COMMITMENTS
IGM Financial’s operating companies, IG Wealth Management, Mackenzie Investments and Investment Planning Counsel, have all formalized their commitments through responsible investment 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. In March and December 2021, Groupe Bruxelles Lambert (GBL) and Putnam Investments, respectively, formalized their commitment to incorporating ESG considerations into the way they conduct business, including in their investment activities, through the adoption of their ESG policies.
Many of our group companies are signatories to the Principles for Responsible Investment (PRI), including Putnam Investments, Irish Life Investment Managers, IG Wealth Management and Mackenzie Investments. 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. GBL is also signatory to the PRI, furthering its commitment to pursue the development of its responsible investment approach, as are our alternative asset investment platforms Sagard and Power Sustainable. In addition, IG Wealth Management and Mackenzie Investments are members of the Responsible Investment Association (RIA).
Sagard and Power Sustainable, through its platform Power Sustainable China, have also formalized, through a CSR statement and/or a responsible investment policy, their commitment to consider ESG factors into their investment analysis process.
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. In addition, in early 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 is then followed up by meetings with the sub-advisors to talk about their climate action commitments and strategies. Again in 2022, IG Wealth Management published its Sustainable Investing brochure, which describes its overarching investment philosophy and how ESG factors are integrated into their processes.
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 and tobacco).
Mackenzie Investments, for its part, is on a mission to make it easy for investors and advisors to integrate sustainable solutions into their portfolios. In 2021, it launched its Sustainability Centre of Excellence (COE), which aims to deliver firm wide ESG support and increase capabilities across Mackenzie Investments. Efforts range from developing sustainable investment products to offering centralized ESG research and expertise, to taking the lead on ESG advocacy efforts and engagement with regulators. Also in 2021, Mackenzie Investments published its first Sustainable Investing Report with the goal of showcasing the company’s firm wide approach to addressing environmental, social and governance risks and opportunities, and highlights its corporate and investment management sustainability practices.
Great-West Lifeco subsidiaries Putnam Investments and Irish Life Investment Managers (ILIM) 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, the company focuses on 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. Moreover, Putnam Investments’ Sustainable Equity team extends research beyond the foundation of ESG integration. This team seeks companies demonstrating excellence in sustainability that offers potential to improve their long-term business prospects. These strategies invest in companies where leadership in relevant sustainability issues and creation of solutions to key sustainability challenges can potentially enhance investment merit.
For its part, ILIM has incorporated sustainability as a core pillar of its future business strategy at a policy, entity and strategy level. ILIM now has €40 billion in responsibly managed assets, representing 40 per cent of total assets under management – compared to just 25 per cent at the end of 2020. ILIM’s responsible investment approach is driven by two overarching sustainability megatrends, which were identified to be closely linked to the company’s core investment activities: decarbonization and the move to a stakeholder-centric business model. Within the core sustainability megatrends, ILIM structures its activities around four thematic priority areas: climate change, natural capital, human rights, and corporate governance. The selection of the four themes was driven by internal research and considerations on the exercise of shareholder rights, the importance of corporate governance in terms of principal agency theory and the long-term systemic risks ILIM considers most impactful on the long-term performance of investee companies and economies as a whole.
GBL, a long-term investor, understands ESG issues allows them to reduce risks and capture opportunities in portfolio management and to enhance the company’s investment performance over the long term. GBL believes that the integration of ESG factors into the investment analysis and management of its participations supports better risk-adjusted returns for its portfolio. 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.
In 2021, as part of its ESG Policy, GBL adopted an exclusion policy to support the identification of climate-resilient investment opportunities. In addition, in order to strengthen the dynamic and real-time nature of its ESG risk identification capabilities, GBL strengthened its existing ESG risk review with the development of and artificial intelligence information processing analysis based tool. Moreover, last year’s annual ESG risk review also benefited from an in-depth analysis of the biodiversity risk exposure and potential biodiversity impact of each portfolio participation. Leveraging on an artificial intelligence based tool, GBL assessed the absolute biodiversity consumption expressed in land used and mean species abundance equivalent and the relative absolute biodiversity consumption per units of capital employed. In 2022, beyond the areas identified during the annual risk review process described above, engagement will focus on investee companies with biodiversity neutrality pledges and commitments and the management of the reputational risk related to such commitments in light of the outcome of the risk assessment.
ENGAGEMENT ACTIVITIES AND PROXY VOTING
IGM Financial oversees its investments through an active ownership approach where their executives sit on the boards of directors of the companies they control or in which they strategically invest. Through regular interaction with the senior management and boards of these companies, they engage on ESG issues to ensure that their investments are being managed in a manner consistent with its responsible management philosophy and Corporate Sustainability Statement. In addition, all of their 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.
At Mackenzie Investments, investment teams engage with companies or issuers on material ESG risks and opportunities that may impact the value that they’re able to deliver to clients. 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 2021, Mackenzie Investments’ investment teams engaged with a total of 467 companies around the world, on 741 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, they participate in a pooled engagement service that targets companies that have 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, and its sustainable investing team are helping to advance the sustainability field through an engaged ownership, thought leadership and collaboration. As long-term investors, the company believes active managers have a particular role to play in working with company management teams and, through its fundamental research process, they are already in regular dialogue with company leadership about strategy and execution. In addition to ongoing research-related conversations, the company sends annual, individually tailored letters to the CEOs of all companies held within Putnam Sustainable Leaders Fund and Putnam Sustainable Future Fund, acknowledging efforts to date and encouraging future progress on key sustainability issues specific to each company. Similar letters will be sent in 2022 to the CEOs of Putnam’s overall top equity and corporate credit holdings, representing approximately 50 per cent of equity assets under management. The voting process for Putnam Investments’ mutual funds is overseen by the funds’ Board of Trustees, and the team collaborates closely with their governance experts on relevant proxy-related issues. Lastly, the company’s ongoing dialogues with company management teams and board members include discussions of corporate strategy, board oversight, and external reporting, and they specifically support disclosures that align with the SASB and TCFD frameworks. A number of companies in Putnam Investments’ portfolios have published inaugural sustainability reports, increased communications on relevant ESG metrics, or made significant progress in identifying material sustainability issues after work with multiple stakeholders, including the company’s team.
Voting and engagement activities are the two core components of ILIM’s active ownership approach. ILIM’s voting in 2021 was aligned to its four thematic priorities, generally voting in favour of most well-constructed shareholder proposals on climate change, natural capital, human rights and corporate governance related topics. In fact, this last year was noted as a record-breaking one, as support for environmental and social proposals reached historic highs. In 2021, there were 6,055 meetings voted, representing 91.2 per cent of the meetings.
Engagement is a key component of ILIM’s responsible investment approach. The company has continued to enhance and expand its engagement program during 2021, building on the progress made during 2020. In 2021, ILIM launched 52 new engagements across 10 topics. The company has been engaging for many years with portfolio companies regarding human rights, climate change, water stewardship, supply chain labour standards and anticorruption, and it continues to launch new dialogues on these vitally important topics. In 2021, it has also been widening the range of themes on which it engages in alignment with its four priority topics of climate change, natural capital, human rights and corporate governance. In this context, during 2021, ILIM started dialogues on four additional issues: physical climate risks, biodiversity, waste and modern slavery.
Moreover, given the materiality of holdings in underlying companies, ILIM believes that in some instances, acting collectively with other like-minded investors and industry bodies is the most appropriate means of having meaningful impact. For instance, the company takes part in the CDP Non-Disclosure Campaign, which aims to drive further corporate transparency around climate change, deforestation and water security by encouraging over 1,320 companies to respond to CDP’s disclosure request. ILIM is also a participant investor in the Climate Action 100+ initiative, which aims to ensure the world’s largest corporate greenhouse gas emitters take necessary action on climate change, targeting 167 focus companies across 15 sectors, responsible for 80 per cent of global industrial emissions.
In 2022, ILIM is working to expand its engagement program. Aligned with its four thematic priority areas, in Q4 2021 ILIM joined four thematic collaborative engagements, led by Sustainalytics, around the topics of Sustainable Forests & Finance, Localised Water Management, Modern Slavery, and Tomorrow’s Board. The thematic engagements aim to influence companies to proactively address ESG risks and opportunities and improve ESG performance, addressing specific issues through the engagement activities. ILIM has also joined the Global Standards engagement, an incident driven engagement with companies that severely or systematically violate the UN Global Compact, focused on improving company behaviour on ESG issues in relation to international guidelines and conventions.
