Looking beyond the numbers
Assessing risks and opportunities such as climate change, water usage and waste
Prioritizing worker, community and societal health and well-being
Encouraging high performing boards of directors and good governance practices
Translating our beliefs into action
Integrating ESG in private investments
We conduct an in-depth ESG risk and opportunity analysis during the due diligence process for our private investments in Real Estate, Infrastructure, Natural Resources, Private Equity and Credit Investments. As owners, we closely monitor assets and engage directly with boards and management of our investee companies on material ESG risks and opportunities, with a view to protecting and enhancing long-term financial value.
Integrating ESG in public investments
As part of our investment analysis and decision-making processes, we identify material ESG factors that may impact the long-term financial performance of our public market investments. We leverage our ownership positions to promote good governance practices, exercising our proxy voting rights and actively engaging with companies. We take a stand on issues that matter to capital markets more broadly by supporting best practices. A report of each year’s engagement activities is provided in our annual Responsible Investment Report.
Standing by our beliefs
We strive to vote at all shareholder meetings organized by companies in which we invest. Our Proxy Voting Guidelines serve as our guide and focus on eight themes.
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Setting a high bar for external managers
We assess the ESG practices of fund managers to ensure that their approach is aligned with our Responsible Investment Policy and expectations. Before allocating capital to any external managers for public market investments or committing to private investment funds, we use an in-house framework to objectively evaluate their ESG practices. By reporting back to them on our findings, we share our ESG vision and open the door to discussions about ESG best practices and how to adopt them.
Collaborating on issues that matter to capital markets
We work with a number of organizations to support initiatives that enhance the quality of ESG practices and disclosure.
Principles for Responsible Investment (PRI)
We are a signatory of the PRI, the world’s leading proponent of responsible investment, and a member of the PRI Québec Network. The PRI works to understand the investment implications of ESG factors and supports its international network of investors in incorporating these factors into their investment and ownership decisions. See our actions in support of PRI principles.
The 30% Club believes that gender balance on boards encourages better leadership and governance, and ultimately contributes to better board and corporate performance. We have joined with others to support the objective of 30% of board seats and senior management positions to be held by women.
Canadian Coalition for Good Governance (CCGG)
CCGG allows us to unite our voice with those of other institutional investors to promote good governance practices in Canadian companies, as well as the efficiency and effectiveness of Canadian capital markets.
We are a signatory to the CDP and the CDP Water Program. The CDP runs the global disclosure system that enables public companies to measure and manage their environmental impacts. We support their campaigns encouraging companies to disclose their climate-change and water-related risks and opportunities.
International Corporate Governance Network (ICGN)
ICGN is an investor-led organisation whose mission is to promote effective standards of corporate governance and investor stewardship to advance efficient markets and sustainable economies worldwide. As an ICGN member, we support its Global Governance Principles and Global Stewardship Principles.
Pension Investment Association of Canada (PIAC)
We are a member of PIAC, the national voice for Canadian private and public pension funds and a forum for sharing knowledge and best practices. As an active participant in PIAC’s Investor Stewardship Committee, we aim to develop, monitor and promote robust standards and best practices for pension investment stewardship in Canada.
Sustainable Stock Exchange (SSE) Initiative
We have joined the SSE Initiative, a peer-to-peer learning platform for exploring how exchanges, in collaboration with investors, regulators and companies, can enhance corporate transparency and ultimately performance on ESG issues.
We have joined Finance Montréal’s Responsible Investment Work Group to identify strategic projects for the development of responsible investment practices in the financial community.
Council of Institutional Investors (CII)
CII is a leading voice for effective corporate governance, strong shareowner rights and vibrant, transparent and fair capital markets. CII promotes policies that enhance long-term value for US institutional asset owners and their beneficiaries. We are an active member of CII’s Corporate Governance Advisory Council.
Learn more about our processes
This diagram illustrates some of the risks we look into when evaluating investments across asset classes. Some cut across several categories; for example, climate change can have far-reaching social impacts in addition to its environmental ramifications. While cybersecurity risks need to be properly overseen by boards as part of their risk management responsibilities, security breaches often have significant social impacts. As a long-term investor, we proactively address the following factors as part of our investment strategy:
With the assistance of a service provider, we dialogue directly with companies in our public equity and bonds portfolio, and participate in collaborative engagements with peers. Companies are selected for engagement based on the ability to create shareholder value, the prospects for successful engagement and the relevance of ESG issues. Engagements have clear objectives aimed at driving behavioral change and can involve multiple meetings and last several months or years.
This infographic breaks down our five-step engagement process.
- Fostering effective boards of directors
We believe that well-sized and diverse boards with the proper balance of skills, expertise and independence are critical to a company’s long-term success. As a result, we place considerable emphasis on the quality of directors and the overall composition of boards. We expect robust nominating processes that attract qualified and independent candidates from diverse backgrounds, and sound director performance evaluations and renewal practices. Directors should have sufficient time to devote to their board duties.
- Voting standards in support of shareholder democracy
We support initiatives and mechanisms that provide shareholders with meaningful and effective elections. We generally support actions that enhance shareholder democracy such as individual and annual director elections, majority voting, and the use of universal proxies for contested meetings and proxy access.
- Providing shareholders with a meaningful voice
We believe that voting rights should be proportional to shareholders’ economic interest. Companies should allow shareholders to participate in decisions concerning fundamental corporate changes and adopt governance structures and procedures that give shareholders the ability to hold the board of directors and, indirectly, management to account.
- Seeking alignment between compensation and performance
Compensation and incentives to management and directors should be structured to enhance shareholder value while rewarding performance that meets or exceeds objectives. The compensation policies and amounts payable to senior executives and directors should be disclosed in the proxy circular so that shareholders can assess whether the interests of senior executives and directors are aligned with their own.
- Fostering an efficient capital structure
Companies should have an efficient capital structure that minimizes the long-term cost of capital. All changes to the capital structure of a company should be fair and completed with a view to supporting growth, increasing shareholder value or for other sound business reasons.
- Merger, acquisitions and takeover protection: opportunity to maximize shareholder value
Proposed mergers, acquisitions and corporate restructurings have important impacts on shareholder value. These transactions as well as any takeover protection measures should be structured to maximize shareholder value without compromising shareholder rights.
- Protecting the independence and integrity of auditors
External auditors play an important role in verifying the integrity of a company’s financial reporting to ensure that information provided to shareholders is free from material misstatements and presented fairly in all material respects. As such, we place great importance on the quality and independence of the external auditors.
- Responsible investment: promoting long-term performance
Our approach to proxy voting seeks to be consistent with our Responsible Investment Policy. This is the particularly relevant when addressing environmental and social issues that we may be asked to vote on. These issues differ from corporate governance topics because they are typically proposed by shareholders rather than management and they cover a broader range of issues.