ESG Integration

COMMITMENTS

Several Power group companies have formalized their commitments through responsible investment or ESG policies outlining their approaches to integrating ESG criteria in investment analysis and decision-making processes, and to enabling active ownership through engagement and proxy voting. These include Great-West Lifeco’s subsidiary Putnam Investments, IGM Financial’s subsidiaries IG Wealth Management, Mackenzie Investments and Investment Planning Counsel, as well as Groupe Bruxelles Lambert (GBL), Sagard and Power Sustainable.

In addition, many of our group companies are signatories to the Principles for Responsible Investment (PRI), including Putnam Investments, Irish Life Investment Managers, IG Wealth Management, Mackenzie Investments, GBL, Sagard and Power Sustainable. They are integrating ESG factors into their investment processes as a way to identify both risks and opportunities to enhance long-term returns for investors.

Finally, IG Wealth Management and Mackenzie Investments are members of the Responsible Investment Association (RIA).

ESG INTEGRATION

In recent years, IGM Financial and its operating companies strengthened their responsible investment practices. For example, IG Wealth Management partners exclusively with asset managers who are also signatories to the PRI and share their commitment to sustainable investing. Sub-advisors are selected through a rigorous due diligence process that includes evaluation of their ESG integration and active ownership practices. The ongoing oversight includes an annual comprehensive sustainable investing assessment and a thorough competencies review. In addition, in 2022 IG Wealth Management enhanced its expectations through a formal letter encouraging them to support the Glasgow Financial Alliance for Net Zero (GFANZ) by joining the Net Zero Asset Managers Initiative, and to become signatories to both the Task Force on Climate-Related Financial Disclosure (TCFD) and Climate Action 100+. The letter was followed up by meetings with the sub-advisors to talk about their climate action commitments and strategies. It also enhanced its capacity for climate-related investment risk measurement and scenario analysis. In 2022, IG University partnered with the RIA to offer the Responsible Investment (RI) Fundamentals for Retail Advisors course which provides knowledge of RI practices and serves as a foundation for informed discussions with clients about IG’s Climate Action Portfolios and ESG perspectives.

Similarly, Investment Planning Counsel takes an active ownership approach through proxy voting and corporate engagement. The company evaluates ESG integration practices in selecting new sub-advisors and in the regular due diligence process for existing sub-advisors. Also, its ESG principles exclude companies that contravene ESG standards or whose operations involve anti-social business activities (e.g., controversial weapons, thermal coal mining, use of coal in power generation and tobacco).  

For its part, Mackenzie Investments established in 2020 its Sustainability Centre of Excellence (COE) to increase sustainable investing capabilities across its company. Efforts range from developing sustainable investment products to offering centralized ESG research and expertise, to taking the lead on ESG advocacy efforts, top-down prioritization of material ESG risks and opportunities for investment funds and supporting various oversight activities, including the chief investment officer’s oversight of sustainable investing practices to investment boutiques.

Great-West Lifeco subsidiaries Putnam Investments and Irish Life Investment Managers also integrate ESG considerations into their investment processes.  

Putnam Investments integrates ESG considerations in its research across asset classes, respecting differences among them. To ensure that its research is investment relevant, their approach are guided by mapping financially material ESG issues. Inspired by the work of the Sustainable Accounting Standards Board (SASB), they have developed materiality maps to help structure their ESG-related research priorities, with a goal of adding investment-relevant insights. Moreover, Putnam Investments’ investment teams generate independent, in-depth research on specific sustainability themes and issues. Their analysts have deep fundamental understanding that helps them utilize ESG data within the relevant context of each company and industry, and they share insights across Putnam’s global research platform. 

As for GBL, it believes that the integration of ESG factors at different steps of the investment cycle and management of its participations supports its investment decisions and contributes to achieving better risk-adjusted returns. Since 2020, GBL licenses and applies the SASB Materiality Map^® General Issue Categories to support its responsible investment strategy and integration process, allowing ESG issues to be incorporated into investment practices. As part of its engaged ownership approach with the companies in which it invests, GBL ensures through direct engagement with the companies’ governance bodies that they are managed in a manner consistent with its responsible management philosophy, including its Code of Conduct and ESG Policy. 

Considering the nature of its core business and its long-term investment horizon, GBL’s ESG integration process encompasses each of the following elements: investment universe definition supported by its exclusion policy focusing in particular on exposure to UN Global Compact controversies as well as sectorial exclusions; pre-investment identification of ESG risks using the proprietary ESG rating tool developed by GBL and an analysis of ESG risks as part of an in-depth due diligence; post-investment ESG integration through its daily interactions with portfolio companies and annual ESG risk review leveraging internal and external AI-driven assessment, as well as proprietary data notably derived from its in-house Compliance questionnaire; voting and stewardship; and transparency and reporting in accordance with internationally recognized sustainability reporting frameworks.

ENGAGEMENT ACTIVITIES AND PROXY VOTING

IGM Financial oversees its investments through an active ownership approach where its executives sit on the boards of directors of the companies it controls or in which it strategically invests. Through regular interaction with the senior management and boards of these companies, IGM Financial engages on ESG issues to ensure that its investments are being managed in a manner consistent with its responsible management philosophy. In addition, all of its operating companies have formalized their commitment through sustainable investment policies, which outline the approach taken to integrate ESG criteria in investment analysis and decision-making processes, and to enable active ownership through engagement and proxy voting. 

IGM Financial’s subsidiary, Mackenzie Investments, believes that stewardship and active ownership require both a corporate and a portfolio-level focus to be most effective. At the portfolio level, investment teams engage with companies or issuers on material ESG risks and opportunities that may impact the value that they are able to deliver to clients. From a corporate perspective, Mackenzie’s Sustainable Investing Steering Committee sets the agenda for stewardship priorities that present the greatest risks to its overall investment exposure, that align with its corporate values, and where it can make the most significant impact. Mackenzie’s current priorities are focused on diversity, climate action and good governance. Through proxy voting and engaging with these companies and issuers, Mackenzie Investments is able to highlight material ESG risks and opportunities that may impact an entity’s long-term performance. In 2022, Mackenzie Investments’ investment teams engaged with 369 unique companies around the world on 1,042 topics on environmental, social, governance and strategy, risk and communication issues.

Investment Planning Counsel uses the services of a leading provider of corporate governance and sustainable investment solutions, for proxy voting and engagement. Through this process, it also participates in a pooled engagement service that targets companies with identifiable ESG risks in their business or that are laggards in their industry on key ESG themes. 

Putnam Investments, a subsidiary of Great-West Lifeco, believes that active managers have a particular role to play in engaging with company management teams. The company’s fundamental research process involves regular dialogue regarding corporate strategy and execution. As part of its investment process, engagement with companies and issuers spans a wide range of topics, including long-term strategy, capital allocation, and financially material ESG issues. In addition to ongoing research-related conversations, investment teams send annual, individually tailored letters to the CEOs of companies held within Putnam Investment’s top holdings. In 2022, Putnam Investment sent CEO letters to companies representing approximately 50% of all equity assets they manage, 100% of sustainable equity portfolio holdings, and more than 50 key corporate credit holdings. This correspondence presents an opportunity to document what it views as the most material ESG issues for each company, to note its interest in issues where progress or performance might not be apparent, and to provide a grounding for ongoing research and dialogue on these topics. The most frequent themes addressed in Putnam Investments’ 2022 CEO letters were advocacy for improved ESG disclosures; assessment of product impact; environmental management (emissions, water, energy, ecosystem impact); diversity, equity, and inclusion and employee well-being; and risk management and capital allocation. In addition, Putnam Investments considers proxy voting to be a cornerstone of strong governance and effective engagement. Proxy policy and the proxy-voting process for its mutual funds are led and controlled by the independent Trustees of The Putnam Funds. The same functions for its institutional investment management clients, and its actively managed exchange-traded funds (ETFs) are managed by its internal Proxy Committee and Legal and Compliance Division. These functions are undertaken with the consistent goal of promoting strong corporate governance, acting in the best interests of its shareholders and clients.

Voting and engagement activities are also the two core components of Irish Life Investment Managers’ (ILIM) active ownership approach. In 2022, ILIM created a bespoke custom voting policy, with focus on board independence, board diversity and climate change. Its 2022 global proxy voting guidelines were created by taking into consideration best practices, its engagement efforts, the Net Zero Asset Management initiative, and ISS’s Climate Proxy Voting Guidelines. The company’s voting in 2022 was in line with its four thematic priorities: climate change, natural capital, human rights and corporate governance. It voted on 5,369 meetings and took direct voting action against directors of companies either lagging in climate change performance or with insufficient levels of board diversity and independence. 

Regarding engagement, the company has continued to enhance and expand its engagement program during 2022. This has included more one-to-one and collaborative engagements, and a greater focus on the outcomes of the engagements undertaken. ILIM engages directly with companies on the topics of climate change (transition and physical risks), biodiversity, water, waste management, human rights, supply chain labour standards/modern slavery, anti-discrimination and diversity, anti-corruption, and ESG risk. In 2022, it has conducted 147 direct engagements with 144 companies. During the year, ILIM also commenced a direct engagement outreach program, based on proprietary analysis conducted by its Responsible Investment team. As part of that, it launched 26 engagements based on how it voted on shareholder proposals on racial equity audits, lobbying, and say-on-climate, 21 engagements focused on gender diversity, and 13 engagements focused on environmental disclosures from Irish companies. ILIM is focusing efforts on more active dialogues with investee companies and targeting senior management as well as board members.