

Posted on May 26, 2022May 26, 2022 by Editor

The complex challenges facing institutional investors looking to engage more deeply with ESG often center around data. With rising investor interest, an array of ESG metrics, data sources, scoring methods and reporting standards have proliferated. Yet the need for consistency and relevance in these data sources is a recurring theme.

Investors typically have a need for at least some degree of customization to reflect individual preferences and priorities, standards to support the ESG investment process, and demonstrability of ESG representation in sustainable investments. Asset managers, insurance companies, and other institutional investors can expect demands for greater transparency around ESG investing in their portfolios from internal and external stakeholders. Asset owners face particularly complex demands, with rising awareness and demand from plan members, related sponsor organizations, and stakeholder groups to better measure, report, and act on ESG goals.

In some ways, the pursuit of better ESG data and technology outcomes is only one example of a larger data challenge facing institutional investors. The pursuit of innovative and sophisticated investment and organizational strategies continues as some are turning to advanced technology and data tools to streamline operations, access new market opportunities, and gain competitive advantage. Target outcomes include greater agility, enhanced resiliency, and a desire to better future-proof technology operations against the emerging needs of tomorrow. Addressing data challenges and ESG challenges may go hand in hand for many.

Considerations for ESG Data

To be usable or viable, unstructured ESG data must be incorporated into analytical calculations, internal, and external reporting. Particularly for organizations seeking to incorporate ESG into an array of investment and business processes, ESG data cannot be evaluated in isolation and will need to be connected to other content in the investment process. To add to the struggles of managing data, third party ESG data providers use varying methodologies, and as a result lead to a variance in scores.

There are challenges in the actual data: Why are different scorecards or taxonomies used when looking at portfolio companies? Clients must consider data because ultimately it will be used to conduct due diligence to decide if the data is a fit in terms of their sustainability objectives. They will also use data to balance their financial and non-financial tolerances – they are going to look at if there is an opportunity cost to the priorities they want to have in sustainability portfolios. Ultimately, each investor, manager and service provider has to make an assessment to understand their place in the data handling chain. What are the ultimate stakeholder obligations: for reporting, organizational engagement, investment activities and more.

Stakeholders will need to ask hard questions such as “do we primarily focus on a reporting requirement or are we trying to tie the data to an investment decision?” or, “how do we align ESG data to more than a sustainability investment or reporting team, and connect it across our entire investment process?” By embedding ESG into a long-term strategy, investors eliminate the need to try to arbitrage data, i.e., choose some data and start benchmarking on that basis. If the methodology of the data set is exposed, then organizations can disclose how they are making decisions based on the data their stakeholders are relying on.

In Canada and globally, we continue to see demand from institutional investors looking not only to bring in unstructured data, but also connect multiple sources of it and derive their own scores similar to creating their own benchmark to evaluate the impact of ESG on their investment decisions. As more firms consider how to incorporate ESG into their everyday processes, they are faced with the challenge of determining which sources of ESG information best align with their investment approach and workflows.

According to research from the Chartered Financial Analyst Institute and United Nations Principles for Responsible Investment, the lack of standards around ESG data verification and the demonstrability of the ESG factors shaping investment portfolios are among the key barriers to greater ESG integration into investment processes. The lack of standards can also lead to claims of “greenwashing” or “social washing,” which can impact trust and credibility and in turn expose asset owners to risk. Investors and their stakeholders have a clear and shared interest in creating foundations for trust that include shared definitions and shared measurements against which to assess, test, measure and report.

Solutions on the Horizon

The Government of Canada addressed the lack of standards in its 2022 Federal Budget which states that Canada’s Office of the Superintendent of Financial Institutions (OSFI) “will consult federally regulated financial institutions on climate disclosure guidelines in 2022 and will require financial institutions to publish climate disclosures—aligned with the TCFD framework—using a phased approach, starting in 2024.” According to the budget, OSFI will also expect financial institutions to collect and assess information on climate risks and emissions from their clients. Furthermore, the Government of Canada will move forward with requirements for disclosure of environmental, social, and governance (ESG) considerations, including climate-related risks, for federally regulated pension plans.

Fortunately, progress toward common standards continues across several fronts. For example, the Canadian Securities Administrators (CSA) in January 2022 issued CSA Staff Notice 81-334 – ESG-Related Investment Fund Disclosure to provide guidance to investment funds with respect to how those funds should be named and how investment approaches should be written in regulatory filings. Likewise, the International Sustainability Standards Board (ISSB) – which has its North American HQ in Montreal – recently launched a consultation on its general sustainability-related disclosure requirements and climate-related disclosure requirements. The ISSB states that it is seeking feedback by July 29, 2022, and aims to issue the new standards by the end of the year, subject to the feedback.

Technology will be an essential factor in achieving the greater transparency that stakeholders are demanding. New tools connecting asset managers and investment finance teams with detailed information on performance and management will be important tools for cutting-edge information and meeting compliance goals. For example, our enterprise application introduces the concept of ‘crowdsourcing metrics’ to address the sustainability challenges and allows investors to compare their priorities and in turn work to realize their strategies. As with any group, both overall and relative performance are important and the ability to compare and benchmark against peers is a key element of responding to Boards, Trustees, shareholders and other stakeholders regarding progress and opportunities.

In summary, the ESG investment landscape remains complex and fast moving, but Canadian asset owners and their stakeholders are moving just as rapidly to grow their sophistication, understanding, and capabilities in turn.

The ‘H’ in ESG: Exploring Human Capital and Canada’s Just Transition

Posted on May 26, 2022May 26, 2022 by Editor

What does it take to transition to a lower-carbon economy? Beyond involving complex technologies, extensive infrastructure changes, and sophisticated modeling, one fundamental element will be paramount to our collective success: we must remember that humans will be behind – and impacted by – it all. Governments and country leaders worldwide have already publicly recognized this, introducing the term “just transition” into the 2015 Paris Agreement. The legally binding international treaty on climate change calls on its signatories to consider “the imperatives of a just transition of the workforce and the creation of decent work and quality jobs in accordance with nationally defined development priorities”, all while working towards limiting global warming to well below 2 degrees Celsius compared to pre-industrial levels.

In 2021, the Canadian government published a discussion paper, People-centered just transition, along with a statement explaining that the just transition involves:

“Preparing the workforce to fully participate in the low-carbon economy while minimizing the impacts of labour market transitions;
identifying and supporting inclusive economic opportunities for workers in their communities; and
putting workers and their communities front and centre in discussions that affect their livelihoods.”

Suffice it to say, although the transition to a lower-carbon economy may be an environmental issue at its core, its social implications are significant. The human element, the “H” in ESG, is inextricably linked to the transition, and investors have taken note. Capital markets have been increasingly focused on better understanding the social responsibility of organizations within the context of the transition, with the investment community publicly acknowledging the financial materiality of human capital management.

Social Matters

The COVID-19 pandemic has also helped shed light on the importance of this issue. During the past two years, our public systems and economies were shaken, and income inequality rose. Companies have had to alter the way they conduct business; team mental and physical distress levels have increased – and so have employee resignations.

This growth in employee attrition, paired with an increased competition for talent, has become a key ESG topic for many organizations. In Millani’s latest ESG Sentiment Study of Canadian Institutional Investors, one asset manager shared: “Every industry is facing human capital shortages. Companies must now go the extra mile to attract, retain, and train their employees or have a different approach […]. A change of mindset is required.” For instance, the Royal Bank of Canada increased its workforce by about 2% last year, but total human resources costs rose by 8.4%, further demonstrating the topic’s financial implications. These S-related issues can also have macro-level implications. In March 2022, some of CP Rail’s employees went on strike following rising tensions relating to compensation, at a time when commodities like fertilizer were scheduled to ship out for the start of seeding season, and livestock feed had to be sent to regions affected by recent drought. Combined with existing inflationary pricing pressures and supply chain interruptions, this type of situation could potentially engender serious repercussions on the functioning of farms nation-wide. It could also contribute to growing social unrest and income inequality – going against the very ethos of a just transition and leading to short-to-medium term consequences for our economy, and therefore for investors.

Corporate culture is another related theme increasingly being perceived as key to growing and protecting enterprise value. Investors know that a strong corporate culture helps build trust and reduces risk; however, if poorly managed, it can also be detrimental. Rio Tinto took a notably deep dive on this topic in its February 2022 Report into Workplace Culture, an official acknowledgement of the culture challenges that permeated parts of the organization. The report discloses the results of a third-party assessment which uncovered signs of racist, sexist, and other inappropriate behavior, and provides the framework put in place to remediate these challenges. It serves as a reminder that maintaining healthy and safe work environments can affect the ability to attract and retain employees, which is not only a key topic for issuers and investors, but also part of supporting a just transition.

Disclosure on S Topics

Through Millani’s work with corporate issuers and investors, a growing need for disclosures on social topics, and their financial materiality, has been identified. As we undertake the transition, we expect to see an increase in the standardization of employee-related metrics in ESG reporting frameworks, with regulators and standard setters already integrating social topics into corporate and investor disclosures requirements.

Of note, the International Financial Reporting Standards (IFRS) Foundation will be embedding the Sustainability Accounting Standards Board (SASB)’s industry-based standards development approach into the International Sustainability Standards Board (ISSB) standards, which will include human capital. Currently, SASB addresses three issues connected to human capital management in its standards: employee health and safety; diversity, inclusion, and engagement; and labor practices. A consultation project is underway to assess the scope and prevalence of various human capital management themes, namely workforce composition, costs, and turnover.

This desire for social disclosures is also growing in the U.S. The Securities and Exchange Commission (SEC) has already published disclosure requirements related to human capital, and we expect enhanced scrutiny of these topics in the short-term. In March 2021 during a keynote address to the Center for American Progress, Allison Herren Lee, former acting chair of the SEC, discussed the rise in investor demand for disclosure on topics like human capital. She further reiterated this point during the Shareholder Association for Research and Education (SHARE)’s 2022 Investor Summit, where she discussed the quality of disclosures for topics related to human capital and the desire for more robust disclosures.

Ultimately, the transition to a lower-carbon economy will be significant and addressing the human element in this transition will be crucial. The expectation that teams manage, track and build quality data around this topic will likely keep growing. Companies should also be prepared to disclose and be engaged on their ESG risks and opportunities related to social topics. As the market strives for a just transition, we expect social issues to remain at the forefront of investor engagement themes going forward.

ESG-Related Litigation: A Growing Credit Risk

Posted on May 26, 2022May 26, 2022 by Editor

As investors have called for more transparent and harmonized sustainability data in recent years, regulators in major markets are introducing a rising number of mandatory reporting requirements for certain types of entities. Combined with existing legislation, these rules have intensified ESG-related litigation risk for reporting entities.

A growing number of lawsuits on the basis of ESG statements in securities filings, including bond offering documents, have been filed against corporations and governments. A stakeholder’s right to pursue civil remedies varies depending on jurisdiction, but the scope of information that can form the basis of a lawsuit is expanding with greater inclusion of ESG. In the credit market, this includes sustainable finance frameworks, sustainable bond documentation, and any other sustainability information contained in material related to the solicitation of investment. A potential liability occurs when sustainability disclosures are false, misleading, or cannot be substantiated, causing financial harm to an investor.

The US provides the most scope for investors to sue based on information in securities documentation, including ESG statements in securities filings. The size of the US’s financial market means that non-US entities can be subject to litigation in the US, including those that do not have a physical presence in the country. In addition, legal developments in several countries have increased the amount of litigation taking place in other markets. Australia is the second-largest jurisdiction for corporate class actions after the US, with 20% of global cases related to shareholder claims, according to data from Allens law firm.

Climate-focused lawsuits are the most common type of ESG-related litigation. Most fall into one of three categories:

Suing a government over climate change policies; seeking damages or a change in law;
Suing a corporation for contributing to climate change; seeking damages or a change in its operations, practices, or strategy; and
Suing an entity over misleading climate claims in securities documentation; seeking damages or a change in its operations, practices, strategy, or law.

About 1,800 climate change lawsuits have been filed to date, and most cases have a government as defendant – about 75% of all cases in Australia and the UK, and 88% of US cases in 2020 and 2021, according to the Grantham Institute and the Sabin Center for Climate Change Law. Most cases are brought by NGOs on behalf of a community, on the basis that a government has failed to mitigate climate change. Lawsuits against governments in Colombia, France, Ireland, Mexico, Nepal, the Netherlands and Spain have been decided in favour of environmental groups and resulted in policy changes on emissions, national climate plans and renewable energy.

Within corporate litigation, climate change is a small but growing subject. Sectors with sizeable emissions impacts, such as oil and gas, utilities and vehicles are most often targets of corporate climate litigation. In 2021, Dutch courts ruled against Royal Dutch Shell plc (AA/Stable) in a landmark class action suit (Milieudefensie et. al. v Royal Dutch Shell plc), requiring the company to reduce its Scope 1, 2, and 3 emissions by 45% by 2030. Shell has filed an appeal. There are several active cases by US state and local governments against oil and gas companies that have yet to be decided or are under appeal.

Among securities lawsuits, judges have not consistently agreed with investors that financial losses due to climate-related issues were intentional or avoidable by the plaintiffs – although cases seeking policy changes rather than compensation, or those with corresponding criminal/regulatory enforcement actions, have been more successful.

In our view, the main consequences of climate lawsuits against governments are regulatory and policy changes that could significantly alter the operating environment for carbon intensive industries. We do not see a direct link between climate lawsuits and credit risk impact for sovereign or public finance issuers themselves at this time. For lawsuits against companies, a ruling leading to a change in business strategy or operations would have a greater effect on medium- to long-term credit profiles than financial settlements or fines.

While there has been a heavy focus on environmental-related litigation, the development of the sustainable finance field is likely to determine which ESG issues feature in lawsuits. Regulations targeting modern slavery, deforestation, labour conditions, and supply chain due diligence will increase the amount of reporting on these subjects. While most ESG-related securities class action lawsuits have a climate or environmental basis, societal trends can influence year-to-year swings in certain areas – for example, six securities class actions in the US related to workplace discrimination, harassment, or abuse in 2018 following the emergence of the #MeToo movement in the previous year.

The growing importance of social factors within corporate sustainability frameworks may create new areas where investors or consumers identify gaps between disclosures and practices. Areas that could see increased ESG-litigation in the coming years include consumer greenwashing, data privacy, labour-related issues, and health and safety.

The main risks to issuers from the rising incidence of ESG-related litigation are not financial but strategic and operational, as many ESG lawsuits seek structural changes in business practice rather than financial restitution.

Bucking Big Brother: Setting Appropriate Limits on Facial Recognition Technology

Posted on May 5, 2022May 26, 2022 by Editor

The breathtaking progress of modern technology has bettered our lives in innumerable ways, but little reflection is needed to see that, for all its benefits, today’s cutting-edge technology is not entirely positive, and in many ways threatens our core humanity.

Nowhere is this clearer than with Facial Recognition Technology (FRT). Combining biometrics and artificial intelligence, FRT enables its users to identify a person by mapping their facial features and comparing this data to facial images stored in a database.

While FRT has potential benefits, the sheer scale of the harm this technology can cause, from racial profiling to full-blown dystopian mass surveillance, makes it imperative for governments to establish and enforce clearly defined limits on its use. As investors, we can help accelerate these efforts through targeted and coordinated advocacy.

The “Good”

Potential benefits of FRT include preventing terrorist attacks, overturning wrongful convictions, aiding criminal investigations, preventing school shootings, improving airport and border security, and even simple things like unlocking an iPad.

In most of these cases, however, it is extremely difficult to strike the right balance between personal privacy rights – a core pillar of a free and democratic society – and the often-competing benefit of added security. So even where FRT is arguably a positive, its use is an ethical minefield for any society that values individual liberty.

The “Bad & the Ugly”

It is easy to see how FRT can be used as a tool of oppression by authoritarian governments. China, Russia and other dictatorial regimes across the globe have incorporated this technology as a tool of Orwellian mass surveillance, enabling them to suppress free expression and quell dissent.

The use of FRT for malign purposes is not restricted to state actors. For example, apps are now available that allow users to scan uploaded photos against every available online image for potential matches. Critics worry these apps can be abused by stalkers and harassers, leaving women escaping abusive partners vulnerable. Identity theft is another major concern. For example, hackers breached U.S. Customs and Border Patrol systems in 2019, making off with a trove of facial image data and license-plate information.

Racial bias is another major problem. For example, data sets tend to overrepresent White, middle-aged men, and FRT algorithms have been shown to misidentify Asian and Black faces up to 100 times more often than White faces. Both of these failings have led to harmful legal outcomes for minorities.

Setting Boundaries

Meaningful steps are being taken to stem the potential abuse of FRT. In the U.S., a number of jurisdictions have outlawed its use by law enforcement and government agencies. In some cases, the ban has been extended to the private sector as well. Some states have either proposed or passed legislation that places limits on the collection of biometric data, and enshrined into law the need to receive informed consent from anyone targeted by FRT or related technology.

The European Data Protection Board and the European Data Protection Supervisor, Europe’s two privacy regulators, have urged lawmakers to completely ban FRT in public areas. Current legislation making its way through the European Parliament would place hard limits on biometric identification, including FRT.

Here in Canada, privacy laws recently curtailed the RCMP’s use of FRT. Last year, an investigation by the Privacy Commissioner revealed that the Mounties violated the Privacy Act in their use of Clearview AI’s FRT database. Clearview AI, a private sector company with over 3,100 law enforcement contracts in the U.S. alone, maintains a database of billions of images harvested from social media, which the RCMP used to run searches on suspects.

In a statement, the Privacy Commissioner said “the use of FRT by the RCMP to search through massive repositories of Canadians who are innocent of any suspicion of crime presents a serious violation of privacy.” A number of municipal police services were also found to have used Clearview AI, but along with the RCMP, they have stopped doing so – if for no other reason than because the firm has abandoned its operations in Canada. Importantly, the RCMP disputes the Privacy Commissioner’s finding that using Clearview AI violated the Privacy Act.

A Role for Investors

Vancity Investment Management Ltd. (VCIM), sub-advisor of the IA Clarington Inhance SRI Funds, believes investors have a responsibility to use their leverage as shareholders to advocate for positive change. That’s why we’re deeply committed – as part of our longstanding and robust program of shareholder engagement – to advancing the cause of responsible limits on FRT.

Last year VCIM signed the Investor Statement on Facial Recognition along with 51 other global institutional investors, collectively representing $4.8 trillion in assets under management. The Statement urges companies involved in FRT to:

disclose the accuracy of their technology after measurement by a recognized and relevant scientific assessment institution;
disclose the source(s) of their image databases and demonstrate that their technology is constantly monitored to detect algorithmic biases, particularly with respect to race, gender, or age;
demonstrate proper due diligence of clients before making the technology available to them; and
demonstrate that effective grievance mechanisms are in place to enable victims to report consequences and access remedies.

The Statement forms the basis of VCIM’s ongoing engagement with IBM and Cisco. Together with like-minded shareholder groups, we are urging both companies to make a firm commitment to the best practices laid out in the Statement.

Visit inhancesri.ca to learn more about Vancity Investment Management’s shareholder engagement activities.

Contributor Disclaimer
The information provided herein does not constitute financial, tax or legal advice. Always consult with a qualified advisor prior to making any investment decision. Statements by the portfolio manager or sub-advisor responsible for the management of the fund’s investment portfolio, as specified in the applicable fund’s prospectus (“portfolio manager”) represent their professional opinion, do not necessarily reflect the views of iA Clarington, and should not be relied upon for any other purpose. Information presented should not be considered a recommendation to buy or sell a particular security. Specific securities discussed are for illustrative purposes only. Mutual funds may purchase and sell securities at any time and securities held by a fund may increase or decrease in value. Past investment performance of a security may not be repeated. Unless otherwise stated, the source for information provided is the portfolio manager. Statements that pertain to the future represent the portfolio manager’s current view regarding future events. Actual future events may differ. iA Clarington does not undertake any obligation to update the information provided herein. The information presented herein may not encompass all risks associated with mutual funds. Please read the prospectus for a more detailed discussion on specific risks of investing in mutual funds. Commissions, trailing commissions, management fees, brokerage fees and expenses all may be associated with mutual fund investments, including investments in exchange-traded series of mutual funds. Please read the prospectus before investing. Mutual funds are not guaranteed, their values change frequently and past performance may not be repeated. Trademarks displayed herein that are not owned by Industrial Alliance Insurance and Financial Services Inc. are the property of and trademarked by the corresponding company and are used for illustrative purposes only. The iA Clarington Funds are managed by IA Clarington Investments Inc. iA Clarington and the iA Clarington logo, and iA Wealth and the iA Wealth logo, are trademarks of Industrial Alliance Insurance and Financial Services Inc. and are used under license.