Most Canadian mutual funds still strongly support management on shareholder resolutions, though there are signs of some movement away from that trend, according to a report by the Shareholder Association for Research and Education (SHARE) and Fund Votes.
For example, the second annual Proxy Voting by Canadian Mutual Funds report notes that Canadian mutual funds are more likely to oppose the election of directors put forward by corporate management than in previous years. And note the success of this year's "Say on Pay" campaign (not included in the report), which will allow shareholders of Canada's big banks an advisory vote on executive compensation starting next year.
“Canadians depend on mutual fund companies to protect their retirement savings and studies have shown repeatedly that careful proxy voting adds value and manages risk for investors,” says SHARE’s Laura O’Neill. “At this time of battered financial markets and depressed shareholder value, it is a positive sign that more funds are challenging management’s hold on the ballot.”
The report found that three mutual fund companies stood out from the crowd. “Among their peers, Inhance Asset Management, Meritas Mutual Funds, and Northwest & Ethical Funds, were significantly more likely to vote against management,” the report notes. “The three companies are known for integrating environmental, social and governance factors into their investment decisions.” Inhance, Meritas and Northwest & Ethical voted in favour of shareholder proposals on at least 40% of all ballots and each also withheld support from management on at least one in five resolutions.
However, those three companies are the exceptions. Canadian mutual funds supported management about 90% of the time. Eighteen of 21 fund families rejected more than 80% of the shareholder proposals they voted on.
And the report turned out a few anomalies of interest to SRI investors, especially those who are invested in SRI products from fund companies that are not SRI-exclusive or SRI specialists. For instance, the proxy voting records of SRI funds sold by diversified fund companies are likely to be the same. “We looked for evidence that SRI funds would report voting in favour of corporate social responsibility proposals more heavily than non-SRI funds in the same family. With notable exceptions, we found that this was not the case.”
“When you invest in a fund from an SRI family, you can count on very progressive proxy voting,” O’Neill said. “We found that in most cases, an SRI product managed within a non-SRI fund family votes in the same management-friendly way for all of its funds.”
Canadian fund companies have been required to publicly disclose their proxy voting records since 2006. The SHARE/Fund Votes report is available here.
Tuesday, June 30, 2009
Friday, June 26, 2009
The Kimberley Process - what now?
The Kimberley Process is in trouble. Established in 2003, it is a joint initiative by governments, industry and civil society to prevent trade in conflict or ‘blood’ diamonds. Countries that participate pass legislation to enforce the Kimberley Process and set up control systems for the import and export of rough diamonds.
Partnership Africa Canada (PAC) was one of the key players in the creation of the Kimberley Process. Ian Smellie, a research co-ordinator with PAC, resigned earlier this month, unable to tolerate continued inaction by the Kimberley Process in the face of ongoing human rights abuses. Susanne Emond from PAC said "The Kimberley Process must fulfill its potential to ensure a clean diamond trade. We are calling on the diamond industry to join with us in demanding that governments enforce the scheme's rules with greater commitment and timeliness."
The sixth Intersessional meeting of the Kimberley Process Certification Scheme took place this week in Windhoek, Namibia. There was significant concern that the Kimberly Process is not addressing serious cases of non compliance among members. An address by the World Diamond Council stated, “The fact is that to be truly effective, the Kimberley Process requires full political and logistical support from its member states and international institutions, and the wider international community. With only a few exceptions, there is little evidence to suggest that the Kimberley Process is receiving this level of support. It is therefore, unsurprising that events and activities associated with the illegal appropriation of valuable natural resources go unchecked.”
Human rights organizations are distressed about the continued abuses in Zimbabwe, Angola and the DRC among others. Venezuela’s government, for example, has promised to halt diamond smuggling, but it is still going on. The current situation in Zimbabwe’s Marange diamond fields is being closely followed. In March, a team from the Kimberley Process visited Zimbabwe to discuss concerns about smuggling and illicit trade activities. The Kimberley Process Certification Scheme Secretariat reported ” The High Level Envoy Teams visit was a great success as the Team sternly delivered the intended message at a high level within the Government.”
However, Human Rights Watch released a report today, ‘Diamonds in the Rough’ which states “Following the discovery of diamonds in Marange in June 2006, the police and army have used brutal force to control access to the diamond fields and to take over unlicensed diamond mining and trading. Some income from the fields has been funneled to high-level party members of ZANU-PF, which is now part of a power-sharing government that urgently needs revenue as the country faces a dire economic crisis.”
The Kimberley Process is at a crossroads. As Annie Dunnebacke from Global Witness, said: "The clock is running out on Kimberley Process credibility. The work it was set up to do is vital - it would be scandalous if uncooperative governments and industry succeeded in hobbling it into ineffectiveness".
Partnership Africa Canada (PAC) was one of the key players in the creation of the Kimberley Process. Ian Smellie, a research co-ordinator with PAC, resigned earlier this month, unable to tolerate continued inaction by the Kimberley Process in the face of ongoing human rights abuses. Susanne Emond from PAC said "The Kimberley Process must fulfill its potential to ensure a clean diamond trade. We are calling on the diamond industry to join with us in demanding that governments enforce the scheme's rules with greater commitment and timeliness."
The sixth Intersessional meeting of the Kimberley Process Certification Scheme took place this week in Windhoek, Namibia. There was significant concern that the Kimberly Process is not addressing serious cases of non compliance among members. An address by the World Diamond Council stated, “The fact is that to be truly effective, the Kimberley Process requires full political and logistical support from its member states and international institutions, and the wider international community. With only a few exceptions, there is little evidence to suggest that the Kimberley Process is receiving this level of support. It is therefore, unsurprising that events and activities associated with the illegal appropriation of valuable natural resources go unchecked.”
Human rights organizations are distressed about the continued abuses in Zimbabwe, Angola and the DRC among others. Venezuela’s government, for example, has promised to halt diamond smuggling, but it is still going on. The current situation in Zimbabwe’s Marange diamond fields is being closely followed. In March, a team from the Kimberley Process visited Zimbabwe to discuss concerns about smuggling and illicit trade activities. The Kimberley Process Certification Scheme Secretariat reported ” The High Level Envoy Teams visit was a great success as the Team sternly delivered the intended message at a high level within the Government.”
However, Human Rights Watch released a report today, ‘Diamonds in the Rough’ which states “Following the discovery of diamonds in Marange in June 2006, the police and army have used brutal force to control access to the diamond fields and to take over unlicensed diamond mining and trading. Some income from the fields has been funneled to high-level party members of ZANU-PF, which is now part of a power-sharing government that urgently needs revenue as the country faces a dire economic crisis.”
The Kimberley Process is at a crossroads. As Annie Dunnebacke from Global Witness, said: "The clock is running out on Kimberley Process credibility. The work it was set up to do is vital - it would be scandalous if uncooperative governments and industry succeeded in hobbling it into ineffectiveness".
Wednesday, June 24, 2009
The Eco Bottom Line: Making Money
The first of a two part Green event organized by IFIC, yesterday’s breakfast featured Hadley Archer from the WWF and Elizabeth McGeveran from F&C Asset Management discussing how climate change is impacting the investment industry.
Hadley Archer, WWF’s Vice President of Strategic Partnerships, examined corporate social responsibility, and placed it in the context of WWF's Climate Savers Program, 22 companies that are working hard to reduce their environmental footprint. Archer hopes that these companies are also setting new and higher standards in their respective sectors, and preliminary research shows this to be the case.
Quoting work done by Michael Porter at Harvard Business School, Archer talked about how corporations need to analyze their opportunities for social responsibility using the same frameworks that guide their core business choices. Then they would recognize that CSR is not a cost or a constraint but rather a source of innovation and competitive advantage.
If the era of cheap resources is over (as everyone is warning us, most recently Jeff Rubin), then addressing carbon emissions will become a corporate advantage, or disadvantage. As companies come to terms with managing carbon risk, they will also have to look at carbon risk in their supply chains, asking suppliers down the line ‘what are you doing to manage carbon costs and risk?’.
What does it take to provide leadership on climate change? Archer suggests a company needs a holistic climate change strategy to reduce GHG emissions; targets, measuring and transparent reporting; investing in new technologies; and researching emerging areas.
Elizabeth McGeveran then took us through how F&C Asset Management looks at green business through the money management lens. She spoke specifically of their climate change mandate, which they manage for many investors around the world, and which is offered through Scotia in Canada.
Key drivers such as regulation, corporate and consumer behaviour and the physical effects of the changing climate are presenting us with global climate investment opportunities. She stressed that it is a very dynamic playing field, but nonetheless gave us some tips on who the winners will be.
In a world of climate change, which companies are poised to benefit? The first group are those whose products or services are mitigating the effects of climate change. This includes companies in alternative energy, energy efficiency, sustainable mobility and waste management. The second group are those who are involved in adaptation, where opportunities present themselves in water and food. The third and final group is supporting services, the consultants, the carbon traders etc.
McGeveran made the point that companies in the climate change portfolio are not necessarily environmental best actors. For example, nuclear power companies, which are excluded from many Canadian SRI mandates, are part of the climate change fund. As with so much of SRI, ‘it’s all about the trade offs’.
Hadley Archer, WWF’s Vice President of Strategic Partnerships, examined corporate social responsibility, and placed it in the context of WWF's Climate Savers Program, 22 companies that are working hard to reduce their environmental footprint. Archer hopes that these companies are also setting new and higher standards in their respective sectors, and preliminary research shows this to be the case.
Quoting work done by Michael Porter at Harvard Business School, Archer talked about how corporations need to analyze their opportunities for social responsibility using the same frameworks that guide their core business choices. Then they would recognize that CSR is not a cost or a constraint but rather a source of innovation and competitive advantage.
If the era of cheap resources is over (as everyone is warning us, most recently Jeff Rubin), then addressing carbon emissions will become a corporate advantage, or disadvantage. As companies come to terms with managing carbon risk, they will also have to look at carbon risk in their supply chains, asking suppliers down the line ‘what are you doing to manage carbon costs and risk?’.
What does it take to provide leadership on climate change? Archer suggests a company needs a holistic climate change strategy to reduce GHG emissions; targets, measuring and transparent reporting; investing in new technologies; and researching emerging areas.
Elizabeth McGeveran then took us through how F&C Asset Management looks at green business through the money management lens. She spoke specifically of their climate change mandate, which they manage for many investors around the world, and which is offered through Scotia in Canada.
Key drivers such as regulation, corporate and consumer behaviour and the physical effects of the changing climate are presenting us with global climate investment opportunities. She stressed that it is a very dynamic playing field, but nonetheless gave us some tips on who the winners will be.
In a world of climate change, which companies are poised to benefit? The first group are those whose products or services are mitigating the effects of climate change. This includes companies in alternative energy, energy efficiency, sustainable mobility and waste management. The second group are those who are involved in adaptation, where opportunities present themselves in water and food. The third and final group is supporting services, the consultants, the carbon traders etc.
McGeveran made the point that companies in the climate change portfolio are not necessarily environmental best actors. For example, nuclear power companies, which are excluded from many Canadian SRI mandates, are part of the climate change fund. As with so much of SRI, ‘it’s all about the trade offs’.
Tuesday, June 23, 2009
Few companies report on indigenous rights: EIRIS
Investors should take a close look at how corporations are dealing with the critical issue of indigenous risks, according to a recent report from EIRIS (Experts in Responsible Investment Solutions).
“Indigenous rights are a human rights issue that companies and their investors should take into account,” the EIRIS report states. The U.K.-based independent researcher analyzed the impact and response of 250 listed companies on the FTSE All World Developed Index considered to have a high or medium risk exposure to indigenous rights.
Firms operating in the extractive sector (such as oil and gas, mining, etc.) and high indigenous risk countries (e.g., Canada, Australia, the United States, South Africa, New Zealand) were identified as medium risk for indigenous rights exposure.
Companies accused of indigenous rights abuse within the past three years were identified as high risk. Of the 250 companies analyzed, 83% were medium risk and 17% were high risk.
“The highest risk companies for indigenous rights are not adequately responding to risks and opportunities,” the report notes, adding that only 7% of companies identified as high risk responded to indigenous rights issues at the corporate level; 62% reported no corporate response whatsoever.
In fact, few companies report on indigenous rights issues and when they do, the quality of reporting is generally poor, EIRIS notes. “Whilst most companies provide a response to allegations of breaches of indigenous rights, few report voluntarily on areas of non-compliance.”
EIRIS used a number of factors in its assessment, including company policies on indigenous rights, free prior informed consultation/consent (a consultative process which companies undertake before commencing operations that are likely to disrupt indigenous communities), employment and resettlement.
Given the level of attention on indigenous rights, the report states, as well as the introduction of laws and regulation in many countries, companies with strong commitments and effective engagement processes will undoubtedly benefit in an environment where access to land and resources is becoming increasingly restricted.
For companies that choose to ignore indigenous rights, the risks are high. For example, earlier this year the U.K.’s Co-operative Bank announced that it would fund a legal challenge by the Beaver Lake Cree Nation against oil and gas companies on the basis that oil sands extraction in Canada is destroying indigenous peoples’ hunting and fishing lands and resources. Mutual fund company Ethical Funds has identified health concerns as the most pressing issue facing indigenous peoples living in and around Alberta’s 140,000 square kilometre oil sands region.
The full EIRIS report is available here.
“Indigenous rights are a human rights issue that companies and their investors should take into account,” the EIRIS report states. The U.K.-based independent researcher analyzed the impact and response of 250 listed companies on the FTSE All World Developed Index considered to have a high or medium risk exposure to indigenous rights.
Firms operating in the extractive sector (such as oil and gas, mining, etc.) and high indigenous risk countries (e.g., Canada, Australia, the United States, South Africa, New Zealand) were identified as medium risk for indigenous rights exposure.
Companies accused of indigenous rights abuse within the past three years were identified as high risk. Of the 250 companies analyzed, 83% were medium risk and 17% were high risk.
“The highest risk companies for indigenous rights are not adequately responding to risks and opportunities,” the report notes, adding that only 7% of companies identified as high risk responded to indigenous rights issues at the corporate level; 62% reported no corporate response whatsoever.
In fact, few companies report on indigenous rights issues and when they do, the quality of reporting is generally poor, EIRIS notes. “Whilst most companies provide a response to allegations of breaches of indigenous rights, few report voluntarily on areas of non-compliance.”
EIRIS used a number of factors in its assessment, including company policies on indigenous rights, free prior informed consultation/consent (a consultative process which companies undertake before commencing operations that are likely to disrupt indigenous communities), employment and resettlement.
Given the level of attention on indigenous rights, the report states, as well as the introduction of laws and regulation in many countries, companies with strong commitments and effective engagement processes will undoubtedly benefit in an environment where access to land and resources is becoming increasingly restricted.
For companies that choose to ignore indigenous rights, the risks are high. For example, earlier this year the U.K.’s Co-operative Bank announced that it would fund a legal challenge by the Beaver Lake Cree Nation against oil and gas companies on the basis that oil sands extraction in Canada is destroying indigenous peoples’ hunting and fishing lands and resources. Mutual fund company Ethical Funds has identified health concerns as the most pressing issue facing indigenous peoples living in and around Alberta’s 140,000 square kilometre oil sands region.
The full EIRIS report is available here.
Saturday, June 20, 2009
Corporate Knights v. Macleans (part II)
Toby Heaps, Editor-in-chief of Corporate Knights says Maclean's editor Ken Whyte's remarks (see yesterday's post) are inaccurate. "Corporate Knights has an active trademark application for "Best 50 Corporate Citizens in Canada" on file with the Canadian Intellectual Property Office. It is currently in a stage called examination. It has not been rejected by the Canadian Intellectual Property Office.
"In addition to registered trademarks, Canada also recognizes common-law trademarks, which arise through use. Corporate Knights has used "Best 50 Corporate Citizens in Canada" since 2002, and as such, has acquired trademark rights via Canada's common law.
"Common law trademarks are enforceable in Canada. Even if a company does not have a registered trademark, if it has a common law trademark that company has trademark rights."
Heaps says Maclean's cover used the wording 'Canada's 50 Best Corporate Citizens', which is the crux of the dispute.
"In addition to registered trademarks, Canada also recognizes common-law trademarks, which arise through use. Corporate Knights has used "Best 50 Corporate Citizens in Canada" since 2002, and as such, has acquired trademark rights via Canada's common law.
"Common law trademarks are enforceable in Canada. Even if a company does not have a registered trademark, if it has a common law trademark that company has trademark rights."
Heaps says Maclean's cover used the wording 'Canada's 50 Best Corporate Citizens', which is the crux of the dispute.
Friday, June 19, 2009
Corporate Knights/Maclean’s battle turns nasty
Maclean’s magazine launched its inaugural “Jantzi-Macleans 50 Most Socially Responsible Corporations” in this week’s issue, prompting an angry response from rival publication Corporate Knights, which has been publishing its own “Best 50 Corporate Citizens” issue for eight years.
“While we welcome newcomers to the corporate responsibility realm, it’s unfortunate that Maclean’s seems to have taken a run at our market share by using a trademark that is, in our considered opinion, confusing with our distinctive trademark,” said Corporate Knights president Toby Heaps in a press release.
“The good news,” said Heaps, “is that concern about this confusion, shared by many eminent Canadians, presents an excellent chance, at a time of economic and ecological upheaval, for [Maclean’s publisher] Ken Whyte and I to flesh out for the Canadian public, what exactly is a good corporate citizen, and how one goes about defining one.”
According to the Corporate Knights website, Ken Whyte refused an invite from CBC's The Current for a Maclean's-Corporate Knights debate on corporate citizenry.
Masthead magazine contacted Ken Whyte about the Corporate Knights challenge, Whyte replied, via e-mail: "I’m still not sure who they are but I’m delighted that they read Maclean’s. I had no real knowledge of these guys until June 12 when I received a nasty letter from their lawyer threatening to sue us for trademark violation over our cover line Best 50 Corporate Citizens. They demanded we pull all copies from newsstand, destroy them, print a retraction in Maclean’s, and pay them $4 million dollars. They further threatened to open a public relations campaign against us if we failed to comply. Turns out they don’t even own the trademark to Best 50 Corporate Citizens. They’ve tried to trademark it and been rejected, twice, on the grounds that it is a descriptive phrase and couldn’t be appropriated for exclusive use. As you might understand, I’m not interested in furthering their efforts to publicize themselves at our expense."
Heaps responded to Whyte’s comments to Masthead via e-mail. "I think it borders on credulity for him to say he hadn't heard of our Best 50 Corporate Citizens. His research partner, Jantzi, was the same one that did our first Best 50 ranking - before we took on our rankings in house with the establishment of the Corporate Citizenship Database established on intellectual property built up with Industry Canada financing.”
“While we welcome newcomers to the corporate responsibility realm, it’s unfortunate that Maclean’s seems to have taken a run at our market share by using a trademark that is, in our considered opinion, confusing with our distinctive trademark,” said Corporate Knights president Toby Heaps in a press release.
“The good news,” said Heaps, “is that concern about this confusion, shared by many eminent Canadians, presents an excellent chance, at a time of economic and ecological upheaval, for [Maclean’s publisher] Ken Whyte and I to flesh out for the Canadian public, what exactly is a good corporate citizen, and how one goes about defining one.”
According to the Corporate Knights website, Ken Whyte refused an invite from CBC's The Current for a Maclean's-Corporate Knights debate on corporate citizenry.
Masthead magazine contacted Ken Whyte about the Corporate Knights challenge, Whyte replied, via e-mail: "I’m still not sure who they are but I’m delighted that they read Maclean’s. I had no real knowledge of these guys until June 12 when I received a nasty letter from their lawyer threatening to sue us for trademark violation over our cover line Best 50 Corporate Citizens. They demanded we pull all copies from newsstand, destroy them, print a retraction in Maclean’s, and pay them $4 million dollars. They further threatened to open a public relations campaign against us if we failed to comply. Turns out they don’t even own the trademark to Best 50 Corporate Citizens. They’ve tried to trademark it and been rejected, twice, on the grounds that it is a descriptive phrase and couldn’t be appropriated for exclusive use. As you might understand, I’m not interested in furthering their efforts to publicize themselves at our expense."
Heaps responded to Whyte’s comments to Masthead via e-mail. "I think it borders on credulity for him to say he hadn't heard of our Best 50 Corporate Citizens. His research partner, Jantzi, was the same one that did our first Best 50 ranking - before we took on our rankings in house with the establishment of the Corporate Citizenship Database established on intellectual property built up with Industry Canada financing.”
Thursday, June 18, 2009
Tracking climate change management in Asia
Investors recognize the challenges that climate change brings to the global economy. As a result, they are keeping their eye on Asian companies. As their economies continue to grow, so too do the responsibilities Asian companies have to manage carbon and protect the environment.
Experts in Responsible Investment Solutions (EIRIS), a global provider of independent research into the environmental, social, governance and ethical performance of companies, has produced a study of the 300 largest cap global companies. It has also released a regional update, focusing on Asian companies listed on the FTSE All World Developed Index, which compares Asian companies with their global peers and examines the implications for investors.
In terms of corporate governance of climate change, Asian companies lag behind the global average. 88% of companies with significant exposure to climate change have corporate-wide climate change commitments compared with 93% worldwide. Only 5% have long-term greenhouse gas (GHG) emission reduction targets (compared with 32% globally) and only 1% have linked GHG emission reduction strategies (or equivalent strategies) with board and/or senior management remuneration; the global number is 23%.
The EIRIS paper also notes that Japanese regulations and initiatives have had a positive impact on companies’ performance against global peers and other Asian countries. Overall, however, EIRIS suggests that Asian companies should improve their carbon management performance, including further disclosure and engagement with stakeholders.
The paper makes three main recommendations for investors:
1. Identify risk in your portfolio and integrate carbon risk factors in your company analysis. Understand the carbon profile or footprint of your portfolio. But be sure to look beyond emissions intensity and look at how the company is responding to the challenges of climate change.
2. Include best practice companies in your portfolio. Increasing the proportion of best practice companies in carbon-sensitive sectors is a more practical measure against climate change than divestment in these sectors, the EIRIS paper says. It’s also an incentive for companies to enhance carbon management and disclosure.
3. Engage with laggard companies. Engagement, among other initiatives, could redirect the climate change policies of Asian companies and would greatly contribute to the mitigation of climate change risk on a global level.
To read the full EIRIS report, visit Climate Change Tracker: Asia.
Jennifer Holloway is an environmental business journalist based in Ajax, Ontario.
jenholloway(at)sympatico.ca.
Experts in Responsible Investment Solutions (EIRIS), a global provider of independent research into the environmental, social, governance and ethical performance of companies, has produced a study of the 300 largest cap global companies. It has also released a regional update, focusing on Asian companies listed on the FTSE All World Developed Index, which compares Asian companies with their global peers and examines the implications for investors.
In terms of corporate governance of climate change, Asian companies lag behind the global average. 88% of companies with significant exposure to climate change have corporate-wide climate change commitments compared with 93% worldwide. Only 5% have long-term greenhouse gas (GHG) emission reduction targets (compared with 32% globally) and only 1% have linked GHG emission reduction strategies (or equivalent strategies) with board and/or senior management remuneration; the global number is 23%.
The EIRIS paper also notes that Japanese regulations and initiatives have had a positive impact on companies’ performance against global peers and other Asian countries. Overall, however, EIRIS suggests that Asian companies should improve their carbon management performance, including further disclosure and engagement with stakeholders.
The paper makes three main recommendations for investors:
1. Identify risk in your portfolio and integrate carbon risk factors in your company analysis. Understand the carbon profile or footprint of your portfolio. But be sure to look beyond emissions intensity and look at how the company is responding to the challenges of climate change.
2. Include best practice companies in your portfolio. Increasing the proportion of best practice companies in carbon-sensitive sectors is a more practical measure against climate change than divestment in these sectors, the EIRIS paper says. It’s also an incentive for companies to enhance carbon management and disclosure.
3. Engage with laggard companies. Engagement, among other initiatives, could redirect the climate change policies of Asian companies and would greatly contribute to the mitigation of climate change risk on a global level.
To read the full EIRIS report, visit Climate Change Tracker: Asia.
Jennifer Holloway is an environmental business journalist based in Ajax, Ontario.
jenholloway(at)sympatico.ca.
Tuesday, June 16, 2009
Is SRI sustainable in a downturn?
Trade publication Advisor.ca has just posted a package of stories based on the recent Canadian Responsible Investment Conference in Winnipeg, on topics ranging from lessons from the credit crisis, oil sands risk, Canadians' attitudes towards sustainability and the current state of academic SRI research in Canada.
Although we've covered many of these topics in the blog over the past week or so, there are a couple of fresh articles to peruse (disclaimer: Advisor.ca commissioned me to write articles for this package).
The online package, aimed at both investors and advisors, is available here.
Although we've covered many of these topics in the blog over the past week or so, there are a couple of fresh articles to peruse (disclaimer: Advisor.ca commissioned me to write articles for this package).
The online package, aimed at both investors and advisors, is available here.
Monday, June 15, 2009
Complex but not Complicated
‘It’s time for candour.’ Ed Waitzer, former chair of the OSC, partner at Stikeman Elliot, undisputed member of the regulatory aristocracy in Canada, hopes that the current crisis will lead to a ‘teachable moment’ for the financial services industry.
Speaking at the Responsible Investment Conference, he began by stating that leaders will now need to expand their horizons, to look further ahead, beyond financial regulation, into other international processes and to widen the circle. Recognizing that people will attempt to game any regulatory framework, he says “you can’t solve problems by bureaucratizing morality”
Mr. Waitzer has some welcome ideas about the need to rebuild trust, and how to go about it. First, we need new reporting and assurance mechanisms based on a duty to serve. This would refocus the responsibility of asset managers as stewards of wealth. Second, we need to start looking at reporting as a learning process rather than an end in itself. This would open up all sorts of possibilities. What if we asked stakeholders to report on the performance of organizations, in addition to the organizations reporting to the stakeholders, creating an interactive process? Thirdly, and relatedly, we need to see assurance as a process and not just as an outcome. To think about it as something that helps and informs the organization.
This was a message that resonated with the audience. Current responses to regulation encourage ‘bureaucratic formalization’ at the expense of innovation and adaptability. Mr. Waitzer suggests that we reduce our dependence on complicated financial assets which would in turn reduce the need for expert advice. He believes that if we focus on the interest of long term beneficiaries, and spend more time on fiduciary standards, that would encourage responsible investing. Realigning compensation with long term incentives would also help. Excellent ideas, and ones the SRI community has been advocating for some time.
However, Mr. Waitzer also startled the audience by suggesting that independent directors were not necessarily a good thing. He suggests that ‘cosmetic boards’ may look good, but ultimately have limited power as they often only get the information that management gives them. He contrasts this with boards of private companies. These will lack independent directors, but the directors are more likely to be extremely involved in the company and better able to understand the impact of the decisions they are asked to make. From a time perspective, these private directors may spend a significant amount of time on their director’s duties, as compared to the 10 -15 hours per meeting put in by the independent director. Interesting points, and sure to be researched by some people in the room. Stay tuned for the debate.
Speaking at the Responsible Investment Conference, he began by stating that leaders will now need to expand their horizons, to look further ahead, beyond financial regulation, into other international processes and to widen the circle. Recognizing that people will attempt to game any regulatory framework, he says “you can’t solve problems by bureaucratizing morality”
Mr. Waitzer has some welcome ideas about the need to rebuild trust, and how to go about it. First, we need new reporting and assurance mechanisms based on a duty to serve. This would refocus the responsibility of asset managers as stewards of wealth. Second, we need to start looking at reporting as a learning process rather than an end in itself. This would open up all sorts of possibilities. What if we asked stakeholders to report on the performance of organizations, in addition to the organizations reporting to the stakeholders, creating an interactive process? Thirdly, and relatedly, we need to see assurance as a process and not just as an outcome. To think about it as something that helps and informs the organization.
This was a message that resonated with the audience. Current responses to regulation encourage ‘bureaucratic formalization’ at the expense of innovation and adaptability. Mr. Waitzer suggests that we reduce our dependence on complicated financial assets which would in turn reduce the need for expert advice. He believes that if we focus on the interest of long term beneficiaries, and spend more time on fiduciary standards, that would encourage responsible investing. Realigning compensation with long term incentives would also help. Excellent ideas, and ones the SRI community has been advocating for some time.
However, Mr. Waitzer also startled the audience by suggesting that independent directors were not necessarily a good thing. He suggests that ‘cosmetic boards’ may look good, but ultimately have limited power as they often only get the information that management gives them. He contrasts this with boards of private companies. These will lack independent directors, but the directors are more likely to be extremely involved in the company and better able to understand the impact of the decisions they are asked to make. From a time perspective, these private directors may spend a significant amount of time on their director’s duties, as compared to the 10 -15 hours per meeting put in by the independent director. Interesting points, and sure to be researched by some people in the room. Stay tuned for the debate.
Friday, June 12, 2009
Shareholder Engagement: We're here for a long time...
The Responsible Investment Conference in Winnipeg wrapped up Tuesday with a stellar panel discussing shareholder engagement. Asked to identify the top issues of 2009, there was agreement that the advisory vote on executive compensation, say on pay, was a big win for the SRI community. Peter Chapman of SHARE provided a brief timeline, indicating that in the first year say on pay was raised, no one was interested. By the second year, the resolutions garnered over 30% of the votes and this year the results were ‘fantastically strong’, followed by some companies announcing voluntarily that they would offer shareholders a say on pay. Chapman pointed out that this is typical of the shareholder engagement process, that it is a multi year commitment, ”not something you do one year and walk away from”.
Highlighting some of the work their shareholder engagement team did on labour issues in the electronics and apparel industries, Jennifer Coulson from Ethical Funds agreed that engagement takes time. She pointed out that the resolution on the proxy is only a small part of what they do, and often a last resort. Most of the work is done outside the resolution, working with corporations to come up with mutually acceptable solutions and timelines.
Continuing with the theme of long term engagement, Dermot Foley of Inhance Investment Management started off by saying that he used to think of engagement as an opportunity to ‘wrestle a company to the ground’ but now he views it more as a long slow waltz. Certainly some of the issues Inhance is working on with corporate Canada, such as climate change, the tar sands and diversity in senior management, will take a lot of time and work before meaningful changes occur.
Debra Sisti from RiskMetrics asked “What does it mean now that shareholders have a say on pay?” If we want to have the ability to compare and assess compensation, we need more information and better disclosure. In this as in many other areas, the work that socially responsible investors do also crosses into the public policy area.
Why do we continue to address these issues? In his closing comments Gary Hawton, the moderator of the panel and CEO of Meritas Mutual Funds, stated “We have a voice, which for whatever reasons, is listened to. And we have a moral obligation to speak on other’s behalf, our neighbours here, and our global neighbours, whose voices are no less important, but perhaps not as well heard.”
Highlighting some of the work their shareholder engagement team did on labour issues in the electronics and apparel industries, Jennifer Coulson from Ethical Funds agreed that engagement takes time. She pointed out that the resolution on the proxy is only a small part of what they do, and often a last resort. Most of the work is done outside the resolution, working with corporations to come up with mutually acceptable solutions and timelines.
Continuing with the theme of long term engagement, Dermot Foley of Inhance Investment Management started off by saying that he used to think of engagement as an opportunity to ‘wrestle a company to the ground’ but now he views it more as a long slow waltz. Certainly some of the issues Inhance is working on with corporate Canada, such as climate change, the tar sands and diversity in senior management, will take a lot of time and work before meaningful changes occur.
Debra Sisti from RiskMetrics asked “What does it mean now that shareholders have a say on pay?” If we want to have the ability to compare and assess compensation, we need more information and better disclosure. In this as in many other areas, the work that socially responsible investors do also crosses into the public policy area.
Why do we continue to address these issues? In his closing comments Gary Hawton, the moderator of the panel and CEO of Meritas Mutual Funds, stated “We have a voice, which for whatever reasons, is listened to. And we have a moral obligation to speak on other’s behalf, our neighbours here, and our global neighbours, whose voices are no less important, but perhaps not as well heard.”
Thursday, June 11, 2009
Addressing oil sands risks
Alberta's oil sands are a controversial topic for Canada's SRI community. The 140,000 square kilometre region has become a front-line issue for investors concerned about climate change. Yet, Canadian SRI mutual funds can't afford to ignore energy companies working in the sector, since energy makes up approximately 30% of the TSX.
“It's difficult to avoid that sector and provide competitive rates of return,” says Bob Walker, vice president, sustainability, at Ethical Funds. “80% of our investors care most about financial performance and most Canadian energy companies are involved in the oil sands,” he said during a breakout session at the Canadian Responsible Investment Conference in Winnipeg earlier this week.
Still, that doesn't mean Ethical Funds is ignoring the issue, quite the opposite, in fact. The Vancouver-based firm is currently conducting an extensive study of operating projects in Alberta's oil sands.
“We're going to establish a benchmarking tool to find out which companies are mitigating risks,” Walker said. “And we'll establish some rules around acceptable and unacceptable risk.”
In the meantime, Walker says companies working in the oil sands could have changed forced upon them, thanks in part to U.S. President Obama's promise to cut greenhouse gas emissions and reduce American dependence on “dirty” oil.
”We have seen a slowdown in new [project] approvals,” Walker said. “We've seen projects rejected because of objections from First Nations groups,” he added, noting that aside from climate change, the more acute risks from oil sand projects are health-related, particularly among the First Nations.
“There is the potential for the industry to slow down and re-think, perhaps consider ESG issues,” he added.
The Ethical Funds research is being conducted in partnership with the National Union of Public and Government Employees (NUPGE) and Ceres and will be published in the fall of 2009.
“It's difficult to avoid that sector and provide competitive rates of return,” says Bob Walker, vice president, sustainability, at Ethical Funds. “80% of our investors care most about financial performance and most Canadian energy companies are involved in the oil sands,” he said during a breakout session at the Canadian Responsible Investment Conference in Winnipeg earlier this week.
Still, that doesn't mean Ethical Funds is ignoring the issue, quite the opposite, in fact. The Vancouver-based firm is currently conducting an extensive study of operating projects in Alberta's oil sands.
“We're going to establish a benchmarking tool to find out which companies are mitigating risks,” Walker said. “And we'll establish some rules around acceptable and unacceptable risk.”
In the meantime, Walker says companies working in the oil sands could have changed forced upon them, thanks in part to U.S. President Obama's promise to cut greenhouse gas emissions and reduce American dependence on “dirty” oil.
”We have seen a slowdown in new [project] approvals,” Walker said. “We've seen projects rejected because of objections from First Nations groups,” he added, noting that aside from climate change, the more acute risks from oil sand projects are health-related, particularly among the First Nations.
“There is the potential for the industry to slow down and re-think, perhaps consider ESG issues,” he added.
The Ethical Funds research is being conducted in partnership with the National Union of Public and Government Employees (NUPGE) and Ceres and will be published in the fall of 2009.
Monday, June 8, 2009
Tipping pointers: an advisor roadmap
In 2007, it seemed socially responsible investing had finally reached its "tipping point" in Canada - institutional investors were on board following the UN's Principles of Responsible Investment and on the retail side, the big banks were launching their first-ever SRI funds.
But, thanks to the credit crisis, the euphoria was short-lived, and today, SRI advocates are once again seeking ways to engage new investors. That was one of the topics of an advisor panel discussion held Monday at the Canadian Responsible Investment Conference in Winnipeg.
Cheryl Crowe, SRI Specialist at the Assiniboine Credit Union in Winnipeg, says it's back to basics: make sure you bring up the SRI question in your discussion with clients and, if you haven't yet done so, add a question on SRI to your "know your client" form. Resources are also important, Crowe stressed, suggesting that other companies might want to consider hiring their own SRI specialist or resource person.
"It would be great if other credit unions would pick up on the [Assiniboine] model," says Stephen Whipp, an SRI-only advisor based in Victoria. Whipp says he has clients who have come to him because their credit union didn't raise the SRI option. "As an investor, I was never asked about SRI."
Betty-Anne Howard, a Kingston-based SRI advisor, suggests making connections with other like-minded groups in the community. Whipp also likes the idea of networking, noting that Victoria stages regular "green drinks" nights in an attempt to bring together various environmental and social groups.
The panel also discussed SRI mutual funds in Canada, and whether it might be time to add some new products. Though all agreed there's a good cross-section available now, certainly enough to construct a diversified, SRI-only portfolio, some clients are asking for more.
"Animal welfare is a big issue in Manitoba," Crowe said, as well as Alberta's tar sands and genetically-modified food. Whipp puts clean tech and water on his new fund wish list.
Interestingly, the market downturn doesn't seem to have fazed SRI investors, the panelists said. "As an advisor, the market meltdown really shook me up," says Howard. "But my clients have a passion to promote SRI."
"I'm more scared than my clients," Whipp agreed. "Once someone is on board, they stay."
But, thanks to the credit crisis, the euphoria was short-lived, and today, SRI advocates are once again seeking ways to engage new investors. That was one of the topics of an advisor panel discussion held Monday at the Canadian Responsible Investment Conference in Winnipeg.
Cheryl Crowe, SRI Specialist at the Assiniboine Credit Union in Winnipeg, says it's back to basics: make sure you bring up the SRI question in your discussion with clients and, if you haven't yet done so, add a question on SRI to your "know your client" form. Resources are also important, Crowe stressed, suggesting that other companies might want to consider hiring their own SRI specialist or resource person.
"It would be great if other credit unions would pick up on the [Assiniboine] model," says Stephen Whipp, an SRI-only advisor based in Victoria. Whipp says he has clients who have come to him because their credit union didn't raise the SRI option. "As an investor, I was never asked about SRI."
Betty-Anne Howard, a Kingston-based SRI advisor, suggests making connections with other like-minded groups in the community. Whipp also likes the idea of networking, noting that Victoria stages regular "green drinks" nights in an attempt to bring together various environmental and social groups.
The panel also discussed SRI mutual funds in Canada, and whether it might be time to add some new products. Though all agreed there's a good cross-section available now, certainly enough to construct a diversified, SRI-only portfolio, some clients are asking for more.
"Animal welfare is a big issue in Manitoba," Crowe said, as well as Alberta's tar sands and genetically-modified food. Whipp puts clean tech and water on his new fund wish list.
Interestingly, the market downturn doesn't seem to have fazed SRI investors, the panelists said. "As an advisor, the market meltdown really shook me up," says Howard. "But my clients have a passion to promote SRI."
"I'm more scared than my clients," Whipp agreed. "Once someone is on board, they stay."
Green Real Estate: The Next Frontier
Socially Responsible Investing is typically understood in terms of publicly traded equities, but SRI can impact other asset classes such as fixed income or real estate.
An engaging panel at the SIO Conference provided us with lots of thought provoking ideas on the subject of green real estate. This topic has generated considerable interest because many of the asset managers who signed on to the UN Principles for Responsible Investment are not only owners of stocks and bonds, they have significant holdings of real property. Responsible property investment is an approach to property investment that recognizes environmental and social considerations along with more conventional financial objectives. And because green real estate has widely accepted benchmarks like LEED, and the business case is easily quantified, socially responsible real estate may be an easier first step for mainstream investors.
REITs (Real Estate Investment Trusts) are identifying and responding to ESG challenges, such as reporting, using benchmarks like LEED, and staying ahead of the regulatory curve. Ben Spruzen, from Australia’s Sustainable Investment Research Institute, told us about a study of 36 REITs that showed that the management of ESG risks and opportunities contributed positively to performance. However, many challenges to green real estate remain. These include energy efficiency, mandatory disclosure of energy performance, emissions trading, the availability of green building stock and litigation over unhealthy buildings.
David Ogden of ISG Capital Corp offered more evidence of the financial benefits of greening your real estate. In addition to eye popping returns on investment for green upgrades, he also said that companies are changing the way that they procure buildings which will lead to increased demand for green buildings, and that healthier buildings may provide enhanced cash flow because there is less tenant turnover.
While some Canadian companies are working on green real estate, and demand from the retail investor is strong, Bob Mann from Jantzi Research feels the sector has not yet developed enough to create green investment product offerings, although they are on the horizon. Congruent with existing SRI principles of raising the bar, perhaps it is time for a pale green REIT, a portfolio that is biased towards the better, and will demonstrate the performance benefits of green real estate.
An engaging panel at the SIO Conference provided us with lots of thought provoking ideas on the subject of green real estate. This topic has generated considerable interest because many of the asset managers who signed on to the UN Principles for Responsible Investment are not only owners of stocks and bonds, they have significant holdings of real property. Responsible property investment is an approach to property investment that recognizes environmental and social considerations along with more conventional financial objectives. And because green real estate has widely accepted benchmarks like LEED, and the business case is easily quantified, socially responsible real estate may be an easier first step for mainstream investors.
REITs (Real Estate Investment Trusts) are identifying and responding to ESG challenges, such as reporting, using benchmarks like LEED, and staying ahead of the regulatory curve. Ben Spruzen, from Australia’s Sustainable Investment Research Institute, told us about a study of 36 REITs that showed that the management of ESG risks and opportunities contributed positively to performance. However, many challenges to green real estate remain. These include energy efficiency, mandatory disclosure of energy performance, emissions trading, the availability of green building stock and litigation over unhealthy buildings.
David Ogden of ISG Capital Corp offered more evidence of the financial benefits of greening your real estate. In addition to eye popping returns on investment for green upgrades, he also said that companies are changing the way that they procure buildings which will lead to increased demand for green buildings, and that healthier buildings may provide enhanced cash flow because there is less tenant turnover.
While some Canadian companies are working on green real estate, and demand from the retail investor is strong, Bob Mann from Jantzi Research feels the sector has not yet developed enough to create green investment product offerings, although they are on the horizon. Congruent with existing SRI principles of raising the bar, perhaps it is time for a pale green REIT, a portfolio that is biased towards the better, and will demonstrate the performance benefits of green real estate.
Sunday, June 7, 2009
Climate change: the case for pricing carbon emissions
Climate change policies have been ineffective for the past two decades, partly because governments have been relying on voluntary actions by the public to reduce greenhouse gas emissions, says Mark Jaccard, professor of environmental management at Simon Fraser University.
Jaccard, the opening speaker at the Canadian Responsible Investment Conference in Winnipeg, says that although he's a strong believer in governments providing information on the importance of climate change and the promotion of energy efficient products, those actions alone will not produce the dramatic reductions in greenhouse gas emissions scientists are telling us we need.
"We've been relying on voluntary, non-compulsory behaviour," Jaccard says. "Governments love to believe that energy efficiency is the way to go and that people like SRI investors will take care of it." But effective climate change policy requires a price on greenhouse gas emissions, he says, such as carbon taxes and cap and trade. "We have to price carbon emissions."
That may not be a popular choice politically, but Jaccard notes that Canadian governments have been setting - and missing - greenhouse gas reduction targets since 1988.
"In market economics, we're not going to be able to reduce greenhouse gases without drastic change. Voluntarism won't get us there."
As for the argument that carbon pricing regulation reduces a country's competitiveness, Jaccard says that's a red herring. "There are no competitiveness issues because all countries must ultimately have policies that apply similar carbon costs to all industries. Climate change risk trumps everything else."
Jaccard, the opening speaker at the Canadian Responsible Investment Conference in Winnipeg, says that although he's a strong believer in governments providing information on the importance of climate change and the promotion of energy efficient products, those actions alone will not produce the dramatic reductions in greenhouse gas emissions scientists are telling us we need.
"We've been relying on voluntary, non-compulsory behaviour," Jaccard says. "Governments love to believe that energy efficiency is the way to go and that people like SRI investors will take care of it." But effective climate change policy requires a price on greenhouse gas emissions, he says, such as carbon taxes and cap and trade. "We have to price carbon emissions."
That may not be a popular choice politically, but Jaccard notes that Canadian governments have been setting - and missing - greenhouse gas reduction targets since 1988.
"In market economics, we're not going to be able to reduce greenhouse gases without drastic change. Voluntarism won't get us there."
As for the argument that carbon pricing regulation reduces a country's competitiveness, Jaccard says that's a red herring. "There are no competitiveness issues because all countries must ultimately have policies that apply similar carbon costs to all industries. Climate change risk trumps everything else."
Tuesday, June 2, 2009
Sustainable investing in unprecedented times: a conference preview
Since the credit crunch took hold in 2007, it’s been a challenging time for investors of all stripes. The 2009 Canadian Responsible Investment Conference will explore the SRI community’s response to market volatility.
From climate change to community investment, this year’s conference, held in Winnipeg from June 7-9, “Sustainable Investing in Unprecedented Times,” features a number of high-profile keynote speakers and an array of workshops.
Mark Jaccard, a professor at B.C.’s Simon Fraser University will tackle climate change. The trend towards compulsory policy changes, such as carbon taxes, emission caps and fuel regulations is inevitable, he argues. “The sooner we acknowledge this, the sooner we replace emissions reduction talk with emissions reduction action.”
Former OSC chair Ed Waitzer will discuss financial re-regulation in Canada and around the world, focussing on what went wrong and whether the current crisis will lead to a ”teachable” moment. If so, Waitzer says, financial leaders will need to extend their horizons “beyond regulation, into other international processes regulation and widen the circle.”
Other highlights include the results of a survey of Canadians’ attitudes on sustainability, presented by Nancy McHarg of the Strategic Counsel. Lloyd Axworthy, a former foreign affairs minister and now president of the University of Winnipeg will speak on community investment and revitalization. David Martin, the president of Bromart Holdings which owns and controls the CSL Group and Horizon Capital Holdings will focus his speech on aboriginal development and the role of the investment community.
The conference also includes workshops on green real estate, clean technology, renewable energy, shareholder advocacy, academic research on SRI in Canada and microfinance.
A special advisor-only workshop, moderated by Toronto-based SRI specialist Sucheta Rajagopal, will tackle the difficult question: Is the market downturn shaking investor commitment to SRI?
A two-day course on the Global Reporting Initiative, touted as the most widely-used framework for sustainability reporting, will be available following the conference. Deloitte, which will be hosting the course, will also present a module on assurance related to sustainability reporting.
The conference agenda is available here.
SRI Monitor will be providing extensive coverage of the conference, starting next week.
From climate change to community investment, this year’s conference, held in Winnipeg from June 7-9, “Sustainable Investing in Unprecedented Times,” features a number of high-profile keynote speakers and an array of workshops.
Mark Jaccard, a professor at B.C.’s Simon Fraser University will tackle climate change. The trend towards compulsory policy changes, such as carbon taxes, emission caps and fuel regulations is inevitable, he argues. “The sooner we acknowledge this, the sooner we replace emissions reduction talk with emissions reduction action.”
Former OSC chair Ed Waitzer will discuss financial re-regulation in Canada and around the world, focussing on what went wrong and whether the current crisis will lead to a ”teachable” moment. If so, Waitzer says, financial leaders will need to extend their horizons “beyond regulation, into other international processes regulation and widen the circle.”
Other highlights include the results of a survey of Canadians’ attitudes on sustainability, presented by Nancy McHarg of the Strategic Counsel. Lloyd Axworthy, a former foreign affairs minister and now president of the University of Winnipeg will speak on community investment and revitalization. David Martin, the president of Bromart Holdings which owns and controls the CSL Group and Horizon Capital Holdings will focus his speech on aboriginal development and the role of the investment community.
The conference also includes workshops on green real estate, clean technology, renewable energy, shareholder advocacy, academic research on SRI in Canada and microfinance.
A special advisor-only workshop, moderated by Toronto-based SRI specialist Sucheta Rajagopal, will tackle the difficult question: Is the market downturn shaking investor commitment to SRI?
A two-day course on the Global Reporting Initiative, touted as the most widely-used framework for sustainability reporting, will be available following the conference. Deloitte, which will be hosting the course, will also present a module on assurance related to sustainability reporting.
The conference agenda is available here.
SRI Monitor will be providing extensive coverage of the conference, starting next week.
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